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Questions/Answers about Islam's Stance on Interest (Riba)
Author/Source: Junaid Hassan  (spaces.msn.com/junaidhasan) Posted by: Junaid Hassan
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Q: Is interest halal (permissible) in any form?
A: No. Taking of interest (Riba) is not only forbidden in the Qur’an (Al-Baqarah 275-281, Al-Imran 3:130) but Bible as well (Exodus 22:25, Leviticus 25:36, Leviticus 25:37, Deuteronomy 23:19, Ezekiel 18:13,17).

Similarly, it has been considered morally wrong and harmful for a society not only by some of the ancient economists but modern ones as well. See, for example:

• It's The Usury, Stupid! by Tom J. Kennedy, 2006. http://www.newmediaexplorer.org/chris/2006/01/12/its_the_usury_interest_stupid.htm

• Usury and Just Compensation: Religious and Financial Ethics in Historical Perspective by Constant J. Mews and Ibrahim Abraham, Journal of Business Ethics 72:1–15, 2007.
• Conflicts of Interest? The Ethics of Usury by Martin Lewison, Journal of Business Ethics 22: 327–339, 1999.

Q: I mean buying things on lease or getting loan on lease etc., are these allowed in any way or any case?
A: Please note the following points which would help answer your question:

1. Interest is defined as a fixed increase which a lender demands from the borrower just because the former has given the latter the permission to use some amount of money for a certain period of time.

2. Interest is only related to consumable items e.g., money, food etc. The additional money one pays on monthly basis on buying, for example a car or house, is rent, not interest. However, in such cases, the ownership must reside with the seller until or unless the buyer pays the agreed upon amount in full. If the buyer fails to pay the full amount, the item, a car, house or whatever, must be returned back to the owner.

3. Taking of interest or to help someone in taking it (e.g., writing interest’s agreement or going to collect interest money on someone’s behalf etc.) is prohibited in Islam. Whereas, to pay interest is neither prohibited in the Qur’an nor the Hadith. People have understood a hadith (Sahih of Muslim no. 4093) wrongly due to which they hold that paying it is prohibited too. That hadith forbids to “cooperate or assist” someone in business of interest and some people argue that to pay interest is, in fact, to assist interest’s business. Though, the one who pays it does so out of helplessness and does not intend to cooperate or assist someone in interest’s business, therefore, the wrongdoer is only the one who demands it.

Q: Should a study loan option be considered?
A: Yes, in my opinion, it should be considered when one does not have sufficient means to assist one’s studies. As I have discussed above, only taking of interest is a sin. The one who pays it cannot be deemed as a sinner, for he is wronged and treated unfairly with.

Even if we agree for a moment that paying of interest is also prohibited, still, one may be exempted from all Islamic rulings in cases where one becomes helpless. For example, if a Muslim woman has to deliver a child and there is no female doctor around, she can go to a male doctor. This is a helpless situation in which the lives of the mother and child, of course, are far more important than to cover mother’s private parts from the male doctor. Similarly, in your case, when it seems impossible for you to carry on your studies without taking a loan on interest, you may go for it.

Further Comments:
Interest is an evil which has become a part and parcel of our economy; no one can flee from it at this time. When wrongdoings make such a place in a society, Islam teaches to finish them gradually.

The best example is the evil of slavery in the Arab society in the time when the Qur’an was revealing. The Qur’an did not finish it overnight because it simply was not possible. Had it given an instant order to free all slaves, the whole Arab economy which was based on slavery would have immediately collapsed. Secondly, there were old, sick and handicap slaves who, if instantly freed, would have found no means of sustenance but to go for begging. Similarly, there were young maids who would have gone for prostitution and young men who might have become thieves. Islam first improved people’s awareness about the problem by introducing the concept of equality in the society, then paved way to help the slaves become self sufficient to live on their own and, in the process, closed the door, for everyone, to make new slaves. In the same way, instead of eradicating interest overnight which would collapse our economic system in a single moment, wisdom as well as the model of the Quranic reformations suggests that we should think of alternative ways to get rid of it and, in the meanwhile, tolerate it until an alternative system is fully functional. (By tolerating, I do not mean to back it up but let interest-based institutions, e.g. banks, work.)

I hope this would be helpful. Should you have any other query, please feel free to write. Of course, Allah knows the best and we are only the students of His D’in.

Thank you.




The above answers are based on Alama Javed Ahmed Ghamidi’s research. For further reading please see his book: Meezan, 3rd ed., Chapter: Qanoon-e-Maeshat (Lahore: Al-Mawrid, 2008), p. 508 to 512. Available online here: http://www.ghamidi.org/

For the English version, please see: http://www.monthly-renaissance.com/issue/content.aspx?id=308

yusufabi The best, clearest explanation I have seen of how to understand and deal with the problem of riba in the modern economy.
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