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“Those who devour usury will not stand except as stand one whom the Evil one by his touch hath driven to madness. That is because they say: “Trade is like usury,” but God hath permitted trade and forbidden usury. Those who after receiving direction from their Lord, desist, shall be pardoned for the past; their case is for God (to judge); but those who repeat (the offence) are companions of the Fire: They will abide therein (for ever).”
- Quran Verse 2:275 (Chapter Al-Baqara)
For some such Quranic verse will come down as very unpleasant & stern judgment and they are infact very severe as Islamic Shari’a looks upon consumption of Usury (common definition: interest on money) as serious offence.
Quran prohibits its followers from Riba (Usury) and has couple of stern verses to dissuade the people from brining in the concept of Usury in their economic & social life.
At another place Al-Lah says:
“O ye who believe! Fear God, and give up what remains of your demand for usury, if ye are indeed believers.”
- Quran Verse 2:278 (Chapter Al-Baqara)
Verses like such (“…if ye are indeed believers.”) further highlights the gravity of offence by exhorting people to obey if they indeed think themselves as Muslims.
Quran not only put a stop on Usury but it also encourages leniency towards debt-ridden as way to social upliftment.
“If the debtor is in a difficulty, grant him time Till it is easy for him to repay. But if ye remit it by way of charity, that is best for you if ye only knew.”
- Quran Verse 2:280 (Chapter Al-Baqara)
But why has Islamic Shari’a prohibited the Usury from economic and Business transactions?
To understand the wisdom behind such prohibition we need to be first aware of 2 key Islamic principles on wealth-creation.
1. Islam permits increase in capital through trade and, at the same time, it blocks the way for anyone who tries to increase his capital through lending on interest (riba) – whether it is at a low or a high rate.
Allah Almighty says :
“O you who believe, do not consume your property among yourselves wrongfully, but let there be trade by mutual consent…â€?
- Quran verse 4:29 (Chapter An-Nisa)
I would also like to point to another prohibited means of earning (though not the subject of this post) – ‘gharar’ (transactions based on speculation/gambling).
Modern financial practices that are Haram under ‘gharar’ include use of derivatives such as futures and the purchase of insurance. However, investment in the stock market, except holding preferred stock with a fixed dividend, is permissible on the principle of shared risks and rewards.
The Hadith of Prophet says:
Do not buy fish in the sea, for it is gharar. (Ibn Hanbal)
Buying ‘fish in the sea,’ or alternatively, ‘what is in the womb’ highlights the speculative nature of the transaction.
2. ‘Gharar’ (speculation/gambling) violates the principle that all parties have both complete knowledge and access to the product before the transaction.
In summary, Quran forbids both risk-less gain, as in the case of Riba (Usury), and transactions based entirely on risk, as in ‘Gharar’ (Speculation/Gambling). Islamic Shari’a encourages Muslims to be “risk neutral” and earn profit through neither seeking speculative gain nor hoping to lock down all risk with fixed returns.
With these explanations on Islamic principles of Wealth-creation let me now put forward the wisdom behind prohibition of Usury (interest on money) in Islam.
The strict prohibition of Interest in Islam is a result of its deep concern for the economic, moral, and social welfare of mankind.
Economic: Dependence on interest discourages people from working/trading to earn money and the value of work/trade is reduced. Such people won’t bother to take the trouble of running a business or risking money in trade/industry. For most of the readers this statement may not make sense (or won’t be able to relate) as they themselves are from class of Workers or Traders (and not money-lenders). For such reader, I would recommend them to read this short macro-level explanation of today’s debt-ridden economies (The facts about Usury: Why Islam is Against Lending Money at Interest)
Moral: Acceptance of Usury discourages people from doing good to one another and lend out of good will. A society which encourages interest on lending will require needy people to pay back more than he borrowed, which quite often is a source of huge burden.
Social: If interest is allowed, the rich (who are most likely to be lender) will exploit the poor (borrower). As a result, the rich becomes richer and the poor becomes poorer. This generates envy and hatred among the poor toward the rich, resulting in social disorders, conflicts and at times breeds revolutions & movements.
To understand these economic, moral and social effects we Indians don’t have to look further than Vidarbha and the plight of farmers there which in recent time has received much publicity for unfortunate circumstances. And Vidarbha is a part of much larger problem area.
Between 2001 and 2006, over 14000 farmers have committed suicide in various regions including Vidarbha and Telangana. In almost each of these suicide cases the only recurring reason is debt-trap.
Jaideep Hardikar in his report Loan after Loan notes:
A farming family holding 27 acres in Vidarbha has become a marginal landholder in a span of few years, and a vicious cycle of usurious debt robbed their lands and hopes. There are hundreds of others in the lurch similarly.
These farmers who very often had to borrow from money-lenders at 60-120% interest, to sow seed, and toil every day from sunrise to sunset and if-and-only-if the harvest is good or saved from natural torments will they be able to pay out the interest and some principal. But seldom it happens as willed and for years after years they are still trying to come out of debt. And for many the only way out of these miseries was through death. Suicide is not an easy route as some would think. It is an end for those who see all hopes vanished. It is also thus no surprise that Vidarhba and Telangana are demanding separate States.
Thus, in a society which permits interest, the strong benefit from the suffering of the weak, resulting in conflicts, social-disorders, and revolutions.
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AHAD, could you kindly tell me where it says that a poor person can ’snatch’ money from a wealthy person?
TRIPLE, they will surely lose their homes if they fail to make the repayments! However the oppression arises when interest rates rise and therefore the monthly repayments rise.In an Islamic scheme the repayments are locked in at the beginning and therefore there is no uncertainty.It is much easier for the loanee to plan his or her finances.
Yaseen,
Why should I watch my words – if something is incompatible with something else, I have the RIGHT to speak it!
It is my FREEDOM OF SPEECH and I WILL use it!
Mishal,
regular banking also offers fixed rate of interest. some ppl chose to take it and some ppl chose to take floating as they hope the rates in future may fall (when they do, ppl have to pay less interest). and banks only raise interest in response to market conditions and government policy – so there is no exploitation, its very transparent.
and it offers ppl choice, for example if my income is variable interest, i’d like my instalments to be variable interest too so that i’m covered against interest rate changes etc etc. calling things one does not understand exploitation is just brainwashed belief.
Yaseen,
yes its a personal choice and u don’t have to ask my permission to do live as u wish.
i was just doing daawa by showing which system is better
i’m sure u support daawa where ppl try to convert others in matters of personal choice 
Sridhar,
It is important to be able to pick up the drift of things. That is precisely what it is with Islam and slavery. Though slavery was not outright banned, the rigors of the same were mitigated and the institution was weakened. The Holy Prophet (SAWA) desired to PHASE IT OUT.
Polygamy (and it is only polygyny because polyandry is not allowed) is not meant to be practised at will. For such matters, do refer Quranic tafsirs as they are more authoritative than wikipedia
Sridhar
Islaam is not confined for any period…it’s rules was/is for all the ages to come…but this UDHR is amendable to suit best to your present….there is no comapre between the two….because as a human our insight is very limited
Akber,
so if we insert a clause in UDHR that says that UDHR is for all times and for all generations and for everyone, then shridhar can say the same to u eh?
because, koran is a book for all times, for all ect etc is written in koran itself!
have u read catch22 by joseph heller?
Milind,
My point is that Islam, as it is understood today, allows slavery and polygyny (at will) and I believe that Wikipedia is quite accurate on both the counts. If you think it is not, you may change its content by providing the necessary tafsirs.
It seems quite bizarre that the prophet would quite literally leave “no stone unturned” when it came to abolishing “idolatry” but would consider only a “phased” removal of the more abhorrant custom of slavery..hmm.. On this I think wikipedia is right again, for the prophet may have considered that slavery was part of the “natural order”:
“http://en.wikipedia.org/wiki/Muhammad%27s_slaves#Treatment”
Akber,
It is precisely the reason that Islamic law is considered UNAMENABLE that it is a problem. This is not unique to Islam, it is true for all religious laws. That is precisely why human rights should be INDEPENDENT of religion. That is why UDHR is superior (i.e. truely secular).
Perhaps some secular muslim voices on the issue of Riba would be good. If Mohib or any other author could please provide an insight into their world of economics?
Bro Yaseen, I am with you. Certainly no doubt when Allah has ordained something as haraam for us Muslims even though it looks beneficial.
Sridhar,
Why would we want to go so much into discussing slavery? It is a system that hardly operates today, and therefore does not really merit our attntion.
There are many other weighty topics on which people need a clarification as to the Islamic standpoint, the two most important ones being treatment of women and relations with Non Muslims
Declared Interest does not necessarily imply that it is Ethical in its nature, just as the “Cigarette Smoking is Injurious to Health” cannot make the smoker free from the danger of Cancer.The Cancer of Interest spreads owing to its addictive nature just like any other carcinogenic high giver. The prospect of owining a brand new Merc with an emphasis of RIGHT NOW as clearly propagated by interest reeked cronies belies what lies ahead,especially if the borowwer is struck by misfortune.If the lending is a business then like any other business show me the investment in this business.The bank takes money to set up its lending base,its very foundation of investment is based on the money invested by u and me alone.The bank has no money or good or service to offer by its own.It bases its gain on the strife of those who borrow from it with an intention of making profit.Do you know what happens if they don’t ?.Their security lies with the word of honor of the Government and God save those whose very government is under seige from the mammoth accumulation of debt thanks to once gain, WHO ELSE, but our holy grail of success……..UNREST……oops……..I mean INTEREST.
I have read the quranic verses, translations, and I have also gone through many books, articles, fatwas, on usury riba & interest. what surprised me is none of the scholars referred to the AYATH where QURAN says “O ye who believe! devour not usury doubled and multiplied; but fear Allah; that ye may prosper. 3: 130 ” or discussed the meaning of ” doubled and multiplied”.
And as per the above parameters any amount that is doubled or more in a year is RIBA. (Purchase on credit card for an amount of 10,000/- pay after one year – you will know the meaning).
I beleive QURAN is a guide for a better living for the whole of humanity, whoever follows will benefit – even without accepting the faith. A medicine will heal all who use it.
May ALLAH guide me and all of humanity to understand its guidance.
najeeb.mateen@gmail.com
Alhamdulilaah, Allah is the Most Wise with regards to what is good and bad for His Servants. Sometimes certain things seem good to us, but they are bad for us and other things seem bad but are actually good.
We need look no further than the consistent collapse of the American Capitalist Economic system to see that an Economic system based on interest can never be sustainable. They have been forced to sustain their financial dominance by bullying the rest of the world into submission and controlling certain resources. It is all falling flat now though as their dollar is not in reality worth what they have tried to make us believe.
People look to the western, modern, secular world as a place of economic success and prosperity, but they have attained most of this economic power through exploitation and now it’s all coming back to haunt them. Interest is a fundamental part of their economics which is why it will never be sustainable.
Allah knows best and we are only his created servants.
May Allah protect us from Riba and provide us with alternatives which are Halaal.
Agreed.
While I find some of the arguments out here bizarre, I guess its to each ones own. Contrary to what we may believe, US economic system has not collapsed and it will remain the most envied nation for a long time to come.
I have no argument against people who hate “interest based economy” howsoever amusing I may find that. Well, the left hates any kind of enterpreneurship! Someone’s “halal” is someone’s “haram”.
As far as India is concerned we should learn to respect all thoughts as long as they respect ours.
look its clear like black and white “the QURAN says that not to engage in a deal where a third party exist e.g. the bank. there are many banks in england and around the world named as an islamic bank and they says its halal but let me tell you one thing if a halah shop who is selling hahal meat says that he is selling ham (pig meat) naauzubillah it dosent mean that it is halal because pig is haram anyway so intrest is the same thin. it is not halal it is haram.
Would like to know the views on Taking health care insurance in India. will it come under the amit of usury. Can Someone explain.
Syed Kaleemullah
If you are in the taqleed of Ayatollah Seestani, then your insurance is valid.
As per His Excellency, as insurance implies a mutual obligation, it is valid.
Those non-conformists, who want to practice ‘interest’ are free to do their deeds. Satan needs more followers, Allah needs none. Ed IM, please try to limit the rhetoric of the fools who simply want their point repeated anytime they find a comment for Islam. [...]. How much we are allowed on the ‘non-Muslim’ sites should be the criteria for any ‘pratictioner of Right of Freedom’. They can go voting all around the polling booths and EVMs in India, but IM is not financed by the so called selective freedom of speech system prevalent in India.
For those who may read this website (and the like) and comment in the future, as a practicing Muslim in the U.S. I too believed that interest is haram, but what is truly haram is “usury” which is NOT the same as what interest in the form of an credit card company’s or bank’s APR is understood to be. Please look up the definition of both (usury AND interest) in any english dictionary or refer to the Quran in the Arabic context of what is being refered to as haram.
As far as Islamic Shari’ah is concerned, the dinar is an actual coin which has a value specific to the amount of gold that makes up the coin. The riyal, the Saudi Arabian currency (I’m only using Saudi Arabia as an example, because people believe that they have the toughest form of interpreting Shari’ah) is minted– rather, PRINTED, like all paper money and is truly a currency!
PLEASE NOTE: Money and Currency are NOT the same!
So let’s take an example: According to strict Islamic Shari’ah, if you wish to buy something valued at 100 gold pieces, but don’t have the money, then you ask someone/some group of people for that amount, AND you return 100 gold pieces from whomever you borrowed from. According to what is meant by the Quran and Shari’ah, you borrow 100 gold pieces and you return them based upon a certain time period. Obviously, very few people can return 100 gold pieces right away and the people you borrowed from are not going to wait until you can return all 100 at once nor can they wait for you to return it in piecemeal (eg, 1 gold piece per week for 100 weeks– that would be nearly 2 years after lending you the money!) [please note, I said money].
Naturally, the person lending you this money wants something in return, cause otherwise they would have kept the 100 gold pieces to themselves or given it to someone else to do something else with. So, you have an agreement before money is exchanged ahead of time: you get 100 in exchange for you to return 1 piece, per week, but instead of 100 weeks, it is now 150 weeks. Why is this good? Because you get to slowly return what you borrowed without it being a burden on you, nor does the lender get nothing in return for helping you for the first 2 years that it takes to return his investment in you.
Why does this over-simplified example exist? Because many Muslims have the concept of money and currency confused. You have currency in your wallet (ie: CURRENCY EXCHANGE whenever you go to a foreign country) You do not have money, which has a value that is recognized globally at a set rate. Currency is exchanged, rises in value, falls in value. Inflation occurs to currency, not to money! You CANNOT take your dollar bills out of your wallet and get something for it unless someone recognizes what the value of that paper currency is: if talking about the United States, then it means that sitting in “somewhere” between the Federal Reserve Banks and Bullion Depository aka Fort Knox, is gold that the U.S. government says gives the person holding the paper version the ability to exchange and do commerce with another entity (person, company, or bank) and get a value for it, BUT not get gold in exchange for it. This is the same around the world– no one can get a straight value of gold for their currency because there is not a single country/nation/kingdom that runs by having a direct link of being valued with gold. (The U.S. was devalued from gold back in 1971!)
Interest on currency is LEGAL and completely HALAL, so long as it is not excessive to the person who borrows nor illegal for the person who lends it to such a person. Also, whatever the arrangement for repayment, consequences for early, late, or deficient repayment must be made and understood, by both, ahead of time. As far as banks are concerned– that is not a 3rd party, they are always the lender. The people who invest in the bank (such as savings accounts or CDs- certificates of deposit) expect to get something in exchange, otherwise they could have kept in underneath their mattresses. [However, inflation would cause that paper money to decrease in value over time!]
And Allah knows best and may He forgive me if I have spoken anything wrong. But, I do say all this because people need to be told the truth and seek it out for themselves.
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