Can Islam Based Banks Work Under a Different Definition of Interest?

Answer 1

In the opinion of Muhammad Asad,

"Every successive Muslim generation is faced with the challenge of giving new dimensions and a fresh economic meaning to the term Riba ( interest) which, for want of better word, may be rendered as usury."

So the pressing question is, "Are Muslim scholars dynamic in reinterpreting the concept of usury (Riba) in order to find solutions to the problems arising in the modern contemporary world of advanced economics?"

TRADITIONAL ALIMS'(Scholars) INSUFFICIENCY IN DEALING WITH COMPLICATED ECONOMIC PROBLEMS

More knowledgeable Alims who have been well trained in both Islamic jurisprudence and in specialized fields of study such as economics, investment, insurance, banking, finance etc., should come forward and try hard to intellectualize the educational, marital, economic, financial, corporate, investment, banking, insurance and other mundane problems of the minority Muslims of India and the world.

I am sure Islamic principles can not be as rigid as our conservative scholars expect us to believe. Please bear in mind that Muslim minorities are not governed by Wilayat-al-fiqih (Islamic laws), but are governed by compromising

secular laws, hence we can not apply Islamic jurisprudence in their finest details in Toto.

The basic question to be addressed is:

"Do the secular laws of non-Muslim nations undermine the basic beliefs of Muslim minorities?"

In accordance with the opinions of world renounced Imams (Muslim leaders) Muslim minorities ought to live by the laws of the country where they live, as long as the laws allow Muslims to adhere to the basic personal and private practices of Islam.

This has been the position of millions of Muslims living in the U.S.A., U.K., France, Germany, Canada, Netherlands, Australia and in some of the Asian countries like

India, China, Philippines, Thailand, Cambodia, Sri Lanka, Singapore etc

Leaders of Muslim minorities should not make an illogical ruling on insurance or buying homes on mortgage and similar interest based contractual financial transactions, and put the minority Muslims at a very big economic disadvantage when their standard of living and per- capita incomes are several degrees far below the national average of the majority community.

ISLAM BASED BANKING IN OTHER COUNTRIES

To take a case study, Malaysia has an excellent Islamic banking.

Islamic bankers operate on financial rewards to the depositors, levy charges on the borrowers, The terminology varies but the basic principles remain very much the same.

Minority Muslims should develop and possess the resources, caliber, organisation, corporate mindset and honest business ethics to set up similar Islamic principle based institutions that exist not only in Malaysia but even in very many Western countries catering for the economic needs of Muslim minorities

( Even Dow Jones has its Shariyah based share index, so does London FT index).

THE CONCEPT OF INTEREST (usury) IN ISLAM:

The concept of interest is one of the most complicated in Islam. The Prophet received the revelation condemning riba only a few days before his death and so the companions had no opportunity to ask the blessed prophet (SAW) for the fullest implications of the order. Even Sayyidina Umar ibn al-Khattab had said,

"The last revelation of the Quran was concerning riba(usury) and the Apostle of Allah passed away before explaining the full meaning of the passage to us" ( Ibn Hanbal, on the authority of Said ibn al-Musayyab).

The exploitation of the economically weak by the strong is a form of oppression. Hence, attaching profits (riba) on the personal loans obtained by those who are really poor, downtrodden and debt-laden is a disgrace and is condemned as haram(forbidden) by Islam. There can never be two conflicting opinions on this.

But not all interest-bearing financial transactions fall within this category of exploitation by the economically strong. Life assurance and buying houses on mortgage are two examples of contractual financial transactions which fall outside this category of exploitation.

To quote Muhammad Asad again," the question as to what kinds of financial transactions fall within the category of riba(usury) is, in the last resort, a moral one".

It is impossible to give an outright judgment in a non-Muslim country banning on all kinds of interest-bearing financial transactions, in a rigid and once-for-all manner putting the economically weak Muslim

minority in non-Muslim majority countries at a greater economic disadvantage.

The interpretation of Islamic scholars must not ignore the changes to man's environment on his social, economic and technological development.

That is the adoring beauty of the Quran. It is Islam's biggest miracle. People living the third millennium may read the same Quran without an alphabet having been changed, but will see totally new light, new messages, new interpretations and new discoveries that go beautifully and logically cognizant of the socio-economic- technological environment of that time that we people living in the second millennium never ever dreamt of.

Hence my simple assertion is that, our traditional Muslim scholars should not apply the first century Hijrah definition of Riba to solve the most complicated economic problems of the 21st century.

One other point that is worth mentioning here is that, during the time of the Prophet(SAW) the value of money was constant and inflation was non-existent and hence Riba ( as the sort practised by Arabs like Abbas-RAA )was forbidden because the lender even after a year of waiting will get the money that he lent whose purchasing power had not diminished at all.

But in many countries the annual rate of inflation is about 15 to 20%.

In such a condition of rising prices, is it fair to expect a person depositing his money for safe-keeping ( or lending to another trader who makes profits) with a bank to withdraw the same amount without any additions, say after a period of 12 months.

Should the Alims give a fatwa(judgment) that bank interest on deposit is haram, the depositor will get back the same amount whose purchasing power has fallen by 15 to 20%

This is one of the angles (there are many others) from which we should aim for a new definition of riba(interest)

P.A.Mohamed Ameen