RIBA & QURANIC VERSES
DR. S. M. ALAM
Oct 17 - 23, 2011
The charge made (or price paid) for the use of loanable funds is called interest. The rate of interest is amount payable, usually expressed as a percentage of the principal sum borrowed, per period of time, usually per month, quarter, or year. Financial intermediaries will commonly both borrow and lend funds. Their profitability depends on the difference between rate which they are willing to pay depositors and the rate they charge borrowers.
Interest rate may be calculated on a simple or a compound basis. Simple interest involves a percentage return on the principal per period, whereas compound interest involves a return based on both the principal and accumulated interest already paid in the previous periods.
A simple interest signifies advantage, benefit premium paid for the use of money and normally refers to the additional or extra income in form of a profit, which a lender recovers from the borrower according to a fixed rate over and above the principal amount. Interest refers to excessive or exploitative profits.
In the Islamic terminology, interest means an effortless profit. It is a loan with the condition that the borrower will return to the lender more than and better than the quantity borrowed. Islam clearly condemns usury (interest) and Islam allows profit through trade, but prohibits interest, because of the negative effects of the fixed interest-bearing loan.
Descriptions about interest (usury) from the different Surahs of the Holy Quran:
1. In Surah Baqarah 2, Verse 275: Those who subsist on usury shall not stand (before Allah) except as stands on whom Satan has driven to madness by his touch. That is so because they say: "trade is just like usury". But Allah has permitted trade and forbidden usury. After receiving the admonition from his Lord whoso desists, he shall retain what he received in the past. And his case is with Allah for judgment. And those who repeat (the sin), shall be companions of the Fire, to abide there in permanently.
2. Surah Baqarah 2, Verse 276: Allah obliterates the benefits of usury and increases those of charity and Allah does not love any ungrateful sinner.
3. Surah Baqarah 2, Verse 278: "O you who believe! Fear Allah and give up what remains of your demand for usury, if you are indeed believers."
4. Surah Baqarah 2, Verse 279: "But If you do it not, then beware of war from Allah and his Messenger (PBUH) and if you repent, you shall have back your principals. Deal not unjustly and you shall not be dealt with unjustly."
5. Surah Al-Imran 3, Verse 130: O you who believe! Devour not the usury multiplied manifold; and fear Allah that you may prosper."
6. Surah Al-Nisa 4, Verse 161: That they took usury though they were forbidden the same and they devoured peoples wealth wrongfully and We have prepared for the disbelievers among them who reject faith a grievous torment.
7. Surah Al-Room 30, Verse 39: And whatever you give as interest to increase the property of people it does not increase with Allah, and whatever you give towards the charity seeking the countenance of Allah, it is these who will get a recompense manifold.
Allah does not bless usury (interest). He decreases the property acquired by means of usury. On the other hand, He blesses alms and increases the property acquired through resources on which alms have been given.
i) The Prophet Muhammad (PBUH) cursed people who pay interest, those who collect it, those who write an agreement based on it and those who witness such an agreement.
ii) On the night of Ascension, the Prophet (PBUH) noticed some persons with inflated stomachs. On enquiry, he learnt that they used to take usury during their lifetime.
iii) On the day of the conquest of Makkah, the Holy Prophet (PBUH) announced that the entire pagan institution of usury lay crippled under his feet.
iv) Receiving usury is equivalent to 73 sins, the most minor of which is committing adultery with one's mother.
v) Interest may temporarily increase your wealth but ultimately it will cause shrinkage in it.
vi) Holy Prophet (PBUH) said: A time will certainly come over the people when none will remain who will not devour usury. If he does not devour it, its vapor will overtake him.
vii) The Messenger of Allah said: A dirham of usury that a man devours and he knows is greater than 36 fornications.
viii) The Messenger of Allah said: Avoid the seven great destructive sins, (i) To join worship along with Allah, ii) To practice sorcery, iii) To kill a person which Allah has forbidden except for a just cause, iv) To eat up riba (usury), v) To eat up an orphan's wealth, vi) To show one's back to the enemy and fleeing from the battlefield at the time of fighting, and vii) To accuse chaste women who never even think of anything touching their chastity and are true believers.
Interest would cover all types and forms of exploitation such as usury, graft, robbery, bribery, unequal exchange, monopoly earnings, profiteering and income through corrupt practices. Earning interest through different banks or from any other institutions is illegal. The Holy Quran has strongly condemned this type of income on the strongest terms. Banks or other institutions have taken so- called Fatwa with the connivance of the local mufties, moulvies, alims etc. declaring that banks earnings are legal and free from riba or interest. As being Muslim, our 'Muslaks i.e. Faith' are only Allah, Rasul (PBUH) and the Holy Quran. Being followers of Islam, we must strictly follow what our Allah, His Prophet (PBUH) and the Holy Quran have pointed out to the 'Momins' about the 'Interest or Usury'.