V. Economic Issues
1. Islam has an Economic System
Most people think that Islam provides us with a complete economic system and the only thing needed is its implementation in favorable circumstances. This notion is not correct.
It needs to be appreciated that man has been blessed with the faculty of intellect and reason and has also been blessed with innate guidance regarding good and evil. In the affairs of life, his intellect and innate guidance are generally enough to guide him and show him the way. It is only at certain crossroads that he needs divine guidance to select the right way. Consequently, in all such affairs a detailed system of directives has not been divinely revealed to guide mankind: only a broad outline has been given in the form of a set of rules and regulations which must be adhered to. Bearing this in mind, intellect and reason must evolve a system suited to the requirements and needs of a society. Since these requirements vary with time and place, the resulting systems will also vary accordingly. However, these systems shall be based on the same set of rules and regulations. In other words, the shari'ah, which is a set of rules and regulations is divine and, therefore, eternal, but the system evolved upon this shari'ah is a human inference and, therefore, flexible. This flexibility, obviously, has been left to accommodate changing circumstances and evolutionary developments of human societies.
Therefore, instead of extracting an economic system from the Qur'an and Sunnah which, of course, does not exist, all out efforts should be made by Muslim scholars to derive the economic shari'ah of Islam. The task of formulating a system on its basis should be left to the economists and to those who understand the intricacies of this field.
2. Interest is analogous to Rent
There are people who justify the charging of interest by saying that it is money charged for the amount lent and in this way is like the rent of a commodity. In other words, they contend that just as a person pays rent for using a house, he pays rent for using money borrowed and this rent for money borrowed is interest. Thus if charging rent is allowed, then interest should also be allowed.
An analysis of this argument shows that the analogy drawn is not correct. Rent is the money charged on commodities which are "used" and not "used up". These commodities remain intact and do not have to be recreated when they are required back; they only need to be handed back to their owner. Thus while a house which is rented is used such that it remains intact, money which is borrowed is used up and it does not remain intact; it is consumed on whatever it was borrowed for. In order to return, the borrowed money it needs to be recreated or reproduced and some more money over and above the borrowed amount too needs to be produced to pay back as interest.
Technically, it can be said that interestis charged on circulating capital whereas rent on fixed capital.
3.Taking Interest for a Noble Cause
Some people are of the view that interest can be charged if it is to be spent on philanthropic ventures.
It needs to be appreciated that taking interest is forbidden in Islam even if it is taken for a noble cause.Islam requires that both the means and the objective of an enterprise be morally justified. It does not condone the "Robin Hood" concept of achieving noble objectives through ignoble means. Its objective is to purify a person's concepts and his deeds from any semblance of evil. Its message is to strive in the right direction whether the objective is achieved or not – for achieving an objective depends not on a person's efforts; it depends on the will of Allah. It is not our obligation by any means to spend money on philanthropic causes when we do not have it from the right means.
An example from the Qur'an may help in illustrating this point: gambling and drinking in pre-Islamic times were a means through which the rich showed their generosity and helped the poor and needy. In winters, when cold winds blew in and caused conditions akin to drought, the courageous would gather at various places, drink liquor and, in their state of inebriation, slaughter any camels they could get hold of. They would pay the owner of the camels whatever price he demanded. They would then gamble on the meat of the slaughtered camels. Whatever parts of meat a person won in this gambling, he would generously distribute them among the poor who would gather around on such occasions. In pre-Islamic Arabia, this was a matter of great honour and people who took part in this activity were considered very philanthropic and generous. The poets would narrate the accounts of their benevolence in their odes. On the other hand, people who stayed away from this activity would be called barm (stingy).
It was this very benefit of drinking and gambling which prompted people to make an inquiry when they were regarded as prohibited items. The Qur'anasserted in its reply that in spite of serving this noble cause, they were instrumental in producing moral misconduct in an individual, which in no case can be allowed:
يَسْأَلُونَكَ عَنِ الْخَمْرِ وَالْمَيْسِرِ قُلْ فِيهِمَا إِثْمٌ كَبِيرٌ وَمَنَافِعُ لِلنَّاسِ وَإِثْمُهُمَآ أَكْبَرُ مِن نَّفْعِهِمَا (219:2)
They ask you about liquor and gambling. Tell them: there is great sin in them and some profits as well for people. But their sin is greater than their profit. (2:219)
In other words, despite having utility, drinking and gambling were prohibited since they cause moral misconduct.
Therefore, one should not charge interest even for philanthropic ventures.
4. Commercial Interest is not Forbidden in Islam
There are people who think that interest charged on ventures which are commercial in nature is not forbidden.
It should also remain clear that whether a loan is acquired for personal, business or welfare purposes, the real meaning of riba is not ascertained on these bases. It is an indisputable fact that in the Arabic language the word riba, irrespective of the aim of the lender and the condition of the borrower, just implies a pre-determined increase acquired on a loan. Consequently, the Qur'anitself has clarified this fact: during its own period of revelation, lending on interest for business purposes was quite rampant and these loans were given with the intention of prospering through the wealth of others. The Qur'an says:
مَا آتَيْتُمْ مِنْ رِبًا لِيَرْبُوَا فِي أَمْوَالِ النَّاسِ فَلَا يَرْبُوا عِنْدَ اللَّهِ وَمَا آتَيْتُمْ مِنْ زَكَاةٍ تُرِيدُونَ وَجْهَ اللَّهِ فَأُوْلَئِكَ هُمْ الْمُضْعِفُونَ (39:30)
That which you give as loan on interest that it may increase on [other] people's wealth, it has no increase with Allah; but that which you give as zakah seeking Allah's countenance, it is these people who shall get manifold [in the Hereafter] of what they gave. (30:39)
The expression "…that it may increase on [other] people's wealth"is not only inappropriate for application to interest-based loans given to the poor for their personal use, but is also clearly indicative of the fact that interest based loans were generally given for business purposes and in this way they "increased on other people's wealth"according to the Qur'an.
It is to this fact that the following verse also points:
وَإِنْ كَانَ ذُو عُسْرَةٍ فَنَظِرَةٌ إِلَى مَيْسَرَةٍ وَأَنْ تَصَدَّقُوا خَيْرٌ لَكُمْ إِنْ كُنتُمْ تَعْلَمُونَ (280:2)
And if the borrower is in difficulty grant him respite until it is easy for him to repay and if you write off [the debt], it is better for you, if you only knew. (2:280)
Amin Ahsan Islahi comments on this verse in the following words:
Today some naive people claim that the type of interest which prevailed in Arabia before the advent of Islam was usury. The poor and the destitute had no option but to borrow money from a few rich money-lenders to fulfill their personal needs. These money-lenders exploited the poor and would lend them money at high interest rates. It is only this type of interest which the Qur'anhas termed as riba and forbidden. As far as commercial interest is concerned, it neither existed at that time nor did the Qur'anprohibit it.
The verse categorically refutes this view. When the Qur'ansays that if the borrower is in difficulty, he should be given respite until he is able to pay back his debt, it clearly points out that in those times even the rich used to acquire loans. In fact, if the style and stress of the verse are correctly understood, it becomes clear that it was mostly the rich who used to procure loans. Indeed, there was a strong chance that the borrower would find himself in difficulty even to pay the original amount. The money-lender, therefore, is directed to give him more time and if he forgoes the original amount it would be better for him. The words of this verse strongly indicate this meaning. The actual words of the verse are:
وَإِنْ كَانَ ذُو عُسْرَةٍ فَنَظِرَةٌ إِلَى مَيْسَرَةٍ. The particle of condition ِانْ (if) is not used for general circumstances, but, in fact, is used for rare and unusual circumstances. For general circumstances the particle اِذَا (if) is used. In the light of this, it is clear that the borrower in those times was generally affluent (ذُوْمَيْسَرَة), but in some cases was poor or had become poor after acquiring the loan and in that case, the Qur'anhas directed the money-lenders to give them a time rebate.
He has concluded this discussion by saying:
Obviously, the affluent would have turned to the money-lenders not to fulfill their personal needs, but, of course, their business needs. So what is the difference between these loans and the commercial loans of today.
5. Interest can be taken from Non-Muslims
It is believed by some scholars that interest can be charged from Non-Muslims.
It needs to be appreciated that taking Interest is prohibited from a human being, whether he is a Muslim or a non-Muslim because of the fact that it is inherently an unethical contract. Things which are unethical are prohibited whether they relate to Muslims or to non-Muslims. In other words, just as one should be honest not only with Muslims but also with non-Muslims, similarly one should also not be selective on the basis of religion in taking interest.
Those who justify this practice refer to a Hadith. It should be noted that it is not sound and is also not found in the six major books of Hadith. Its content also contradicts the Qur'an.