Your Questions Answered

Your Questions Answered


Ribaand Inflation

Question: It is evident that the value of the paper-currency has a trend of decrease in the inflationary situation. If a debtor who has borrowed a particular amount of paper currency repays the same amount to his creditor after a substantial time, the creditor can suffer the effects of inflation. If he demands of his debtor to pay more in order to compensate him for loss of value he has suffered, can this demand be treated as a demand for Riba?

Answer: An equitable inflationary adjustment does not come under the definition of Riba as this adjustment is meant to return the full value of the loan to the lender. It does not aim at giving any fixed, predetermined, time related gain on that loan.

The Qur'an indicates that if the borrower has to pay Riba, it is exploitation and oppression. Similarly, if the lender is not given his principal back, that too is exploitation and oppression (2:279).1

Modes of Financing

Question: If all the forms of interest or mark-up are held to be repugnant to the Islamic injunctions, what modes of financing do you suggest for (a) financing trade and industry; (b) financing the budget deficit; (c) acquiring foreign loans; and (d) similar other needs and purposes?

Answer: Before attempting to understand the answer to this question, it is important to keep certain general principles in mind:

i) In reformation of society in areas where not resorting to a gradual change carries the strong risk of causing greater evil, it is prudent and in consonance with Islam to adopt a gradual mechanism of change.

ii) Islam has not given any specific system for the economy. It has only given some ethical directives to purge the economy of such evils as cause or may cause oppression and, thereby, impair the purification of man's soul. Therefore, any strategy, procedure or system that does not violate these ethical principles and is in line with their spirit is acceptable to Islam for running the economy. It is needles to say that, as a common sense rule, the system itself should be a sensible and reasonable one.

iii) 'Ideals are often like stars. You can't always reach them, but you can use them to chart out your course'. That an ideal cannot be achieved immediately is not reason enough to distort it. For if the ideal is changed, then one can never reach the goal. No one in his right mind would suggest that corruption should prevail in society. But just because we cannot eradicate it fully right now, we should not have, say, only 60 percent eradication as our ultimate target.

One of the greatest sins that an individual or a people can commit is to change the Divine law or to interpret it wrongly. Even when this is done unintentionally, the consequences are far reaching. There are times when, owing to peculiar (and usually not-so-preferable) circumstances or owing to the failings of a people, it is not congenial to live up to an ideal. But that does not mean that the ideal is wrong in itself. It merely means that gradually the circumstances have to be changed and the failings overcome. If we can't eradicate corruption in our society, it does not mean that we should re-define corruption. Justification of failings in this manner closes the door to repentance and reform.

iv) Quite often, the solution to a problem lies in looking beyond given premises. A seemingly anomalous idea can sometimes offer the required breakthrough and, as such, such an idea as is presented by an established scholar deserves serious deliberation, if nothing else.

Now, in consideration of these general principles, one can say that whatever solution is adopted to solve the problems pointed in the question,

a) the solution may be implemented gradually so as to avoid imbalances in society

b) any solution that does not violate Islamic principles and guidelines may be adopted,

c) even if the solution is not practicable immediately, un-Islamic strategies should not be justified through the subterfuges of new definitions; rather, gradual change in circumstances that hinder the implementation of the correct solution should be made the aim,


d) help should be sought from economists to work out the solution. Scholars of Islam should give them clear guidelines regarding what Islam prohibits. But, it must be remembered that:

i) any real solution would entail some material sacrifice on the part of the affluent in society; for example if we wish to eliminate corruption, those who roam about in their BMW's and lament about the state of affairs in the country may have to settle down for a Toyota or even a Suzuki; the companions of the Prophet (sws) had to do much more to receive the blessings of Allah; God does not shower the blessings of His religion on those who do not have the moral courage to live up to nobler ideals.

ii) to make a breakthrough, new approaches are required; they in turn require moral courage, political will and sagacity.

Now, coming to the question specifically, let us take each issue seriatim:

a) Financing trade and industry

After the failure of three peoples2 to find an alternative to Riba as a basis for institutional credit creation (which is what banking is actually about), especially in working capital loans, it is high time we realised that, in a business enterprise, Riba is an indispensable basis for the extension of credit at an institutional level. The obvious corollary is that one must look not for an alternative to Riba as a basis for institutional credit creation but for an alternative to institutional credit creation itself as a basis for the economy. The notion may seen radical at first, but, as already pointed out, quite often the solution lies in exploring new frontiers, especially those that have been presented on the basis of serious academic work.3

In the analysis of any such solution, the point to remember is that apart from institutional credit creation, all other forms of financing would still be available, for example floating stocks, inducting new partners, better financial management, etc., and that when all are in the same boat no single person would have the competitive edge, which is more often the reason for seeking a loan than any other requirement.

Furthermore, the constraint on the private sector to set up large scale industry does not mean that the economy would be centrally controlled. In fact, this change may form the basis for a congenial mixed economy that not only promotes entrepreneurship and industry but does that without negating the interest of the majority for the sake of a selected few.4

b) Financing the budget deficit

It is unfortunate that our dependence on loans has reached a stage where we usually think of only one way to deal with the deficit in the budget: loans.

It is true that borrowing can help in mobilising resources and stimulating economic activity, but unless the borrowed funds are used with sagacity, effectiveness and long-term vision, the result can be a negative leverage that spells disaster in more than just one way.5

Instead of resorting to risky palliatives as deficit financing that have caused enough ill already, the government should try to move towards real solutions as expanding the revenue base and decreasing expenditure. This may not be as difficult as is usually imagined. For instance, Zakah is used on a very narrow basis to raise funds. Actually, it is a broad based tax (as well as an 'ibadah) which encompasses almost every kind of wealth produced in the economy, and funds raised thereby can be used for all state functions.6 This huge base for revenue has remained unexplored.7

Similarly, on the expenditure side, we seem to be unwilling to even explore the possibility of changing our expense structure. Not only is there the need the curb wasteful expenditure, but there is also the need to find ways to deal with counter-productive expenditure as debt-servicing we are stuck up with and with indispensable expenditure as defence.8

Until we learn to reduce the gap between our revenue and expenditure by expanding the revenue base, increasing production, expanding the production base and reducing and restructuring our expenditure, our reliance on loans can only add to our reliance on loans and to our woes.

c) Foreign loans

As already explained, when acquiring loans becomes unavoidable, paying Riba does not amount to co-operation with evil as such. Our country, however, should gradually come out of the situation where it has to borrow on Riba.

Suggestions for the Elimination of Riba

Question: If you are of the view that all the forms of interest are prohibited by Shar'iah, then what procedure will you suggest for eliminating it from the economy? If you prefer a gradual process, what strategy do you suggest for the purpose which may fulfil the requirements of the Holy Qur'an and the Sunnah?

Answer: The way the Qur'an eradicated evils as intoxication and slavery is an ample proof of the fact that in case of an evil that has pervaded the society to the extent that immediate abolition carries the risk of causing further evil at individual or collective levels, gradual process of reform is in consonance with the spirit of Islam provided that this allowance is not misused (2:173; 6:140 & 16:115).9

For some suggested strategies in this regard see Appendices 1&2. These strategies are suggestions at best, and any better strategy, so long as there is no conflict in it with the principles of Islam, may be adopted.

It must be stressed again that upholding moral values entails some material sacrifice. This sacrifice is rarely, if ever, detrimental to the interests of a nation. In fact, when the affluent in the society make sacrifice to ensure that moral values prevail, the whole society benefits.

It is only when these men, who are in authority and who have the power, are men of God that progress can be made in society without the exploitation of man by man. Although no claims are made in relation to the suggestions given in Appendices 1&2, it is indeed stressed that perhaps what the nation needs more than mere systems for elimination of Riba is a team of men of God and men of sagacity at the helm of affairs. Men who are not only pious but also aware of the fact that the ability of a nation to produce wealth depends not on the self-interest of a few individuals, but on a culture conducive to the production of wealth.

Among the required productive forces for the production of wealth are a variety of natural resources, science and technology, appropriate laws, law and order, a congenial environment for industry, commerce and services, a sense of proportion, and, above all, moral values. Setting up high-tech industries on borrowed funds, which industries benefit few at the cost of the interests of the majority can never be conducive to the progress of a nation, and no educated person should be fooled into believing that ensuring the nation the required assortment of resources at the cost of the interests of the selected few would be detrimental to the interest of the nation as a whole. Blocking resources through the requirement of collateral security and restricting them through interest rates not only kill true and indigenous entrepreneurship but also destroy the more elementary cultural and material advances that must pervade the economy to make good use of available facilities. As George Soule has put it:

Again and again, it has been discovered that a nation cannot much benefit by attracting large foreign loans and putting up highly mechanical factories, unless more elementary and cultural advances have created the readiness to make good use of these facilities. Education, health, desire for improvement, reasonably honest and orderly government, a harmonious interrelationship among agriculture, manufacture, commerce, and good transportation, are all found to be necessary….10

In relation to these general principles, the suggestions presented may be of some use even if they do not serve as a panacea for all economic ills.

Past Riba Transactions

Question: If all the transactions based on interest are held to be violative of the Islamic injunctions, what will be the treatment of the past transactions and agreements? Especially what procedure should the government adopt with regard to the previous foreign loans?

Answer: Foreign loans shall have to be paid with interest agreed upon as fulfilment of the commitment the government has made on behalf of Pakistan (5:1). In relation to domestic loans, the state is not bound to return the Riba it charged in the past on the loans it gave (2:275). Moreover, the state can stop all payments of Riba to domestic borrowers with immediate effect as those who are citizens or residents of the state have no right to violate its laws or to insist upon such violation (2:279). However, allowance should be given to such people as are dependent on Riba on various certificates etc. for their subsistence. The destitute are the direct responsibility of the state, and the state should take immediate steps to bear that responsibility directly before stopping payment of Riba to such people; also the state should feel the moral responsibility of bringing the nation out of the situation in which it has to borrow on Riba and of doing that as soon as possible so that in the eyes of God, it is not guilty of co-operation in sin.

Finally, at a later stage, laws should also be enacted to punish those who insist upon Riba bearing transactions even after no reasonable excuse is left for them to be involved in this crime. (2:279)

Guarantee in Riba Transactions

Question: Whether a creditor can fix time and rate of profit while the debtor saying Insha Allah, he will be able to earn and pay the same in time; failing which the guarantor may give profit asked for plus also a bonus or compensation for delayed payment, if any, also according to other arrangements regarding the loan. What will be the position if the system of insurance for the said profit is introduced?

Answer: When a lender fixes time and rate of gain ('profit') on the loan he gives, he demands Riba in effect. Guaranteeing something which is prohibited in Shari'ah amounts to co-operation in the commission of the evil Shari'ah has prohibited, and cannot be allowed (5:2)

Appendix 1

Some Basic Assertions for Bringing the Economy in Line with Islam

In the following lines, assertions related to Islam are based on the interpretation of the Qur'an and the Sunnah and on the ensuing spirit of this religion.

I Regarding Islam

1. Islam has not given any economic system. In fact, it has not given any social system. A system is essentially a set or assemblage of interconnected and interdependent things that form a complex unity1. If Islam had given social systems in that sense it would have been obsolete long ago. It has however given certain universal ethical principles for the purification of human soul.

2. In the case of vices which have pervaded society to the extent that their eradication in one stroke can only cause greater disruption and evil than the one which is sought to be rooted out, Islam has always had a gradual approach towards implementation (for example, its gradual prohibition of intoxicants during the Prophet's time -- sws)

3. Islam does not take away the freedom of an individual to own and use wealth. Only in exceptional cases, where the chances of exploitation are great, does it take away the right to 'use' wealth2. Also, it acknowledges the fact that there are natural differences among humans in relation to their abilities, circumstances and wealth. These differences create a harmonious society if each individual is given a fair and just opportunity to utilise his or her potential. Islam restrains the freedom of an individual seeking his or her material benefit only to the extent that there is no exploitation and that the collective and personal activities of an individual do not hinder his or her soul's purification, which purification is essential for enabling an individual to become a true servant of God. Purification of human soul is the underlying spirit of injunctions as the prohibition of Riba and of directives as the implementation of Zakah.

II Regarding Economics

1. There is no viable basis for institutional credit creation -- the primary function of banks -- apart from interest. If there had been, someone would have found it by now. The Jews tried it, the Christians tried it, the Muslims tried it3. All failed. It's time we started looking for an alternative solution rather than wasting further efforts on looking for alternatives to interest as a basis for institutional credit creation. Perhaps, the solution lies in looking for a banking-free economy rather than in looking for an interest-free banking system. A radical idea perhaps, but one that needs looking into, especially since preserving the existing structure of banking is not a Divine commandment.

2. Since, as Paul Samuelson has put it 'A thing is worth what people think it is worth'4, values can have the profoundest economic impact. In the promotion and preservation of any value, the affluent and the elite who are at the helm of affairs have a great role to play. It is not only through laws but also through personal example that values are inculcated. That is why it used to be a convention in true Islamic societies that a ruler's standard of living never went above that of an average person.

3. An economic system does not exist in isolation. Any successful economic guideline requires certain accompanying factors in the political, legal, social and cultural set-ups shaping the economy5.

III Recommendations

The economy should be re-structured on the bases of a just distribution of wealth and self-reliance in such a manner that gradually the government is left with no need to impose any tax on its citizens others than Zakah6.

Details of this suggestion, which is based on the ideas of Javed Ahmad Ghamidi7, are presented by Shehzad Saleem in the next appendix. While considering these suggestions in relation to budget making, the following points must also be considered:

1. Usually, policy makers in our country think of only one way of reducing the gap between revenue and expenditure: increasing the revenue -- which is generally done through additional borrowing or increased taxation or both. Yet, another way has always been there: reducing the expenditure -- the wrong kind of expenditure. Expenditure which eats up the stock of capital goods more quickly than it adds to it or leads to such patterns of production and distribution as make the rich richer at the cost of the development of the rest certainly needs to be curtailed. Changing the structure of expenditure requires courage, commitment and sagacity. But it can be done.

At the moment, the greatest curse our nation is facing is debt-servicing. Domestic debt servicing alone is around 60% of the total debt servicing in the revenue account. If the government, by taking the masses into confidence, musters up enough political support to get the majority vote on this one8, it can declare a moratorium on the payment of domestic debt on the basis of the Qur'anic verse which urges a lender to extend the time of ease for a borrower in straitened circumstances9. All interest payment on domestic debt can immediately be stopped on the grounds of interest being un-Islamic. The current value of debt may be linked to gold and re-payment assured on that basis so that no panic results. The facility of sale (through the Exchange) of marketable instruments of this debt may continue. The time-period for re-payment in gold (or value thereof) may be delayed for at least 15 years so that ample time is available for generating income by using the saved funds for productive and developmental enterprise. With this one stroke, the largest chunk of expenditure can be dealt with. All other superfluous expenditures must also be curtailed or stopped.

2. Zakah is usually thought of as a very narrowly-based tax. This tax, with its inherent appeal of being an obligatory ritual of worship for a Muslim, has a very wide base (as is explained ahead) and can be used for all collective and state purposes. In this regard, the condition of Tamlik imposed by some jurists, which restricts the use of Zakah to personal possession at the level of individuals who belong to the destitute class, has no basis in the Qur'an or Sunnah10. It is suggested that this tax be used to the fullest extent to broaden the base of taxation, especially by including agricultural produce in real terms.

3. Since the government has the right to take away the right of use from incompetent owners of wealth so that exploitation in society is checked11, it should look into the possibility of sharing in the management of large, under-utilised tracts of agricultural lands. Some suggestions in this regard follow in the next appendix.

4. The financial system should be restructured in such a way that interest is abolished and indigenous entrepreneurship, especially at the middle-income levels and at the levels of cottage industry, is encouraged. (See the first suggestion in the next appendix for how this restructuring may actually be done).

5. Further foreign loans should not be taken. Efforts should be made to retire all foreign debt in the next 15 years. Superfluous expenditure must be put to an end, the government and its members should promote austerity by personal example, and the more well-off segments of society should take the lead in making the dream of full retirement of debt a reality. Had the present government been a true leadership of the masses rather than of the affluent and of the industrial bourgeoisie, one might even have suggested some drastic measures for the retirement of debt, considering the gravity of the situation. These drastic measures would have included among many others, redistribution or acquisition of land on the basis of original ownership before the British took control from the Muslim rulers of India and acquisition of or sharing in the management of enterprises set up in the private sector through funds borrowed from the State controlled banks and DFI's. (Alternatively, a system of Khiraj as suggested in the next appendix could be used for 'less drastic' measures).

The unhallowed hand of this scribe presents these suggestions with full awareness that in all probability the rulers of today will rather choose to ignore them. But since there is hope in the younger generation, these suggestions it must present. Perhaps, the rulers of the future will pay heed to them in a time when there is no difference between making money and making goods, when the man who makes most money is no longer one who exploits others or stifles indigenous enterprise with his interest-based business expansion and cut-throat competition or who, with his speculation and interest-based business activity, creates for small investors, entrepreneurs and for the majority of people in society problems as panics, industrial failures and unemployment.

But until then, until darkness gives way to that daylight, it seems that the worship of avarice, interest and precaution as gods will continue in nations as ours.12

Notes and references:

1. Koontz and Weihrich, Management, 9th ed. (New York: McGraw-Hill Book Company, 1988) p. 44.

2. See the Qur'an (4:5). Although this verse relates to a specific group in society, the underlying reason for this directive extends the application to include any person(s) who does not have the mental competence to manage his wealth appropriately; for example, the directive may be used by the government as a basis to take away the use (not the ownership) of excessive, under-utilised land from incompetent owners.

3. It may be surprising for some, but in all the three great religions: Islam, Christianity and Judaism, interest had been prohibited. Adherents of all three religions tried subterfuges ranging from defining interest as exploitative usury to different 'modes' of financing. (See Appendix 4)

4. Paul. A Samuelson, Economics, 11th ed. (Tokyo: McGraw-Hill Kogakusha, Ltd. 1980), p. 67

5. For our suggestions on changes required in these areas, see Renaissance, VI (Feb. 1997).

6. Islam does not allow the Islamic State to charge any tax on its Muslim citizens apart from Zakah. For details see Shehzad Saleem, 'The Islamic Concept of Taxation', Renaissance, II (Oct. 1992), 3-12 and Shehzad Saleem, A New Economic Framework, (Lahore: Al-Mawrid, 1995), p.13.

7. President and Research Fellow of Al-Mawrid, Institute of Islamic Sciences.

8. Since such a radical step can incite a lot of opposition, the government, for taking this step, might require majority vote in accordance with the Qur'anic principle of government for the Muslims: amruhum shura baynahum (42:38). (Their affairs are by consultation among them).

9. (The Qur'an 2.282)

10. For details see Nadir Aqueel Ansari, 'Tamlik As a precondition in Zakah', Renaissance, VII (May/June 1997), pp 53-56. For further detail see Amin Ahsan Islahi, Tawdihat, (Lahore, Islamic Publishing Centre, 1985), pp. 107-173. See also Shehzad Saleem, A New Economic Framework: Ghamidi's Proposition,(Lahore: Al-Mawrid, 1995). For details of other Islamic guidelines for the economy, see Javed Ahmad Ghamidi, Qanun-i-Ma'ishat, (Urdu), (Lahore: Al-Mawrid, Islamic Centre, 1997).

11. (See the Qur'an 4:5)

12. See Shaikh Mahmud Ahmad, Towards Interest Free Banking (Lahore: Institute of Islamic Culture, 1989), pp. 27-29 for a criticism on the Keynes' apprehension that owing to psychological factors it will not be economically feasible to let the interest rate fall too low or to let it become zero (despite the advantage of ridding the economy of unemployment -- an advantage he himself conceded).

Appendix 2 A Remedy for the Economic Ills in Our Society

(Based on the Suggestions by Javed Ahmad Ghamidi)

The solution to the problems which plague our economic set-up lies in restructuring the economy of Pakistan on the basis of a just distribution of wealth and self-reliance in such a manner that gradually the government has no need to impose any tax on its citizens other than Zakah11.For this objective, the following steps should be taken by the government:

1. Interest should be totally abolished and the institutional creation of credit should be totally prohibited in the private sector. All banks should be converted into various branches of the Bayt'ul-Mal where people can deposit their savings. These branches should provide protection, exchange, short term loans and other similar facilities. In return for this service, the government should be allowed to invest the deposited funds to establish a broad-based public sector according to the requirements of the country, upon the precondition that without being given any profit on the original amount, a depositor will be returned his money on demand. The industrial enterprises and units so created in the public sector shall be run by the government, and, wherever it is required, the private sector should also be called upon to participate in their running and management by buying a certain quantity of the shares of these enterprises. Alternatively, by imposing Khiraj (tribute) on some of these industrial ventures, the government may entrust their entire management to a party of the private sector just as the Caliph 'Umar (raa) had done so with the conquered lands of Syria and Iraq which he had kept in state ownership and had entrusted their management to their original owners, imposing a fixed tribute on them according to their produce.

2. Further domestic or foreign loans should not be taken in future to run the country. The foreign loans, as well as the interest on them, should be repaid by following a certain schedule. Domestic loan should be converted into equity by transforming this loan into units in the National Investment Trust created for this purpose. Alternatively, an option of remaining a creditor may be given to some or all of the domestic lenders to the government.

3. A National Defence Fund should be announced in which all the citizens of the country should be invited to contribute whatever they can for the defence of their country. A schedule of commitments should be worked out with all those who can donate in this cause.

4. Every economic venture which leads to moral misconduct in the character of an individual, is a means of deceit or damage for the parties involved, or is a cause of accumulation of wealth in the society should be declared unlawful. Interest, insurance, gambling and hoarding should be prohibited, and the law of inheritance should be correctly enforced in matters of all types of wealth and property.

5. Concerning Zakah, the following aspects must always remain in consideration:

i) There is no basis in the Qur'an and Sunnah for the condition of making the recipient the owner of the money given to him (Tamlik) imposed by our jurists. Therefore just as Zakah can be given in the personal possession of an individual, it can also be spent on projects of public welfare.*

ii) Nothing except the tools of production, personal items of daily use and a fixed statutory exemption called Nisab are exempt from Zakah. It shall be levied annually on all sorts of wealth, all types of animals and all forms of production of every Muslim citizen. However, if a need arises, an Islamic State can give a relaxation on any item.

iii) It should also be borne in mind that according to the various heads mentioned in the Qur'an, Zakah is not merely for the poor and destitute, but under al-'amilina 'alayha, it can be used to pay the salaries of all government officials, under al-mu'alafati qulubuhum, it can be spent to meet all political expenditures in the interest of Islam and the Muslim Ummah, under fi sabil-Allah, it can be expended on Da'wah ventures and mosques, education and research, H~ajj and 'Umrah facilities, Jihad and Qital, and other similar projects and ventures of public and religious welfare, under Ibn'ul-sabil it can be spent on projects like roads and bridges.

iv) If the basis of the directive is kept in consideration, all forms of industrial produce, all forms of production based on various skills and all forms of rent on various items or buildings must be classified as produce and not as wealth; therefore, their rates and Nisab should be derived on the basis of the rates and Nisab specified by the Prophet (sws) for land produce.

v) The rates of Zakah in all forms of production should be fixed on the basis of the principle derived from the Prophet's directives (sws). According to this principle, Zakah on all items which are produced both by the interaction of labour and capital is 5%; on items which are produced such that the basic factor in producing them is either labour or capital, it is 10% and on items which are produced neither as a result of capital nor labour but are actually a gift of God, it is 20%.

According to the above mentioned principle,the following system of Zakah should be imposed in the country according to the precepts of the Islamic Shari'ah:

Zakahon Wealth

This is deducted at the rate of 2½% annually after subtracting the statutory exemption (52.5 tl / 612gm silver or its equivalent) and taking into consideration the exemption of personal items of daily use, for example, personal belongings as house and car. Tax on trade capital should also be levied at the same rate, considering this capital to be the sum of cash and stock in trade.

Zakahon Produce

Zakahon produce is deducted on production at the time of produce after subtracting the statutory exemption (1119 kg dates or their equivalent) and taking into consideration the exemption of the tools of production, for example, tools and machinery. Depending upon the kinds of items, Zakah has three rates: 5%, 10% and 20%.

5%:On items which are produced by the interaction of both labour and capital. Examples include:

a) Produce from irrigated lands.

b) Industrial produce from factories.

c) Services provided, for example airways, railways.

d) Income of all private educational institutions.

10%:On items which are produced such that the major factor in producing them is either labour or capital, but not both. Examples include:

a) An artist's creation like paintings.

b) The works of scholars and intellectuals.

c) All rented houses and various forms of rental income.

d) Produce from rainy lands.

20%:On items which are produced neither as a result of labour nor capital but are actually a gift of God, for example treasures which are discovered.

Zakahon Animals

All those animals which are bred and reared for the purpose of trade and business are subject to Zakah. The details of these can be seen in any book of fiqh.

vi. If in the means of production, a person's right to run and manage what he owns of them results in injustice and usurpation, the state has all the authority to interfere and debar a person from this right, though, only after the decree of a court of law or of the Parliament. For example, all the agricultural lands of the country, by the participation of the government, may be transformed into large mechanised farming units and the planning of their cultivation and harvesting should be done at the national level. A National Land Commission should be duly appointed for this planning. The management of these farms should be entrusted to boards comprising the owners of the land, representatives of workers and the elected representatives of the state. Government should provide seed, machinery and water, while the workers should provide all the effort needed to till and harvest the soil. The income generated from these lands should be distributed among the three parties equally. The workers of course should be given a salary as well.

Appendix 3 For Whom the Bell Tolls?

'The time has come' the Warlus said 'to talk of many things: of shoes -- and ships -- and sealing wax -- of cabbages -- and kings --'

(Lewis Carroll)

There are two ways of reducing the gap between revenue and expenditure. Our kings -- and queen(s) -- usually think of only one: increasing the revenue, which, is generally done through borrowing or taxation or both. Yet, another alternative has always been there: reducing the expenditure -- the wrong kind of expenditure.

Expenditure which either eats up the stock of capital goods more than it adds to it or adds such 'items' as make the rich few richer at the cost of the rest certainly needs to be curtailed, if not eradicated completely.

The problem is that the 'unhallowed hands' of the king's vizier -- called modern economist -- have deliberately disturbed 'the wisdom of our ancestors' that all debt is evil (and therefore 'the country's done for'). The modern economist has told the king that borrowing may not be bad after all, for it can help to mobilise resources and stimulate activity. But he has forgotten that a king is a king -- the king is always more interested in his rule than in the economic wisdom necessary for following the vizier's advice with discretion.

So the kings and queen(s) continue to borrow and tax for the wrong kind of expenditure -- palaces and courts and coaches and apparel and adornments and merry making. The kings and the queen(s) and the nobility live happily ever after. The subjects suffer. This is morally despicable -- and very bad economics, for there is no factor of production more important -- economically and socially -- than man. Who knows, the son of a pauper might turn out to be another Einstein or an Edison or a Lee Iacocca or, if nothing else, the average, very innovative entrepreneur who is so essential for the pervasive development of an economy. When a tiny fraction of the whole population, 'the nobility', uses the magic wand it has -- demand (which is not needs and requirements of the economy -- it is money votes to produce whatever is voted for) -- for palaces and adornments, while the majority, containing millions and millions of potential innovators, entrepreneurs, thinkers and skilled workers, cannot even get the share of resources to get out of the vicious trap of poverty, which confines their potential to the most menial of chores for the rest of their lives -- generation after generation, a lot of rethinking needs to be done. The problem then is not the budget. It is the structure of the economy -- and the kings and the queens and the nobility. The big question is: will we ever find an 'Umar Ibn 'Abd al-'Aziz to get rid of the cruel traditions of monarchy?

Appendix 4 Ribaand Subterfuges of Earlier Peoples Who Received Divine Guidance

The strict prohibition of what has been translated in the Old Testament as 'usury'– a word which in English is indicative of exploitative interest vis-a-vis ordinary interest, which presumably is not exploitative –, is in Hebrew a prohibition of Neshek (Neh'shek),12 which translates as 'interest on a debt' (a word built on the root Nashak: to strike with a sting, for example as a serpent does).13 If the translation 'usury' in contrast with 'interest' is to be accepted, how does one account for the fact that the Jews took so much trouble to come up with an interest-free bank, by the name of Agibi in Babylonia in 700 BC14, the basis of which was mortgage of some productive asset like a house etc which the bank hired out in exchange for a loan without interest – an improvement on the idea of Profit and Loss Sharing in Hammurabai's code, but with its limitations in many working capital loans, which limitations necessitated declaring, for example, discount for encashment of the bills of exchange to be outside the ambit of interest, on the authority of one of their eminent rabbis, Maimonides.15 Obviously, all this ado was not about nothing. Unless the prohibition was of interest, they would not have made so much effort to find alternatives. Nevertheless, as far as non-Jews were concerned, the Jews 'solved' the problem with just one stroke. After the commandment 'Thou shalt not lend upon usury to thy brother' (De 23:19), we find a directive which is clearly an infiltration and which allowed the Jew to lend on 'usury' to one who was not a 'brother', that is not a Jew:

Unto a stranger thou mayest lend upon usury; but unto thy brother thou shalt not lend upon usury (De. 23:20).

This allowance opened the way for the Jewish money-lenders in Lombardy and gave birth to characters as Shylock in literature.

Christian scholars know that the money-exchangers of Mathhew (Kollubistes: coin dealer) of Mark and John (e.g. Mt. 21:12; Mk 11:15; Jn 2:15) whom Jesus turned out of the Temple were regular bankers (trapezitai), who also paid interest on deposits despite the Jewish prohibition. 16

In the orthodox tradition, interest was an anathema.17 The concept of service charge as a substitute for interest was evolved under the patronage of the Christian church, but the lending institutions that worked on this basis later became indistinguishable from saving banks, paying a small interest on deposits and charging a higher rate on advances.18 It is not surprising that in the same Christiandom where once, in England, prior to Edward II, a man would be hanged for money-lending and where the English Monarchy was able to get involved in interest only after Henry VIII had severed ties with Rome abolition of interest has now become an incongruous irrationality.

The preceding paragraphs show that issues as

i) whether the prohibition is of interest or of 'usury'

ii) profit and loss sharing for financing

iii) leasing for financing

iv) service charge

v) charging interest on the loan to 'non-believers'

are not new to such peoples as received Divine guidance through the messengers of God, for examples the Jews. Yet, these people, intentionally or unintentionally, fell prey to subterfuges and outright denials. May Allah save the Muslim from the same fate, and give those in authority among them the sagacity to know the truth and the courage to proclaim it.


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