interest and islam

[Canadian Pakistani]

ASA everyone

I just read the whole discussion on this topic. I would like to add a few words here.

First of all, we must realize that the basis of Islam is "Iman". That's it. Even if we don't understand the reason behind a rule we have to accept it. There are some rules whose reason/justification we can understand, and there other rules we can't understand. This is because our knowledge and abilities are limited. Only Allah knows what is best. However, the more we study Islam, the more we understand the logic behind its rules. Further, there are many social and moral effects on society of our actions which we do not understand, but Allah knows and He has accordingly put forward rules.

Now, Riba is haraam. To my weak knowledge, Islam has not differentiated between interest and usury. Neither it has given the criteria for interest to be haraam to be exhorbitant/unjust. This is just part of the logic to interest's prohibition. There are some who say that Islam forbids usury but allows interest. But when I ask them what is the basis of this, then there is no answer.

Islam does not say that you can't have capital. Capital is a must. Islam only says that the remuneration of capital should not be based on interest, but on profit.

Also, the basis of transactions should be actual physical goods and services, not merely money being transfered from one hand to the other. Further, there should be some risk involved in the transaction, and not merely the credit risk.

There is a fine line between interest and profit. If you do it the correct way, it is halal, otherwise it is haraam. Just to give an example, the same act is halaal when married but otherwise it is haraam. When you are married you are responsible for everything, wife, kids and their social/moral behaviour also. Similarly, there could apparently the same transaction but one is halaal and the other is haraam.

For example, giving loan on interest to someone for buying an asset is haraam. But financing someone on morabaha is halaal. Some of the reason for this is that morabaha is itself based on an asset. The financier must first buy the asset and then sell it to the debtor. This involves financier's risk in the asset, though for a short time. Islam allows that a person could fix any price for an asset. (obviously, that price has to be market driven, otherwise the seller would be out of business). It is also allowed that the seller could charge different prices for sale on cash and sale on credit. This is because in credit sale charging premium for credit risk, market risk, opportunity cost is allowed.

The mullahs and moulanas are not against interest just for the sake of objection, but because of hurmat of it. It seems to be a fashion these days of critizing mullahs for everything. Someone said that the molanas don't come for rescue of poor peasants and fishermen. I don't know what kind of rescue is expected by that person. I have great respect for ulemas and molanas in general, recognizing that some mullahs, like the rest of us, are corrupt. But what they have not done is come up with practical solutions for dealing with modern, large businesses. Admirable work has been done by people like Molana Taqi Usmani, but a lot more work is required to be done. Instead of criticizing them we should present the problem to the ulemas and ask for their solution. Obviously, like in any field, not all ulemas are expert in all aspects of Islam. So for financial/economic issues, we should contact the relevant experts, e.g. Molana Taqi Usmani, for their solution.


Regards,