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  • Taking Of A Loan And Paying Interest Thereof

    Posted by Umer on June 24, 2020 at 11:18 pm

    Q: what is the ruling on people who do not charge interest but procure an interest-bearing loan to meet their personal and business needs?

    Umer replied 3 years, 12 months ago 4 Members · 19 Replies
  • 19 Replies
  • Taking Of A Loan And Paying Interest Thereof

    Umer updated 3 years, 12 months ago 4 Members · 19 Replies
  • Umer

    Moderator June 24, 2020 at 11:20 pm

    A: No objection can be raised on paying interest because the prohibition of interest is based on the Qur’anic principle of akl al-amwal al-batil (devouring wealth through unfair means), and a person who pays interest does not devour the wealth of some other person through unfair means. In fact, he pays a part of his legitimately earned wealth to the borrower in lieu of the loan he provides. The issue of interest is mentioned at more than one instance in the Qur’an. Not at one place has the Qur’an condemned those who pay interest. In fact, it calls them oppressed and asked the lender to give them time if they are facing financial constraints. Those who regard paying of interest as prohibited do not base their view on any verse of the Qur’an or any implicit or explicit deduction from any of its verses. They base their view on a Hadith narrative which says that the Prophet (sws) has cursed the person who consumes interest and makes others consume it. The words of the narrative are: آكِلَ الرِّبَا وَمُؤْكِلَهُ … لَعَنَ النَّبِيُّ.[1]In this narrative, the word مُوْكِلis used for a person who makes others consume interest. Linguistically, it can refer to a person who pays interest and also to people who are the agents of professional lenders and in this capacity hunt for potential customers for their masters. If lending on interest becomes a business, then such agents are its essential need; without them, the business of lending interest bearing loans cannot be run. If the narrative relates to such people, then there is no complexity in the narrative because this is blatant co-operation with evil (ta‘awun ‘ala al-ithm). As agents of interest-lenders, those who prepare agreements and documents for them and act as witnesses, their matter too is no different. The service provided by bank staff of these times is of similar nature. However, people who acquire interest-based loans cannot in any way be regarded as guilty of co-operation with evil (ta‘awun ‘ala al-ithm). This expression can only be used for an act done by perpetrators of a sin and for those who reap the benefits of this sin. Those who acquire interest-based loans do not acquire it to help the devourers of interest, they obtain loans for their personal and business needs. If this is co-operation, then it is not more than the co-operation done by our scholars and righteous individuals when they deposit their own wealth and that of their institutions in banks. If interest is prohibited at the state level and all forms of interest transactions are brought to an end, then such people who still pay interest can be regarded as criminals who have breached a law. If the Hadith narrative cited above refers to them, then the directive should relate to the scenario just stated – when interest transactions had been prohibited in the time of the Prophet (sws).

    (Javed Ahmed Ghamidi)

    (Translated by Dr Shehzad Saleem)


    [1]. Al-Bukhari, Al-Jami‘ al-sahih, vol. 5, 2045, (no. 5032).

  • Umer

    Moderator June 26, 2020 at 12:56 am

    Kindly refer to the video below from 52:31 to 57:42 for further clarification by Ghamidi Sahab.

  • Saba Madani

    Member July 20, 2020 at 6:06 pm

    Jazakum Allahu khaira, makes sense

  • Beenish Hussain

    Member July 20, 2020 at 7:53 pm

    FYI- You can ask a bank not to pay you interest on money you keep in the bank.

    In summary, Is the point that keeping money in banks is not equivalent to cooperating with the banks, similarly taking a loan is not cooperating with the devours of interest because we take loan for our personal needs?

    Secondly, I think the Ahadith is reffering to those who CONSUME interest? Meaning the earners, not the payor. What about those who earn it?

    • Umer

      Moderator July 20, 2020 at 11:15 pm

      Once the the interest earning part of economy is reformed, then of course interest payments will also be prohibited on the principle of Sadd-e-Zaria.

    • Beenish Hussain

      Member July 24, 2020 at 1:04 pm

      Sorry I don’t follow. I was asking about earning interest..

    • Umer

      Moderator July 27, 2020 at 8:06 am

      Would you be kind enough to further elaborate your point? Thank you.

  • Sameer Bhagwat

    Contributor July 27, 2020 at 11:36 am

    Is the following transaction haram ?

    I give my friend 100 Rs. at rate of 1% interest over 1 year. After 1 year, my friend returns me 101 Rs.

    I have earned 1 extra rupee over the period of 1 year , as agreed upon. Does Allah consider me a sinner or not ? What about my friend ? Is he a sinner or not ?

  • Umer

    Moderator July 28, 2020 at 4:50 am

    I don’t know what Allah considers you or your friend to be. But as a principle, giving of a loan should be done as a good deed and a Muslim should not force the other person to pay him any sum of amount over and above that principal.

    • Sameer Bhagwat

      Contributor July 28, 2020 at 4:54 am

      Let us not judge me or my friend then, but judging the act only. According to this act alone, keeping everything else same, is it a sin to earn extra rupee over the principal ? Is it also a sin to pay extra money over the principal knowing the agreement ?

    • Umer

      Moderator July 28, 2020 at 4:58 am

      The actual prohibition is of charging of the extra amount over the actual amount lent.

    • Sameer Bhagwat

      Contributor July 28, 2020 at 5:00 am

      What is the rationale behind it ? How is it earning through unfair means? I lend 100 Rs. to someone in need, and for 1 year, I could not use that money for myself, how is it unfair now, if I receive the compensation of that money lending ?

    • Umer

      Moderator July 28, 2020 at 5:05 am

      That person will spend all that money. Now he has to generate that amount of principal as well as the amount over and above it. This will put him through two-fold efforts which is morally wrong.

    • Sameer Bhagwat

      Contributor July 28, 2020 at 5:08 am

      What about me, who has been deprived of that money and its usage for the period of 1 year ? We make a transaction, and he gets benefited by the transaction, while I receive nothing for me as part of this transaction, is it a fair transaction ?

      If lending is charity, then it is expected .. but I don’t think lending the money is charity.

    • Umer

      Moderator July 28, 2020 at 5:14 am

      Ether give it as a good deed for return of principal only or give it as a charity which doesn’t involve return of principal but not as a business transaction which forces the borrower to pay something over and above the principal. If you’re worried about the time value of money then don’t lend the money, no one’s forcing you to lend it.

    • Sameer Bhagwat

      Contributor July 28, 2020 at 5:26 am

      Is lending charity then, but not a business transaction ? Nobody is forcing me to lend, but it is a transaction where I am trying to earn some money by using my money as investment in someone’s work.

      If it is a business transaction, I don’t think there is any inherent problem with it, as long as the interest charged is not oppressive.

  • Beenish Hussain

    Member July 29, 2020 at 2:09 am

    I am no scholar, but my understanding is that If you want to be an investor in someone’s work/business you can do a contract whereby you write down what will be your percentage interest in business in case of profit/loss. That is not forbidden. You have to participate in profit and loss just like a stockholder.

    However, if you are earning “interest” as a gain only then it is not allowed. Your argument is time value of money, and on the flip is purification of your money by helping those in need when you are provided enough to lend a on a voluntary basis. This is not suppose to be an “opportunity” for the rich to earn money by exploiting someone’s need.

    Commercial interest earned by banks where they provide us a loan and earn interest (such as home loan) is a different issue. Not all interest is Riba.

    Umer bhai Please correct me if wrong.

    • Sameer Bhagwat

      Contributor July 29, 2020 at 2:43 am

      Are you saying that if I lend money to someone, I have to share his loss also? That will make me an investor, not a lender.

      Also, is earning interest through investment fine ? That means, if I put money in bank, in a saving account, and earn interest, it should be ok..

    • Umer

      Moderator July 29, 2020 at 7:05 am

      Money (or any other consumable item) given with precondition of amount (quantity) to be returned over and above the principal (original quantity) is riba (irrespective of whether it’s done by a bank or at an individual level, whether it’d be a corporate loan or a personal loan). However, if instead of any consumable item, a usable item is given (e.g. house, car etc.) which itself is not prone to consumption, any amount charged for it’s usage is not riba but rent.

      Please also see this from 1:15:48 to 1:20:12

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