Professional Documents
Culture Documents
Interest
23rd December 1999
1
Introduction
On 14 Ramadan 1420, the Shariah Bench of the
Supreme Court of Pakistan gave its landmark decision
banning interest in all its forms
The Shariah Appellate Bench consisted of
1) Mr. Justice Khalil-ur-Rahman,
2) Mr. Justice Munir A Shaikh,
3) Mr. Justice Wajeehuddin Ahmad,
4) Maulana Justice Muhammad Taqi Usmani.
2
Arguments against the Shariah Court
FIRST ARGUMENT
The verses of the Holy Qur'an which prohibit riba
were revealed in the last days of the life of the
Holy Prophet, (S.A.W), and he did not have an
opportunity to interpret them properly.
3
SECOND ARGUMENT
The second argument runs on the basis that the
word 'riba' refers only to the usurious loans on
which an excessive rate of interest used to be
charged by the creditors. As far the modern
banking interest, it cannot be termed as 'riba' if
the rate of interest is not too much or unfair.
4
THIRD ARGUMENT
5
THIRD ARGUMENT
But the modern commercial loans are concerned, they were not in
the days of the Holy Prophet, (S.A.W), nor has the Holy Qur'an
addressed them while prohibiting 'riba' and the basic philosophy of
'riba' cannot be applied to these commercial and productive loans
where the debtors are not poor people. In most cases they are
wealthy or at least economically well-off and the loans taken by
them are generally used for generating profits. Therefore, any
increase charged from them by the creditors cannot he termed as
Zulm (injustice) which was the basic cause of the prohibition of 'riba'.
6
FOURTH ARGUMENT
The fourth says that the Holy Qur'an has prohibited riba-
al-jahiliyya. In which if the debtor could not pay off the
loan at its due date, the creditor would give him more
time against charging an additional amount. According to
this theory, if an increased amount is fixed in the initial
agreement of loan, it does not constitute riba al-Quran.
However, it does fall in the definition of riba-al-fadl,
prohibited by the Sunnah. Its prohibition is of a lesser
degree which can be termed as makrooh and not haram.
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FIFTH ARGUMENT
1. Surah Ar-Rum
9
Study of the Qur'anic Verses Dealing with Riba
2. Surah Al-i-'Imran
10
Study of the Qur'anic Verses Dealing with Riba
3. Surah Al-Baqarah
Those who take interest will not stand but as stands
whom the demon has driven crazy by his touch. That is
because they have said: 'Trading is but like riba'. And
Allah has permitted trading and prohibited riba. So,
whoever receives an advice from his Lord and stops, he
is allowed what has passed, and his matter is up to
Allah. And the ones who revert back, those are the
people of Fire. There they remain for ever. Allah
destroys riba and nourishes charities. And Allah does not
like any sinful disbeliever.
11
Study of the Qur'anic Verses Dealing with Riba
13
Arguments against the Shariah Court
FIRST ARGUMENT
The verses of the Holy Qur'an which prohibit riba
were revealed in the last days of the life of the
Holy Prophet, (S.A.W), and he did not have an
opportunity to interpret them properly.
14
ANSWER OF FIRST ARGUMENT
15
ANSWER OF FIRST ARGUMENT
16
It is argued that
19
"Those who take interest will not stand but as stands whom the demon has
driven crazy by his touch. That is because they have said: 'Trading is but
like riba'. And Allah has permitted trading and prohibited riba. So, whoever
receives an advice from his Lord and stops, he is allowed what has passed,
and his matter is up to Allah. And the ones who revert back, those are the
people of Fire. There they remain for ever. Allah destroys riba and
nourishes charities. And Allah does not like any sinful disbeliever. Surely
those who believe and do good deeds, establish Salah and pay Zakah,
have their reward with their Lord, and there is no fear for them, nor shall
they grieve.
O those who believe, fear Allah and give up what still remains of the riba if
you are believers. But if you do not, then listen to the declaration of war
from Allah and His Messenger. And if you repent, yours is your principal.
Neither you wrong, nor be wronged. And if there be one in misery, then
deferment till ease. And that you leave it as alms is far better for you, if you
really know. And be fearful of a day when you shall be returned to Allah,
then everybody shall be paid, in full, what he has earned. And they shall not
be wronged." [Al-Baqarah 2:275-281] 20
Mutashabihaat:
Riba does not fall in the category of Mutashabihaat.
Allah almighty declared war against those who indulge in the
practice of Riba.
How Allah Almighty wage war against a practice, which is
ambiguous in nature.
What is Mutashabihaat?
Some words in the beginning of different Surahs, the correct
meaning of which is only known to Allah.
Some attributes of Almighty Allah, the exact nature is not
imaginable.
21
Hazrat Umers Statement:
He stated that the Holy Prophet, Sall-Allahu alayhi wa sallam,
passed away before giving any specific direction with regard to
this difference of opinion about Riba.
The narration of his statement clearly reveals that:
1. All his concern about Riba was related to Riba al-Fadl and not to
Riba al-Nasiah which was prohibited by the Holy Qur'an
2. Even for Riba al-Fadl he did not feel difficulty in many
transactions which were clearly prohibited.
3. However, was doubtful only with regard to some transactions
which were not expressly mentioned.
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SECOND ARGUMENT
23
24
ANSWER OF SECOND ARGUMENT
25
26
ANSWER OF THIRD ARGUMENT
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ANSWER OF THIRD ARGUMENT
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ANSWER OF THIRD ARGUMENT
The words doubled and redoubled are implying that Riba is only
forbidden when the rate is excessive so as to make the payable
amount twice that of principal.
Since the Banking interest is normally not so high it is not covered
by this prohibition.
36
Does Riba only refers to excessive rates of interest ?
This argument is not valid due to the following reasons:
It is a well established fact that different verses of the
Holy Quran on a single subject must be studied in
combination with each other.
No verse can contradict another verse on the same
subject.
The verse 278 of Surah Al Baqarah clearly states that
give up whatever remains of Riba( )
This is further clarified in the following sentence
(
)
37
Does Riba only refers to excessive rates of interest ?
This argument is not valid due to the following reasons:
The verse (Al Baqarah 2:41) States:
Do not sell my verses for a little price.
Similarly the verse (Al Noor 24:33) states:
And do not force your slave girls to prostitution if they
want to remain chaste.
Interpretation of the Holy Quran should be based on
the explanation given by or inferred from the Ahadith. 38
Is Zulm the Illat or Hikmat behind the prohibition of
Riba?
39
Is Zulm the Illat or Hikmat behind the prohibition of
Riba (contd.)
40
FOURTH ARGUMENT
The fourth says that the Holy Qur'an has prohibited riba-
al-jahiliyya. In which if the debtor could not pay off the
loan at its due date, the creditor would give him more
time against charging an additional amount. According to
this theory, if an increased amount is fixed in the initial
agreement of loan, it does not constitute riba al-Quran.
However, it does fall in the definition of riba-al-fadl,
prohibited by the Sunnah. Its prohibition is of a lesser
degree which can be termed as makrooh and not haram.
41
ANSWER OF FOURTH ARGUMENT
42
the seller used to keep on increasing the amount
in exchange of additional time given to the
buyer.
Also Known As Riba Al Quran and Riba Al
Nasiah.
43
'riba al-fadl' or 'riba-al-sunnah
It means that the quantity on both sides must be
equal to each other and if the quantity of any
one side is more or less than this transaction is
also a Riba transaction, because in the tribal
system of Arab these commodities were used as
money. However, this transaction was termed as
riba by the Holy Prophet, Sall-Allahu alayhi wa
sallam, and this meaning was not covered by the
term 'riba al-Jahiliyya'. Therefore, it was called
as 'riba al-fadl' or 'riba-al-sunnah'.
44
Six Commodities
"Gold for gold, silver for silver, wheat for
wheat, barley for barley, date for date, salt for
salt, must be equal on both sides and hand to
hand. Whoever pays more or demands more
(on either side) indulges in Riba."
45
Bank Loans & Riba al-Fadl
It is argued that:
- Bank Loan is not Riba al-Jahiliyya but Riba al-Fadl since the interest
charged on loan is known from the outset.
- However, if the debtor is unable to repay the loan + interest in time, the
additional interest charged for time extension is Riba al-Jahiliyya
46
Bank Loans & Riba al-Fadl (contd.)
This line of argument is incorrect:
- Firstly, it does not matter whether Riba is charged at initial stage
or after the maturity of the loan
- Secondly, the Hadith dealing with Riba al-Fadl is referring to a
sale transaction and not to a loan. The exact words of Hadith are:
DO NOT SELL gold for gold, except in equal quantities and DO NOT
SELL the deferred for the delivered on the spot.
In a sale transaction on deferred payment basis, the seller cannot
ask the buyer to pay the price before the stipulated date; while in
loan transaction, the creditor may ask the debtor to repay at
anytime. The time stipulated in a loan transaction is of moral value
and is not legally binding.
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FIFTH ARGUMENT
48
ANSWER OF FIFTH ARGUMENT
49
Money is a commodity (Nature of Money)
- It is argued that
- Just as a merchant can sell his commodity for a higher price than his
cost, he can also sell his money for a higher price than its face value
OR
- Just as he can lease his property and can charge a rent against it, he
can also lend his money and can claim an interest upon it.
50
Money is a commodity (Nature of Money)