Usury: Is It Interest?
By Syed Osman Sher
Canada
It must be understood at the outset that the message of Islam, to serve as guidance for mankind, has two fundamental aspects. First, it seeks to make a man recognize the supremacy and unity of God, which satisfies his spiritual life, and, second, to put him on the path of life in a way that produces the wellbeing of his person and brings coherence in the society. The Qur’an is, therefore, full of commandments that teach one how to conduct his personal and social life with piety, justice and mutual help.
In this regard, the following directives of the Qur’an relate to riba, or usury:
Those who (in charity) spend of their goods by night and by day, in secret and in public, have their reward with their Lord: On them shall be no fear, nor shall they grieve (2:274)
Those who devour usury will not stand except as stands one whom the Satan by his touch hath driven to madness. That is because they say: “Trade is like usury,” but Allah hath permitted trade and forbidden usury. Those who after receiving admonition from their Lord, desist, shall be pardoned for the past; their case is for Allah (to judge); but those who repeat (the offence) are companions of the Fire: they will abide therein (for ever)(2:275)
Allah will deprive usury of all blessing, but will give increase for deeds of charity: For He loveth not any ungrateful sinner. ( 2 .276)
Those who believe, and do deeds of righteousness, and establish regular prayers and give Zakat, will have their reward with their Lord: on them shall be no fear, nor shall they grieve (2:277)
O ye who believe! Fear Allah, and give up what remains of your demand for usury, if ye are indeed believers. (2:278)
If ye do it not, take notice of war from Allah and His Messenger: But if ye repent, ye shall have your capital sums: Deal not unjustly, and ye shall not be dealt with unjustly. (2: 279)
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 ( 2: 280)
O ye who believe! Devour not usury, doubled and multiplied; but fear Allah; that ye may (really) prosper (3:130)
That which you give in usury for increase through the property of (other) people, will have no increase with Allah; but that which you give for charity, seeking the countenance of Allah (will increase): it is these who will get a recompense multiplied (30:39)
The Muslim Ummah has always been in a quandary, and is ever grappling to arrive at the true meaning of riba. Today, riba has become synonymous to interest. But is it so? The purpose of this article is to bare the threads of the two.
God has created us, and He is the sustainer. But it is man who produces sustenance for himself. If we do not produce goods and services, we will all be dead. Production can be defined as bringing out something which becomes of use, or, in other words, creating utility in something. For example, if a factory fashions some odd pieces of metal, rubber, plastic, etc. in a way that it brings out a car it is engaged in production. If a land is lying fallow, and if a farmer ploughs it and grows crop in it, the land becomes productive, and the useful output is called ‘produce.’ Similarly, the filling of a cask from a river that brings the water under use, which otherwise would have gone waste, is also production.
To affect production, only four factors have to act jointly: Enterprise, Land, Labor and Capital, the last, meaning machinery, raw material, or money to buy them. When an entrepreneur takes initiative and harnesses the other three factors with the intention of producing something, production does take place. The end product is then distributed among them: rent for the land, wages for the labor, interest for the capital and profit for the entrepreneur.
If the three factors get their reward, but capital is denied its share, it will certainly be an act of injustice. It would also have a very serious consequence: production will cease altogether. The owner of the capital will not invest because (1) he would not get the return, (2) he will not incur the risk of losing his capital altogether in this process; (3) even if only the principal (without the added recompense) is returned after sometime its value would be depreciated due to inflation; and (4) he loses the liquidity, i.e., if he himself needed it for his use he would be unable to do so. The denial of reward to capital thus seems irrational, unrealistic, unjust and self-destructive. To ascribe this to God’s command thus seems bordering on profanity, instead of piety.
As mentioned above, our life depends on production. And, whatever commodities have been produced have in them the components of rent, wages, interest, and profit. These jointly are reflected in the price of a commodity, which is paid by the ultimate consumer. We thus pay interest throughout our life in the process of consumption. Our life is not free of interest, because it happens so naturally. Having misconstrued the nature of interest, a bad name has been given to it. And in an effort to demolish it, an edifice of Islamic Economics has been raised supported by such columns of strength as Musharikah, Mudaribah, interest-free banking, and Sharia housing scheme. But when we scrutinize them closely we find, firstly, that they are not smooth running instruments, and, secondly, the fourth engine of production and growth, i.e., interest, is present as ever. What comes naturally has only been camouflaged
Now, take the case of a person who wants to buy, for example, a car or a house, but has no money to pay for it. If he obtains a loan from a bank and acquires that property, the property is not his, because the price has been paid through the bank’s money. If the bank does not receive its due, it can reclaim its property. Now in this case, if the owner asks the debtor for some consideration for using his property why such a demand should seem unjustified, or illegal in Islamic terms? Only because it has been termed as ‘interest’? The Qur’an says in Verse 4.29: O ye who believe! Eat not up your property amongst yourselves in vanities (wrongfully): But let there be amongst you traffic and trade by mutual goodwill: Nor kill (or destroy) yourselves; for verily God hath been to you Most Merciful. Why a religious philosophy which adjoins justice and mutual goodwill should disallow such a payment? In our daily life too when we live in someone else’s house we pay rent. We also rent a car and make payment for using it. Should such transactions be treated as permissible only because here the name of the payment is ‘rent’ and not ‘interest’?
This is the story of today when economic activities abound, and when desires and affordability too are abundant along with the supply of credit. To find out what has been prohibited in Qur’an as riba, we have to travel back fifteen hundred years in the backdrop of a society which had a rudimentary economic system. In those days if one had no money, he had hardly to go to a money lender for loan for production or trade; he simply did not indulge in such activities. Economics had thus nothing to do much at that time But, the impoverished people, in all times, have needed money for meeting their dire needs, like hunger, failure of crops, medical emergencies etc., which otherwise could devastate their lives. It had social underpinnings that Islam had addressed to, not the mechanism of economics. Exacting riba meant adding misery to an already miserable life of the needy. In this backdrop God has prohibited riba.
We all know that nothing comes free in this world. Everything has to be earned, or paid for. Of course, one thing is free, and that is charity. God enjoins charity of every kind repeatedly in the Qur’an as a moral obligation upon mankind. But today if a person deposits his money in the bank but does not accept the interest accrued; or if he obtains loans to buy a house or a luxury car, to start a business, to set up a factory, to get his child higher education abroad, but the bank or any person who lends the money does not charge interest, will such be a case of charity? If we meditate deeply on the relevant verses, it would become clear, firstly, that riba’s prohibition describes a situation of extreme hardship, and secondly, whenever riba is mentioned it is done side by side with charity and zakat. They have been shown as opposite to each other. Riba is oppression, while its remission is charity. To take capital of one’s helplessness in times of need by exacting money over and above the principal cannot be considered even as a trade. The principles of trading are applied in a pleasant atmosphere where traffic is carried out by mutual goodwill resulting in the welfare and prosperity of both parties. Any dealing of exaction in a situation where one is defenseless and vulnerable cannot be considered as virtuous and appropriate. Riba is the product of that situation.
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