P L d 2000 s c 225 (Riba prohibition stayed)

 

 

 

(viii) It is the nature of wealth that it loses weight and value if it is acquired without labour and toil. Easy money seldom receives proper care of the possessors. In all those societies where money is obtainable by the affluent classes without investing the required effort and struggle, there always arise unlimited ailments. People in these societies compete with each other in squandering money and wasting resources. This state of affairs does little harm to the few hundred families who hoard vast riches but takes its toll from those hundreds of thousands of families who either have no easy money or lack the resources for it. The most deplorable becomes the social condition of those millions of families who do not find even a single night’s meal easily. The tendency to concentration of wealth and unwarranted inflation of money is invariably productive of such serious social and moral evils that agitated the mind of the Prophet (p.b.u.h.). And that is why the Prophet (p.b.u.h.) was seldom worried about scarcity of money but often apprehended its excess.

 

 

 

(ix)       A society basing its economic life on a system of usury could never aspire to establish itself on firm moral footing. It simply cannot generate that spirit of cooperation which Islam calls for. That is why whenever we talk today of the concepts of mutual care and maintenance granted by Islam and invoke the perennial social values of our religion that give rise to these concepts, people who are not properly educated in the lore of Islam are rather taken by surprise.

 

 

 

These are some of the social evils that are the necessary consequences of the system of usury. They gradually eat into the whole fabric of the society. Apparently the societies seem to expand and flourish but actually lose all substance and potential. With slight jolt, they crumble to the ground. There has been exhaustive discussion among the economists about the economic ills of usury. It has become by now a near consensus among all fair-minded and objective observers and planners of economic future of humanity that the economic problems arising out of the interestbearing economic systems could only be solved through abolishing interest from the whole world. The most famous economist of the modern Western world who is internationally recognized expert in his field Lord Kaynes emphatically says that the problem of unemployment shall defy all solutions unless interest is abolished from the economics of the world. He further contends that the best way to demolish the exploitative superiority of the capitalist’s class is to eliminate the system of interest. The writings of Kaynes and other leading economists of the world on the negative aspects and demerits of interest has been comprehensively summarized by our country’s most outstanding economist and researcher late Shaikh Mahmud Ahmad, in his concise but masterly work entitled “Man and Money”.

 

 

 

In fact when interest is accepted as the principal basis of investment, it militates against the well-being and welfare of humanity from so many directions that a slight description of it is sufficient to substantiate the Qur’anic declaration of war against its perpetrators: Prof. Shaikh Mahmud Ahmad has enumerated sixteen evil characteristics of interest:

 

 

 

(1)        An evil consequence of interest is that it creates such a heavy encumbrance on the capital that it limits the scope of all productive and commercial activities. The result is that the productive activity shrinks and its natural growth and expansion is arrested. This is the basic and fundamental point which represents the roots of all the economic exploitation the interest based system creates.

 

 

 

(2)        The interest has an adverse effect on employment, particularly, self-employment, mostly because of borrowing facility of the interest-based system is limited to big financiers and capitalists. Small businessmen and entrepreneurs seldom get any borrowing from this system.

 

 

 

(3)        An entrepreneur is forced to maintain the level of profit much higher so that it should always exceed the highest limit of interest. If the level of interest is commensurate with the actual level of profit, the borrower faces the problem in paying the interest. Thus, interest and profit are concomitant. The excessive profiteering and the result out increase in prices is a direct result of interest.

 

 

 

(4)        The rental of all landed property (agricultural land, houses, shops) is consistently on the increase because the entrepreneur has to pay interest on the value of the landed property as well.

 

 

 

(5)        The entrepreneur is forced to keep the level of profit above the level of average rent plus the cost of wear and tear. This also results in decreasing the salaries and wages of the labour and adds a further dimension of socio-economic conflicts and problem.

 

 

 

(6)        The price hike is consistently on the rise resulting in increasing the agonies and accentuating the economic difficulties of the lower and poor class.

 

 

 

(7)        The rising price curtails the demand leading alternatively to the fall of production. The fall of production places the whole economy at a very precarious level.

 

 

 

(8)        As a result of the depression in the market a tendency takes place to freeze the production at a certain stage, i.e. a stage where the maximization of profit is possible. The freezing of the production level is the cornerstone of the interest-based system which is found in almost every capitalist country and capitalist economy. The most striking example of this policy can be seen in the U.S. where the Government spends around 12 billion dollars (in 1980) to freeze the agriculture produce of the country. Such huge amount is not easily available and has to be acquired on interest. Professor Mahmud Ahmad laments the over powerfulness of the capital and weakness of human element as well as suffering of mankind as reflected in this example.

 

 

 

(9)        The situation resulting from these evils of interest lead to another dimension: the capitalist class of the country which controls most of the economic resources make the Government believe that the public exchequer should always keep its expenditure above the level of income to prevent unemployment and subsidize the purchasing power of the people. The Governments easily fall prey to this logic and further add to the economic problems and miseries of their people.

 

 

 

(10) Once the Governments fall prey to this machination of the capitalist class it starts controlling the resources of the Government as well and capture a major portion of national income paid as debt servicing to the capitalists. The result is that the Government borrows billions annually and pays billions annually in debt servicing.

 

 

 

(11)      The wealthy continue to become wealthier and the poor poorer. The middle and the lower classes are continuously crushed under two stones of unemployment and dearness.

 

 

 

(12)      This situation adds to international tension. Every country tries to increase its exports and decrease its imports so that they unemployment created by the interest inside the country is exported to other countries through expansion in its exports. Since all the countries equally suffer from this disease no country can achieve any viable success in this exercise. It only adds the international tension often leading to armed conflicts and wars.

 

 

 

(13) The most important casualty is the culture and civilization. Interest being a means to give preponderance to money over human-beings, it has no concern with the success or failure of human labour. Even if all human labour is lost the capitalist is not prepared to abstain from and relinquish his interest. This results in the continuous and infinite downfall of human values and continuous rise of capital and limitless materialistic tendency.

 

 

 

(14) Those involved in this devilish exercise, to quote the Qur’anic phrase: stand like one whom the devil has striving to madness by his touch. A cursory study of the economic consequences of the system and the resulting miseries will show the  ineffectiveness and bewilderment of modern economy in the face of this colossal problem.

 

 

 

(15)      The capitalist system ensures that capital-flow is always controlled so that it does not exceed to the level and the weapon of interest becomes ineffective and useless. In order to perpetuate interest it is necessary that a system is developed to control the flow of capital and to arrest it within the required limit. The most important step taken for this purpose is what is known as bank reserves. Banks keep a certain portion of their deposits as reserve to meet any possible eventuality. The higher the reserve the lower the supply of capital. If the reserve is 33 % the credit issued can be three times the amount of savings. If the reserve is 25% then the credit may be four times. So also in case of 20% 5 times and in case of 10% 10 times. In our country the bank reserve is 35 % so that slightly less than three times this amount the advanced as credit. It means that interest is a self-generating mechanism in which capital will always be less than the actual need and it will ensure to receive its cost because of its scarcity.

 

 

 

(16) The capitalist class which is the defender of interest is always prepared to put everything at a stake for the sake of its own interest. Nationalization and socialism are some examples of the extent to which capitalist can go to safeguard his interest.

 

 

 

Professor Shaikh Mahmud Ahmad further writes: From the above description, it should not be supposed that these were only evils of interest. The truth of the matter is that the knowledge of the subject is still quite scanty. The capitalist system and its protagonists are trying their utmost to prevent any institutionalized effort to undertake serious research on the problem of interest and its allied issues. The above enumeration of sixteen evils of interest point to the fact that we have not thus far even traversed one quarter of the distance towards gauging the whole range of the negative impact of interest on human life. This is because in a tradition related by Hazrat Abdullah ibn Mas’ud, the Prophet (p.b.u.h.) has said that there are seventy-three evils of usury. The lowest level of these is like committing adultery with one’s mother.

 

 

 

These sixteen aspects of the exploitative nature of usury are those that have been regarded by the Qur’an as injustice. The nature of this injustice perpetrated by interest is different from other categories of interest both in intensity and depth. It is an injustice that not only deprives the poor of their morsel of bread, but also prevents them from finding an alternative means of survival until one surrenders his freedom and honour. There could be other ways of oppression whereby. human beings might be deprived of their means of survival. But there is no other instrument of oppression whereby the victims could possibly be prevented from finding the alternative means of survival. Since the system of Riba directly challenges the Divine Attribute of sustenance and becomes a hurdle to His Sustaining authority and continues to block the bread of human beings until they are deprived of their dignity and honour. That is why this crime deserves declaration of war from Allah and His Prophet (p.b.u.h.) and is seventy times more heinous than adultery with one’s mother.

 

 

 

Apart from the social and economic evils of the interest, it must also be borne in mind that the interest and Riba come into direct conflict T with a number of Qur’anic dictates and precepts. As soon as interest is I allowed, a number of Qur’anic Injunctions cease to operate. A few I illustrations may be useful. The Qur’anic verse (2:280) lays down the nature of relationship that should obtain between creditors and debtors when the latter is poor and destitute. Here only two ways are possible, The best attitude is to write off the loan and relieve the debtor. Otherwise respite must be given. The question is if that is the command of the Qur’an and this ought to be the conduct of the Muslims, then we should see whether there is any bank or eater of usury today who is prepared to appreciate the difficulties and hardships of the debtors and grant them respite so as to restore them to survival? But the actual situation in the society is just the opposite. As soon as there appears any sign of weakness or loss in the business of the debtor and, there seems little chances of his recovery, the bankers, the financiers and the creditors are the first to arrive at the scene of the tragedy and place the demand for repayment of their loans before anything else. The cases of companies that have gone bankrupt in our country are well-known to everyone. In most of the cases the company was doing good business. For some reason the investor became suspicious or doubts were deliberately cast in his mind by any business rival. For this situation instead of lending help, sharing the problem and helping in its solution, the investor came with his one-sided selfish demand to recover his money before everything else. Now the Qur’an invites us to the opposite attitude in this regard. It says that in the first place, when you lend money to your brother, your motive should be mutual sympathy, care and love. If the debtor is in difficulty, you must give him respite. Further than that, if you could afford this then you should even write off the loan. Compare this approach prescribed by the Qur’an with the usury eater’s mentality. The fires thing which happens in such a situation is the cruel and callous strangulation debtor by the creditors.

 

 

 

Regarding the circulation of money, the Qur’an has laid down the clear and unequivocal principle in the verse (59:7) that the wealth should not circulate only amongst the wealthy sections of society. The purpose of this principle is that all strata of the society should benefit from the wealth and it should be disseminated among all sections of citizenry. As blood is distributed by the heart and is disseminated to all tissues and fibers of the body each moment in the same way the wealth should reach every portion of the social body and should continue to reach evenly and equitably. To achieve this objective the Shariah has supplied a number of legal and other devices. The aim of these devices or injunctions is to block the possibilities of the concentration of wealth and to distribute the available wealth equitably and as widely as possible. But contrary to this principle, the entire circle of interest revolves around one axis: to acquire more wealth by the force of wealth and to go on maximizing capital by means of capital until the entire resources of the society, are concentrated and come under the control of a handful of financiers. The tendency of usury is that it collects wealth from all the corners. Instead of disseminating wealth. the mechanism of interest ensures that even a meager amount of wealth does not remain out of its clutches. Now the modern banking system as it operates today, ensures precisely this draining off the society’s wealth. The small income group deposit their small savings of money earned through hard labour in banks- In this way, the earnings of hundreds of thousands of people are pooled in a pond of wealth, as it were. This huge pond of wealth is controlled by a few capitalists. Apparently it is claimed that this capital shall lend money for business and thus it will be spent for the common goals of the society. However, in actual practice, this seldom happens; an ordinary man cannot possibly take loan from the bank and do business with it. Every bank, before granting a loan, demands a guarantee worth hundreds of thousands of rupees. Sometime, it says to the borrower, if he already has a business worth so much amount, he might get a loan worth this much. This means that only those who could provide guarantee and sureties worth millions of rupees have the right to obtain loans from’ these banks Then only the already rich and affluent are entitled to enjoy the benefits of bank loans. For instance on the surety of a property worth two and a half million rupees (Rs.2,500,000) one gets another two and a half million rupees. Thus a capitalist who owned 2.5 million rupees became the owner of five million rupees. If he applies for further loan, he could still get as much-more amount. He will thus get ten million rupees, thanks to the banking system. This means that within a matter of 10-15 years, the rich shall become richer and the poor shall become poorer. Whatever little wealth was available in the society was drained off and collected in a few hands. As vultures keep watching the dying ones, as soon as death approaches, the. vultures come first. In the same way, the creditors keep vigil over those engaged in business. Whoever appears to be weakening these creditors, hasten to grab his neck and in no time, his whole property is distributed among them. The poor businessman is thus doomed and his remaining resources are also acquired by these capitalist creditors.

 

 

 

An established principle of the Shariah upheld by all Muslim scholars and jurists is the mutual relation between profit and loss. This principle has been derived from the famous tradition of the Holy Prophet (p.b.u.h.) which says:-”Benefit devolves with liability”. Various jurists and traditionalists of Islam have explained this principle in their own language. There is no difference over this principle between any Muslim religious group. All Muslims have consensus on this principle of the Shariah that “anything of which one does not accept the risk or obligation to cover the loss, he is also not entitled to enjoy benefits accruing therefrom”. If you are doing business or sharing one, then you will have to incur the risk involved in that business to the extent of your participation in it. When you undertake to accept the obligation to endure loss, then you are entitled to all the profits that might accrue to that business in the open market. But to say that one’s money is safe and it will be payable to him irrespective of the successive failure of the business, is something unacceptable to the Shariah. This position of Islam has been frequently reiterated by the Shariah. There are people who are so naive as to wonder why the scholars of Islam consider charging rent on a landed property permissible, but declare interest on the capital prohibited. The contention of these people is that if some property is gi0en on rent, then the very basis on which we justify charging rent, should equally justify charging rent on the capital. Why one sort of rent is permissible and the other prohibited? Actually this confusion between the two different issues is either due to misunderstanding or willful distortion of the truth.

 

 

 

First, the principle of the Shariah is that only that thing could be lent which itself could be consumed. For example currency notes, coins, gold, silver, wheat and sugar etc. But on the contrary, those things that are not consumable but could be utilized frequently by the same person or by several persons could be given to someone for temporary use, but could not be given by way of loan. For example house, car, book, pen and other similar things of frequent use. Therefore, interest could be charged on gold and silver because these could be lent but could not be charged on land and immovable property because these can be given for use but cannot be lent.

 

 

 

Second, if immovable property is lost or damaged due to a natural calamity, then the loss is that of the lessor/owner, rather than the lessee. But someone who borrows capital for doing business, if his business is lost, he will have to return the capital to the creditor. Because in the latter case, the risk is not that of the owner, but that of the debtor who is doing business. Hence there is a wide difference between the two. And the Shariah clearly distinguishes between the two situations.

 

 

 

There is another dimension of this issue. It might sound surprising strange to the economists, who might also regard it as surprising, but the Shariah holds a different view of the question of loan and credit. Anyone least familiar with the teachings of Islam, knows that Our’an and Sunnah emphasized abstention from debts and liabilities, and have taught the supplicant to seek protection of God against debts and liabilities. Debt has been generally viewed with disapproval in Islam. That is why the basis of trade and business is participation, partnership and sharing and not on debts and loans. Islam provides for a model of trade which is based on a system of sharing profits and losses by the participants subject to a solemn agreement between them. Therefore, all this system of trade and commerce revolving around borrowed capital is incongruent with the principles of Islam. All this present system of usury is based on loans. There is a person who is earning millions of rupees daily. Yet he does not invest in it anything from his own pocket. He has taken all the loans from the banks.

 

 

 

The most important feature of the modern banking system which is to be noted in the context of the elimination of Riba is that it is based entirely on credit and loan. It seems that credit. to the exclusion of anything else, has become the life-blood of modern economy. Not only big businesses, heavy industries and the whole sphere of the corporate financing but also day to day national needs and family requirements have become dependent on credit and loan. The greater the economy the larger the role of credit and loan. In most of the developed economies, the majority of the citizens are heavily burdened with loans and credits of various kinds and dimensions. It appears that the life, dignity, property, honour and even freedom of people, not only on the national level but also at the international level is mortgaged to the creditors whose power and influence is constantly on the rise. This situation is undoubtedly inconsistent with the teachings of Islam where loan and credit has been considered to be an evil which may be resorted to only in very rare and exceptional case of extreme necessity. The Prophet of Islam (s.a.a.w.) sought refuge and protection of the Almighty from the horrors and evils of credit and loan.

 

 

 

The most prominent demonstration of rising power of the credit is the modern banking system given to us by Western capitalistic economy. The entire structure of the banking system is founded on the organization and management of various forms of credit and financing through loans, lending and borrowing. There have been different reasons and factors which have led the Western world to this situation. We need not enter here into those details as they lie outside the scope of this discussion. However, one thing is clear that the practice has emerged from the unauthorized sale and purchase of the deposits and securities kept with goldsmiths for purposes of security and safety. Almost all the writers agree that the goldsmiths soon realized that the depositors use only a little portion of their gold while the rest always lay with them and, therefore, they secretly and discretely started issuing instruments against the securities of peoples deposited for `safe’ custody with them. They started earning money on the basis of these instruments which, later became the basis of currency and paper money. The role of the church and monastic orders was not less significant in popularizing this practice. Virtually breaking the confidence reposed in them by the innocent masses, the churchmen and monists also validated the practice of goldsmiths and started minting money on the strength of the cash, gold and silver kept with them for safety and security.