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Interest (Islam In Light Of Modern Economics)
Assalam-o-Alaikum !
I have a question for which I am still seeking truth even after listening to many great Muslim scholars Including Ghamdi sb on this topic but still not get precise answer , although its very basic but largely impactful. I am going to break it down in following points :
1 ) For example I earned 100$ cash to buy 4 bicycles(25$/each) for my kids but in last moment my friend requested to borrow 100$ cash for his need and will return next year . I said ok , its not urgent I can buy next year.
Next year when he returned me 100$ cash and I went to shop to buy four bicycles , Salesman told me that I can only get 3 bicycles (26$/each) i.e total 104$ . So What happened here ? Am I not in loss or suffering now because I have to top-up 4$ ? Here I want to add refernece to Quran ayat as well @ Surah baqra : 279
“If you do not, then beware of a war with Allah and His Messenger! But if you repent, you may retain your principal—neither inflicting nor suffering harm”
Question: Is it also interest/riba if my friend return exactly 104$ instead of 100$ ? If yes , please explain why ? (with condition that we assume this value is true representation of official interest rate set by State Bank of that country for that time-period, for example 4% )
2) As State banks just not randomly declare interest rate in order to earn profit , it is mainly derived from inflation which is calculated based on the price variation of certain basket of goods/services ? So please explain how state or any lender is earning profit here ? If yes , then how come majority of non-muslim developed countries still have stable economies and least income disparity among citizens despite the fact Islam states that riba/interest makes poorer more poor and richer more rich ?
3 ) Since the globalization of paper currency or banking , I see Interest directly or indirectly linked and influenced by the mathematics factors like Time value of money, depreciation, inflation , supply chain etc , Biggest example is the recent change in Interest rates across the world after Covid pandemic. If not agrees , explain how Interest has nothing to do with all these factors and has sole motive of profit and putting more burden on borrower ?
4) How can Muslim Scholars declare traditional banking haram and Islamic banking halal , when in fact both are engineered deeply by Interest rate ? I am quoting this case from my cousin who worked in Islamic banking for 10 years and he mentioned that they use term like “Market Value” and upon further questioning it comes out that this so-called market value is linked with Interest rate . Another big example is Savings Account in Islamic banking. How is it even possible that after every specified time you get top-up money or profit in your account and never get a loss ? And this amount also closely resembles to ratio of Interest rate ? Is it not like we are fooling ourselves ?
5) I have an appeal to all present world Muslim Scholars to reconsider this topic on war footing basis and include prominent unbiased Subject Specialists / Economists to interpret true definition of Interest in light of Quran & Modern Economics since the launch of Digitization & Paper currency as a mean of trade. Otherwise we are pushing Muslims ummah further into darkness depriving them to become part of mainstream and take charge of world financial system , which is critical for resurrection of Muslims.
We should also drop hate towards interest because of the reason that its pioneers or current beneficiaries are mainly Jewish . It’s similar to lack of approach of Muslims in sub-continent back in 19-20th century when they rejected the idea of learning English because it belongs to British. Later it proved wrong because this language tool played significant role for many Hindu & Muslim leaders to negotiate and gain independence from British. Thanks to Sir Syed Ahmed Khan who advocated to learn English.
JazakAllah and look forward to your feedback please
Thank you
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3 Replies
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Interest (Islam In Light Of Modern Economics)
updated 2 weeks, 6 days ago
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Replies
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Please put one question in one thread.
To receive same value of the money you lend is not interest. People used to lend gold and silver coins and receive the same amount back. The same should be followed. Banks can charge an extra amount in the face of inflation. It is not Riba. But banks’ mark up on loan is not just against inflation of depreciation. It is more than that.
Qur’an doesn’t not say the Riba makes a rich richer and a poor poorer.
Qur’an forbids it because it is unethical, no matter it brings profits or not. This is not its concern. It is unethical because the lender is not investing but lending his money. This is an act of good. Demanding addition on loan is unethical.
Islamic banking not better than conventional banking.
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First of all I am thankful to you for your feedback . So what I summarize from your answer is that you agree thats its not haram if lender demands more money in return but it should be exactly proportion to the Interest rate declared by the state bank+service charges(if applicable) for specified time ? Correct ?
Secondly , with respect to Savings Account please give me example or case study where banks deposit monthly amount more than proportion of actual Interest rate announced by State bank ?
In fact , I have experienced with multiple banks that either monthly deposit amount was equal or lesser than the ratio of Interest rate. Its never been more than proportion of Interest rate which helps to maintain the actual value of cash to some extent.
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For the first, you are right.
For the second, it is a technical problem for which you may need to consult an accountant or do your research to find if the interest rate is equal to the depreciation or not. To us, the interest paid by the banks is riba.
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