BANK LOAN - A BOON OR A BANE
Oct 26 - Nov 01, 2009
Taking loan and its timely repayment is a great achievement and if the payment is irregular or stopped then it turns out to be a curse for the borrower. Before taking loan from a bank one must think 100 times for its timely repayment, otherwise in the end it will be a troublesome matter.
The bitter truth about Pakistan is that it is running its financial affairs totally on loans, advances, or grants from international finance institutions and its external debts and liabilities have surged to over 50.9 billion US dollar.
So far, billions of foreign loans have been injected into the country's tumbling economy. At the moment, the economy is facing multiple challenges. These challenges inter alia include wheat crisis, food inflation, sugar crisis, stagnating exports, trade deficit, budget deficit, power shortage, lower literacy rate, poor health-care facilities, unemployment, poverty, robbery, terrorism, and a widening gap between the rich and the poor.
Bank's loan is giving of money by the bank in form of advance to a needy person to purchase different things according to his need on certain terms and conditions.
A borrower has to pay back the money with sizable and heavy interest rates in a clearly specified period. The impact of interest rates is so large that at the end of the payment duration, bankers actually would earn twice the loaned amount.
There are different needs for which a person requires loan. The loans are required for various purposes such as for buying plots, flat, agricultural lands, purchase of house, cars, education of children, fishing and fish farming, textiles, water supply, marriage of children, opening of hotels, commerce and trade (transport, storage), or investments.
Escalating interest rates have various economic effects such as increased cost of borrowing, increase in mortgage interest payments and discouraging consumer and business confidence.
As far as Pakistan's economy is concerned, interest rate hike is making dent on almost every sector along with making individual's life miserable.
This has resulted in (i) decline in credit-off take ii) impediment to auto sector growth (iii) block in new investment, (iv) and slackness in real estate sector.
Interest rate all over the world is showing a downward trend, while in Pakistan the central bank has kept the rate to 13%.
Pakistan is among those few countries of the world where there are the highest mark-up rates. This is evident in the following comparison.
(In percent): Pakistan (13), Egypt (9), South Africa (7.5), China (5.31), India (4.75), Korea Republic (3), Australia (3), New Zealand (2.5), Taiwan (1.25), European Central Bank (1), United Kingdom(0.5), Hong Kong (0.5), US (0.25), Canada (0.25), Switzerland (0.25), and Japan (1).
Taking and giving interest is totally forbidden in Islam. Therefore, there is no sense of taking and giving interest.
Interest (riba) is the basic cause of ills by which economies suffer from such as unemployment, inflation, depression, income inequalities, poverty, social unrest, and terrorism.
We must stop taking loan from any source. Taking loan is a serious burden on debtor.
The Quranic injections and interpretations forbidding interest, which implies increase, addition, expansion, gain, multiplication, accumulation, or growth and refers to the additional amount, which a lender recovers from the borrower according to a fixed rate over and above the principal amount.
According to Quranic illustrations, interest or riba may be interpreted to include an addition to the principal amount for a particular time limit.
Islamic law prohibits interest or riba, the collection and payment of interest. This prohibition is strict, absolute, and unambiguous.
Interest, in fact, is fundamentally repugnant to the sprit of Islam. Islam does not, on humanitarian grounds, permit the charging of interest on consumption of loans as needy persons for meeting their essential consumption needs take these loans. The charging of interest on such loan amounts is exploitation and Islam opposes exploitation in all forms. There is no concept of loans and credits in Islam for financing, trade, and agriculture.
DESCRIPTIONS FROM THE HOLY QURAN
1. Surah Al-Baqarah 2, Verse no. 275: Those who eat Riba (interest) will not stand on the day of Resurrection except like the standing of a person beaten by Shaitan leading him insanity. That is because they say: "Trading is only like Riba", whereas Allah has permitted trading and forbidden Riba.
So whosoever receives an admonition from his Lord and stops eating Riba shall not be punished for the past; his case is for Allah (to judge), but whoever returns (to Riba), such are the dwellers of the Fire-they will abide therein.
2. Surah Al-Baqarah 2, Verse .276: Allah will destroy Riba and will increase for Saddaqat (deeds of charity, alms etc.). And Allah likes not the disbelievers, sinners.
3. Surah Al-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 Al-Baqarah 2, Verse 279: But if you do it not, then beware of war from Allah and His Apostle; and if you repent, you shall back your principles; do not wrong (others) and you shall not be wronged.
5. Surah Al-Imran 3, Verse 130: O you believe! Devour not the usury multiplied manifold; and fear Allah so that you may be successful.
6. Surah An-Nisa 4, Verse 161: And (because) they took usury, though they were forbidden the same and (also) because they consumed (other) people's property wrongfully; and We have prepared for disbelievers among them a grievous torment.
7. Surah Ar-Rum 30,Verse 39: And whatever you give as interest to increase the wealth of people, it does not increase with Allah: and whatever you pay towards the obligatory charity seeking approbation of Allah, it is they who are to increase (their wealth) manifold.
Allah does not bless usury. 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.
Allah does not love those sinners who in spite of the divine favors of admonition and riches continue to receive usury and consider it legally valid. That reflects rank ingratitude plus contumacious sinfulness on their part.
i) 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 life time.
ii) On the day of the conquest of Makkah, the Holy Prophet announced that the entire pagan institution of usury lay crippled under his feet.
iii) Receiving usury is equivalent to 70 sins, the most minor of which is committing adultery with one's mother,
iv) Allah's curse is on these persons; who receive usury, who give it, who stand surety for its surety, who testify to it as witnesses and who write out the transaction deed about its payment.
v) Usury may temporarily increase your wealth but ultimately it will cause shrinkage in it.
From the above Quranic Ayats and the Traditions of the Holy Prophet Muhammad (PBUH), it is fully cleared that usury or interest is absolutely banned.
Earning usury through banks or from any other institutions is illegal and useless for everyone. The Quran has totally condemned this type of income in the strongest terms. Interest money from any bank, company, loan givers, any other source is totally impure.
In these days, people are depositing their hard cash in so-called Islamic banks on the pretext that the profits from such banks are free from interest and these banks have taken Fatawa with the connivance of mufties, molvies, and Alims saying that the such earnings are free from interest. Being followers of Islam, we must trust and follow only whatever our Noble Quran and the Holy Prophet Muhammad (PBUH) have ordered.