WHY ISLAM PROHIBITS INTEREST/USURY (RIBA)?

Riba is prohibited in Islam as it appears explicitly in the Holy Qur’an. There is complete unanimity among all Islamic schools of thought regarding the prohibition of riba. Since the Qur’an is the undisputed source of guidance in Islam for all Muslims, there is unanimous agreement on the fact that Islam has forbidden the practice of riba. The debate on whether interest is riba or not has been settled. The ulama have made crystal clear that interest is riba. The modern banking system is organized on the basis of a fixed payment called interest. That is why the practices of the modern banking system are in conflict with the principles of Islam which strictly prohibit riba. Islam is opposed to exploitation in every form and stands for fair and equitable dealings among all men. To charge interest from someone who is constrained to borrow to meet his essential consumption requirement is considered an exploitative practice in Islam. Charging of interest on loans taken for productive purposes is also prohibited because it is not an equitable form of transaction

RIBA IN THE HOLY QUR'AN
1. (Surah al-Rum, verse 39) That which you give as riba to increase the peoples' wealth increases not with God; but that which you give in charity, seeking the goodwill of God, multiplies manifold. (30:39).
2. (Surah al-Nisa', verse 161) And for their taking riba even though it was forbidden for them, and their wrongful appropriation of other peoples' property, We have prepared for those among them who reject faith a grievous punishment. (4:161).
3. (Surah Al 'Imran, verses 130-2) O believers, take not doubled and redoubled riba, and fear God so that you may prosper. Fear the fire which has been prepared for those who reject faith, and obey God and the Prophet so that you may receive mercy. (3:130-2).
4. (Surah al-Baqarah, verses 275-81) Those who benefit from riba shall be raised like those who have been driven to madness by the touch of the Devil; this is because they say: "Trade is like riba" while God has permitted trade and forbidden riba. Hence those who have received the admonition from their Lord and desist, may have what has already passed, their case being entrusted to God; but those who revert shall be the inhabitants of the fire and abide therein for ever. (275).

RIBA IN HADITH
1. From Jabir: The Prophet, may peace be on him, cursed the receiver and the payer of riba, the one who records it and the two witnesses to the transaction and said: "They are all alike [in guilt]." (Muslim, Kitab al-Musaqat, Bab la'ni akili al-riba wa mu'kilihi; also in Tirmidhi and Musnad Ahmad).
2. Jabir ibn 'Abdallah, giving a report on the Prophet's Farewell Pilgirmage, said: The Prophet, peace be on him, addressed the people and said "All of the riba of Jahiliyyah is annulled. The first riba that I annul is our riba, that accruing to 'Abbas ibn 'Abd al-Muttalib [the Prophet's uncle]; it is being cancelled completely." (Muslim, Kitab al Hajj, Bab Hajjati al-Nabi, may peace be on him; also in Musnad Ahmad).
3. From 'Abdallah ibn Hanzalah: The Prophet, peace be on him, said: "A dirham of riba which a man receives knowingly is worse than committing adultery thirty-six times" (Mishkat al-Masabih, Kittab al-Buyu', Bab al-riba, on the authority of Ahmad and Daraqutni). Bayhaqi has also reported the above hadith in Shu'ab al-iman with the addition that "Hell befits him whose flesh has been nourished by the unlawful" (ibid).
4. From Abu Hurayrah: The Prophet, peace be on him, said: "On the night of Ascension I came upon people whose stomachs were like houses with snakes visible from the outside. I asked Gabriel who they were. He replied that they were people who had received riba." (Ibn Majah, Kitab al-Tijarat, Bab al-taghlizi fi al-riba; also in Musnad Ahmad).
5. From Abu Hurayrah: The Prophet, peace be on him, said: "Riba has seventy segments, the least serious being equivalent to a man committing adultery with his own mother." (Ibn Majah, ibid).
6. From Abu Hurayrah: The Prophet, peace be on him, said: "There will certainly come a time for mankind when everyone will take riba and if he does not do so, its dust will reach him." (Abu Dawud, Kitab al Buyu, Bab fi ijtinabi al shubuhat; also in Ibn Majah).
7. From Abu Hurayrah: The Prophet, peace be on him, said: "God would be justified in not allowing four persons to enter paradise or to taste its blessings: he who drinks habitually, he who takes riba, he who usurps an orphan's property without right and he who is undutiful to his parents." (Mustadrak al Hakim, Kitab al-Buyu).

Translation – Bahasa Melayu

Riba adalah dilarang sama sekali (haram) dalam Islam kerana penegahannya telah dimuatkan di dalam kitab suci Al-Quran serta hadis-hadis (seperti di atas). Para ulama juga telah sepakat tentang hukum berkenaan riba. Sistem perbankan moden adalah berlandaskan bayaran tetap yang dinamakan faedah, dan oleh sebab itu dasar penbankan moden ini bercanggah dengan prinsip Islam yang menegah riba. Islam menentang sebarang bentuk penindasan dan berlandas kepada keadilan. Untuk mengenakan faedah kepda seseorang yang meminjam untuk kegunaan/keperluan asas dianggap sebagai suatu bentuk penindasan dalam Islam. Mengenakan faedah untuk pinjaman bagi kegunaan produktif juda dilarang kerana is bukanlah transaksi yang adil.

LEADERS IN ISLAMIC FINANCE SUMMIT 2009

Although expanding at a healthy rate, the Islamic finance industry has failed to maximise its growth potential over recent years. However, since the collapse of conventional banking and capital market systems, global interest in Islamic finance is growing rapidly as financial institutions around the world clamber for liquidity.

This summit that will be held in Doha, Qatar (April 19-21 2009) will give rise to an opportunity for the industry to address common problems and work together to help drive the growth of Islamic finance. Let us see what happens afterwards - will there be any initiatives/actions or will there be "same all same all"?

“…We never waste the reward of anyone who did good." (Quran 18:30).

Translation - Bahasa Melayu

Walaupun berkembang dengan kadar yang agak sihat, industri kewangan Islam gagl untuk memaksimakan potensi pertumbuhannya. Tetapi, sejak kegagalan perbankan konvensional dan sistem pasaran saham, kecenderungan global pada kewangan Islam telah berkembang dengan pesatnya terutama ketika institusi-institusi kewangan seluruh dunia mencari-cari kecairan.

Sidang yang akan diadakan di Doha, Qatar (April 19-21, 2009) akan memberi peluang kepada industri ini untuk menangani permasalahan dan bekerjasama untuk meningkatkan pertumbuhan kewangan Islam. Marilah kita sama-sama lihat keputusannya - apakah akan ada inisiatif-inisiatif baru atau hanya ada keputusan-keputusan sama dan "basi"?

SCIENCE VERSUS RELIGION

People sometimes say that 'religion should not interfere with science', but if God has prohibited interest then which man has the right to contradict Him? Isn't it science that has interfered with religion?

The members of the Vienna Circle (secular economists) believe that the scientific world-conception is marked by the application of logical analysis, thus rejecting religion without realising the extent to which religion has played a role in formulating their own ideas. When we examine Western economic thought from the last three centuries, we might reasonably argue that Classicism, Marxism, Keynesianism and Monetarism are its four leading schools. Yet we do not see these schools as representing the ideas of 'Jewish economics' even though Ricardo, Marx, Keynes and Friedman were Jews. Their ideas are presented simply as 'economics'. An economics in which the practice of interest goes largely unchallenged. Interest is the price of money, no justification required.

Islamic economics differs fundamentally from man-made laws and systems in defining economic problem. It represents the only wholly independent, alternative economic paradigm in the world today. It is based on principles revealed from Islamic sources as norms for human welfare that offer a strikingly alternative set of parameters for economic activity. Because Islam differentiates between the basic needs and luxuries, there exists no concept of relative scarcity of resources in Islam. The resources available on earth are sufficient to secure the basic needs (food, clothing, and shelter) of fifty billion human beings. Such a misunderstanding has concealed the reality that starvation, poverty, and economic backwardness, result from misdistribution exasperated by man-made laws and systems.

"But seek, with the (wealth) which God has bestowed on you, the Home of the Hereafter, nor forget your portion in this world; but do good as God has been good to you, and seek not mischief in the land; for God loves not those who do mischief." [Quran (Al-Qasas), 28:77]

Translation – Bahasa Melayu

Orang mengatakan bahawa agama tidak boleh dicampuradukkan dengan sains, tetapi jika Allah s.w.t. menegah riba jadi siapakah yang berhak/berani menentang suruhanNYa? Bukankah ini bermakna yang sains telah bercampur dengan agama?

Pakar-pakar ekonomi sekular pada sidang di Vienna percaya bahawa pandangan saintifik dunia adalah diapplikasikan menggunakan analisa logik semata-mata, dan mengenepikan agama tanpa menyedari bahawa agamalah yang telah memainkan peranan dalam mereka memformulasikan idea-idea mereka selama ini. Apabila kita meneliti pandangan pakar ekonomi dari Barat sejak tiga abad dahulu, kita dapati bahawa terdapat empat cabang ekonomi iaitu Classicism, Marxism, Keynesian dan Monetarism – walaubagaimanapun kita tidak nampak bahawa mereka ini (Ricardo, Marx, Keynes dan Friedman) adalah Yahudi – idea mereka adalah ekonomi Yahudi, di mana penggunaan faedah/riba sebagai harga untuk wang tidak disanggah sama sekali.

Ekonomi Islam amat berbeza dari hukum dan sistem buatan manusia dalam menangani masalah ekonomi. Ia merangkumi segala paradigma ekonomi yang ada di dunia masakini. Ianya berlandaskan prinsip-prinsip dari Al-Quran dan Sunnah dalam menangani permasalahan ejonomi untuk kebajikan manusia sejagat. Tiada konsep sumber terhad dalam ekonomi Islam - kerana Islam membezakan antara keperluan asas dengan keperluan mewah. Semua sumber yang ada di bumi ini cukup untuk keperluan asas umat manusia (makanan, pakaian dan tempat tinggal). Salahfaham yang wujud tentang kebuluran, kemiskinan melampau dan kemunduran ekonomi adalah datangnya dari ketidakseimbangan/ketidakcekapan dalam hukum dan sistem buatan manusia sendiri.

CONVENTIONAL FINANCE VERSUS ISLAMIC FINANCE

Finance is defined as a branch of economics concerned with resource allocation as well as resource management, acquisition and investment. Simply, finance deals with matters related to money and the markets.

Ideally, Islamic economics is economics in accordance with Islamic law. Islamic economics can refer to the application of Islamic law to economic activity either where Islamic rule is in force or where it is not; i.e. it can refer to the creation of an Islamic economic system, or to simply following Islamic law in regards to spending, saving, investing, giving, etc. where the state does not follow Islamic law.

There have been many write ups and articles that give various definitions and variations between these two subjects, however, they are sometimes too difficult to be understood by normal, average layman. However, this does not mean that we (especially Muslims) can disregard the differences - in fact, Muslims should take the initiative to learn more about Islamic finance as to seek knowledge is a requirement –

"Every Muslim person has an obligation to demand and obtain knowledge" (Riwayat Ibn Majah, al-Baihaqi and Ibn Abd al-Barr)

Translation – Bahasa Melayu

Kewangan didefinisikan sebagai salah satu cabang ekonomi yang berkaitan dengan pengagihan dan pengurusan sumber dan pelaburan. Secara amnya, kewangan melibatkan perkara-perkara berkaitan dengan wang dan pasaran.

Secara idealnya, ekonomi Islam adalah ekonomi berlandaskan perundangan Islam yang boleh dikaitkan dengan mengapplikasikan undang-undang Islam kepada aktiviti ekonomi – ia juga boleh dimaksudkan sebagai suatu sistem ekonomi Islam yang hanya mengikut undang-undang Islam dari segi perbelanjaan, simpanan, pelaburan atau hadiah dsb di sesebuah negara/negeri yang tidak mengikut undang-undang Islam.

Ada banyak penulisan serta artikel-artikel yang memberi makna dan variasi tentang dua subjek ini, tetapi kebanyakannya adalah terlalu sukar difahami oleh orang kebanyakan. Walaubagaimanapun, ini tidak bermaksud bahawa kita (terutama umat Islam) boleh menutup mata tentang perbezaan antara keduanya – umat Islam sepatutnya mengambil inisiatif untuk mempelajari tentang kewangan Islam kerana menuntut ilmu pengetahuan itu adalah Wajib –

“Setiap orang Islam mempunyai kewajipan untuk menuntut dan mendapatkan ilmu pengetahuan” (Riwayat Ibn Majah, al-Baihaqi dan Ibn Abd al-Barr)