Usury and Interest in Banking System: An Islamic Perspective

USURY AND INTEREST IN CONVENTIONAL BANKING SYSTEM:
AN ISLAMIC PERSPECTIVE

By

Jibo Nura

E-mail:jibonura@yahoo.com
(9th October,2004).
There have been much talk and debate on the position of Islam as regards to Usury and Interest in financial institutions, most especially the Banks whereby majority of the scholars and writers hold the view that the duo
(Usury and Interest) are synonymous; hence they submit that either words means increase, grow or exceed on the principal or excess or addition paid over principal, which is strongly prohibited by the Qur'an. However, other scholars opined that the concept of Usury and Interest is a clear one and it all depends on ones level of indulgence and/or commitment to the former, especially when it comes to money lending where the money is advanced for consumption purposes etc, whereas the latter they said, is a reasonable charge for the use of money employed in productive process. And they concluded that "Interest, therefore is not prohibited by the Qur'an".

Today, the discourse will focus on the above arguments from more realistic Islamic points of view with the hope of driving an object between the two diversionary/reactionary schools of thought; so that in the end one can unconditionally succumb to the other. But before we proceed, let's look at the literal meanings of these two words in a simple lexicon.
Interest- "Is the extra money paid in return for borrowing money or that which one receives when he/she invests money". Usury on the other hand, "Is the practice of lending money to people at unfairly high rates of interest".

From these definitions, it suffices to see that there is distinction between the words but comparatively one can also see clearly that they are not quite unconnected with certain complements and similarities.

However, Islam and Islamic doctrines, especially in the early part of the 7th century of the Christian era have absolutely condemned the institution of interest. The Qur'an says " Ya ayyuhallazina amanu ittakullaha wa zaru ma bakiya min-al Riba in kuntum mu'uminin. Fa illam taf'alu fa'zanu bi harbin minallahi wa rasulih. Wa in tubtum falakum ru'usu amwalikum la tadhlimuna wala tudhlamun". Meaning: O ye, who believe, have fear of Allah and waive what is still due to you from usury, if your faith be true; or war shall be declared against you by Allah and His apostle. If you repent, you may retain your principal, wronging none (with increase) without being wronged (by suffering a loss). (Q 2: 278-279).

Here, the conflicting views of the scholars on the above verses is that the entire verses they said, generally defined increment in terms of interest/ usury on money lending in whatever ramifications as an abomination. Hence, some tried to draw their own explanation based on the understanding of the facts they hold at hand. But as Dawud Mustafa (Abu Muhammad) quoted Imtiaz in his "Islamic critique of the institution of interest", i.e. "Both interest and usury are similar on the fact that they are both increases that are paid on the principal by the debtor to the creditor. They differ, however, on the amount of increase. Usury is an exorbitant illegal increase, while interest is a reasonable unlawful increase". But this view is diametrically opposed by some fuqaha (Islamic researchers and jurists) who submit that: God in His infinite mercy has made the position of usury clear in the Qur'an by saying:

"Ya ayyuhallazina amanu la ta'akulul Riba ad'afammuda'afah. Watta kullaha la'allakum tuflihun",Meaning: O believers, devour not usury, doubling its rates many times. Have fear of Allah, and you shall prosper. (Q3: 130).

Now comparing the three verses of the two chapters (2&3) and the two divergent interpretations by the ulamas, one can drive a genuine and rational explanation by querying thus: Are Ulamas trying to assert that these verses (the ones in suratul Baqra and the other in suratul Imran) have counter explanations as to the concept of Riba? Or were they not clear and able to read adequate meanings into the verses? First, let's beware that: none of the Qur'anic verses have a counter and/or conflicting explanation of each other. Secondly, all the verses in the Qur'an are devoid of intricacies unless they are misconceived by the interpreters. For instance, when Allah says in the above verse "O believers, devour not usury, doubling its rates many times?" He does not say it is only when 'Riba' is doubled, tripled or even quadrupled that it becomes forbidden. No, it was the ulamas that say" ila adh'afin kathira", which means it's just about an increment. Period! And this issue of Riba is explicitly stated in other Qur'anic verses with the same imports. For example, God says "Wama ataitum mirriballiyarbuwa fi amwalin nasi fala yarbu inda-Allahi wama ataitum min zakatin yuriduna wajhallah. Fa'ula'ika humul mudh ifun", i.e. .That which you give in usury so that it may increase in other people's property will not increase with Allah; but the alms you give for His sake shall be repaid to you many times over.(Q30: 39). And elsewhere in the Qur'an Allah says "Those who take usury shall rise up before Allah like men who Satan has demented by his touch; for they claim that usury is like trading. But Allah Has permitted trading and forbidden usury. He that receives an admonition from his lord and mends his ways may keep what he has already earned; his fate is in the hands of Allah. But he that pays no heed shall be among the people of the fire and shall remain in it forever"(Q2: 275)

Again, Abu Muhammad cited Afzalur- Rahman in 1979, i.e. "The concept of interest as connoted by the word Riba(usury) in the Qur'an is one of those subjects which have been misconceived and deliberately misinterpreted and wrongly criticized by some modern muslims who may have never gone through the Qur'an in their life". He also asserted that other religions and non-Muslim scholars have condemned Interest with all its associated evils. Thinkers and philosophers such as Aristotle and Plato unequivocally condemned Interest as being exploitative and unjust. Karl max was also not comfortable with interest that he considered it as theft. They strongly believed that it has greater negative effect on the universal economic well being of societies. It is also due to its injustice and exploitative tendency that it was outlawed by religions such as Judaism and Christianity. In Judaism under Deuteronomy, it says: "Thou shalt not lend to thy brother money to usury, nor corn, nor any other thing, but to the stranger. To thy brother thou shalt lend that which he wanted, without usury: that the Lord thy God may bless thee in all thy works in the land, which thou shalt go into posses.
(Deut23:19-20). And still in Judaism under Leviticus, it states "Take not usury of him nor more than thou gavest. Fear thy God that thy brother may live with thee. Thou shall not give money upon usury: nor exact of him any increase of fruits (Levit 25: 36-37). So also the same Judaic import under exodus, explains " If thou lend money to any of my people that is poor, that dwelleth with thee: thou shalt not be hard upon them as an extortioner, nor oppress them with usuries. (Exodus 25: 25).

Christianity, however, forbade interest and usuries. For instance, the Bible queried thus: "And if you lend to them of whom you hope to receive, what thanks are to you? For the sinners also lend to sinners, for to receive as much. But the Bible suggests " Love ye your enemies: do good, and lend, hoping for nothing thereby: and your reward shall be great, and you shall be the sons of the Highest?" (Luke 6: 34-35).

From the foregoing therefore, it become compulsory upon the entire Muslim world and the Islamic Banking movement to take a pause and resolve once and for all the debate on Riba and Interest based on the following cardinal questions:
One: Is the modern interest being charged by conventional Banks the same as Riba mentioned in the Qur'an?
Two: Are these conventional Banks driving their profits out of the interest being generated by them, and do they pay their employees from that profit? If so, what is the status of those employees in Islam?
Three: How about the issue of purchasing shares from these conventional Banks whereby the shareholder would be given excess based on the Interest and growth of his/her capital (principal)?

Akulu kauli haza wa'astagfirullah li walakum (May Allah forgive me and you)

TO BE CONTINUED.

Jibo Nura .
E-mail: jibonura@yahoo.com