“Islamic” economic ‘thinkers’ and Islamist political activists ranging from the terror crew (Bin Laden et al), to the “moderates” often like to have a rant at the evil Capitalist economic system, and specifically interest based banking. They often equate the above with the Islamic prohibition on Riba – usually vaguely translated as usury.
Many Islamic theologians/scholars do in fact consider interest an aspect of usury, though many don’t (see here for a full discussion of all of the Islamic scholars who permitted interest and did not see it as Riba). Assuming many did forbid interest as Riba, it does not necessarilly mean that is the complete picture.
Traditionally theologians have developed elaborate means of ensuring that effective financial transactions are not prevented through the blanket application of Islamic rules of Fiqh (human interpretations of Sharia divine law) to situations without recourse to strategies where necessary.
These strategies are known as Hiyal which are means of avoiding unintended consequnces to prohibitions. For example, one which is given in medieval writings, is losing investors when they are afraid to invest funds with people who have ideas and business sense but no capital, when they fear losing their monies. Sound familiar? Well there have been ways of doing so since the early development of Islamic Fiqh.
Below is one found in the writings of Imam Muhammad bin Hasan al-Shaybani, a leading scholar and student of Imam Abu Hanifah (the founder of the 1st Sunni school of Fiqh) as the view of the three Hanafi Imams, Abu Hanifa, Abu Yusuf and Muhammad bin Hasan:
“What if someone wishes to give his capital to another as a form of capital investment where the other is the active partner (and he silent) but he wants the active partner to be liable for it – what is the Heela (permitted strategy) for this?”
He (Shayabani) replied: “The capitalist should give his monies with the exception of one dirham (let’s say a pound!) to the active partner as a loan. He should then form a partnership with him with the dirham (pound) along with the loaned money on condition that they work with the entire capital sum, and share whatever they are gifted by God equally or whatever ratio he so wishes. This is permitted.” Kitab al-Makharij fi al-Hiyal [Edited by J Schacht. Leipzig edition 1930] pp76-78
(He also gives a more elaborate version to secure all monies if required involving three stages of contracts of loans, partnerships and not for profit agencies.)
It would appear then that though there are scholars that forbid interest and venture capitalism and returns on “loans”, they also provide ways around this. The problem with “Capitalism” and interest based banking seems more ideologically and politically driven, than based upon interpretations of Islamic rules and principles (as traditionally Muslims would tolerate differences of practice and opinion amongst themselves and not get revolutionary about it). It is not just the early companions of the prophet like Ibn Abbas, later scholars and also recent Muftis like the famous Maliki Illi’yish (he did not consider Fiat money as being subject to rules of Riba), present day jurists and traditional authorities have explained this also. Those that did forbid interest and so forth have developed means of allowing most financial transactions within sharia frames. (It seems capitalism and interest based banking is not so un-Islamic after all)
There are certainly excesses and exploitation that have and do take place within existing financial institutions, in the developed and the “3rd world” dealings with it which people of conscience should unite against, but these should be separated from Islamist ideological rantings. If only the left new…
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Maybe but mortgages with Barclays are a bloody rip off, I should know.
Look out for a feature article on this subject in next month’s issue of a well known UK based political magazine…
يَا أَيُّهَا الَّذِينَ آمَنُواْ لاَ تَأْكُلُواْ الرِّبَا أَضْعَافًا مُّضَاعَفَةً وَاتَّقُواْ اللّهَ لَعَلَّكُمْ تُفْلِحُونَ
3:130 O you who have believed, do not consume usury, doubled and multiplied, but fear Allah that you may be successful.
وَأَحَلَّ اللّهُ الْبَيْعَ وَحَرَّمَ الرِّبَا
2:175 Allah has permitted trade and has forbidden interest
And in his farewell sermon on the mountain, the prophet said this:
“God has forbidden you to take Riba, therefore all riba obligation shall henceforth be waived. Your capital, however, is yours to keep. You will neither inflict nor suffer inequity. God has judged that there shall be no riba and that all the riba due to ‘Abbas ibn ‘Abd al Muttalib shall henceforth be waived.”
The seriousness of usury is reinforced by the Prophet when he was reported to have said, “A dirham of riba which a man receives knowingly is worse than committing adultery thirty-six times” (Mishkat al-Masabih). In another tradition, the Prophet said, “Riba has seventy segments, the least serious being equivalent to a man committing adultery with his own mother” (Ibn Majah).
And given the extent of Saudi Arabian funds in modern capitalist institutions like banks and asset management firms, it is no wonder that Salafi scholars are concerned with making interest and riba as legal as possible!
Interesting article Zorro. The aspect of this which always intrigues me is the clear link drawn in the Qur’an between riba and zulm – seen in 2:279
Which, especially when combined with 3:130 as quoted by Faisal above warning about doubling and tripling, seems to give a pretty clear indication that what is intended here is to prevent injustice/zulm through claiming extortionate rates of interest (which would lead to the lender getting two or even three times the original sum back).
Also, as interest is intrinsic to modern banking systems, £5 last year was worth more than £5 will be worth next year so it would, in fact, be an injustice to prevent the lender from claiming a fair rate of interest. If there is no injustice there is no riba so, where interest is fair, it is allowed, but where it is not – there is injustice and riba. This kind of distinction would not have been drawn by pre-modern scholars working at a time when the international economic system differed rather from what it is now.
I suppose, however, this isn’t particularly important when set against the historical acceptance of forms of interest through hiyal or otherwise and Medieval records which show items being given prices, a lower one for an immediate cash payment and a higher one for paying on the never-never. But, as you say, those people who talk about how “Muslims need ‘sharia-compliant’ banking” never take any of this into account.
George – I think that you will find though they never discussed this in this manner they did mention that items which are not measured by weight but rather value, should be returned and compensated according to value and this would not be considered riba. Ibn Qudama one of the hanbali jurists explicates this as do others.
So it would be normal to consider then bank interest covering inflation rates certainly not riba as you have stated.
I think there are other scholars more recently like the great Azhari Sheikh Utsadh Mahmood Shaltut who considered banking forms today as being Islamically acceptable, a fatwa which Tantawi gave more recently, stating the same thing.