Riba or interest

[Ruhi_Rose]

Assalaamu Alaikum everyone.  Can anyone give some information or throw whatever light you can on the matter of interest based loan or Riba.  First riba based loans were a common problem in the West.  Now even Muslim countries have started this practice.  Whatever you can say on this will be greatly appreciated because so far I haven't come across any Islamic jurist or scholar who has been able to give a definite or practical response to this issue. 


P.S. I don't recall if there's already a post on this in our forum.  I'll check nonetheless. 

[Ruhi_Rose]

Nope, I couldn't find anything on Riba so far .......

[Zainab_M]

I don't think this topic has been put up on our board yet .. cannot recall .. though I've been meaning to discuss it since long.  However, it so happened that a cousin of mine asked a  similar question on Riba very recently through email to which I responded in sufficient detail. I quote my response below:
 
 
Quote ----
 
I read a lot about Riba and also discussed it with several people to get acquainted with their views, not to blindly accept whatever they say.  Eventually I came to my own decision with the help of Quraanic guidelines.  Alhamdulilah.
 
Here's how I would interpret Riba ..
 
Keeping in mind the Quraanic texts on riba, it's also essential to consider the social set-up of that era of history.  In the 7th century (and till much after that) there were no banks, credit unions or any such financial institutions anywhere in the world.  If people wanted loans, they would go to professional money lenders .. for most of whom this was a family business.  And yes, they would harass their clients by doubling and quadrupling the amount lent in the form of interest / riba.   Today, this rudimentary system is a legally accepted transaction with plenty of stiffer innovations in all financial institutions of the world, including many Muslim banks, though financial organizations in the West have harsher strategies.  It's an awfully oppressive system often with devastating consequences sooner or later.  A perfect example is the current global financial meltdown.  It's a long story and as we know, it started with the greedy practice of promoting subprime mortgages.  Coming more to the point, when a certain practice gets so firmly rooted in a community, it's not upto any common individual to change it.  It's a compelling situation for borrowers with no escape.  They are not the violators, they're the victims.  They simply find themselves trapped in a system don't like.  With the exception of those who try to live far beyond their means, the problems of an average borrower isn't their fault.
 
Regarding the other kind of interest, i.e. yield given to clients by banks on their deposits or investments, is a totally different issue.   The Quraan does not mean this when it states about riba.  Riba, as per the Quraan, refers to interest taken from an individual by another individual or organization.  It's this practice that brings the factor of oppression which is the reason for banning it.  But for example if a multi-billion dollar bank (or any bank) pays a client 2% interest on his/her savings, that institution will make darn sure that it derives benefits worth at least 4% from the client's money otherwise it will never offer that yield in the first place.   Thus, this kind of yield given by financial institutions to individuals allows the strong to help the weak.  While on the other hand, ripping off poor individuals by exorbitant interest rates on loans by these financial institutions is a system that allows the strong to oppress the weak.  This was the system practiced in the 7th century (at a more personal level) by pro money lenders and also among neighbors, relatives and friends which the Noble Quraan forbids.  But like I said, the poor commoners were (and are) getting fleeced by this oppressive system are helpless and faultless. 
 
Many of our fatwa givers (who often preach what they never practice) talk much about disallowing the Muslim community from indulging in riba transactions but without providing them with any proper alternatives.  Many so-called Islamic financial organizations have propped up in North America claiming to offer interest free mortgages.  But each of these organizations are just an eye-wash.  They too derive interest from clients, only they reshuffle the procedure and give riba a different name - like 'profit' or 'monthly fee' etc.  A friend of mine at Facebook who's very particular about avoiding riba went to one such institution in Toronto.  After a detailed consultation she returned thoroughly disappointed.  She said that practically they're quite the same as any Canadian bank.  They too charge riba or interest by simply calling it 'additional fee.'   
 
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Therefore in my opinion, unless one can find a bank that truly runs a risk-free business with no dealings in mortgages and subprimes, the common people are today left with no other choice but to pay interest on their loans and mortgages (including credit card loans).  The responsibility of the violation rests upon the institutions that make is obligatory for these people to pay interest.
 
As for getting a yield on one's investment, is a completely different matter.  The concept of investing with a bank and getting a return is much like that of an association of people or firms formed to engage in an enterprise or to undertake a joint project or promote a common interest.  In other words, it's exactly the same as running a syndicate where everyone contributes their share of money to build a substantial principal for the business.  The profit acquired by this project or enterprise is shared by all.  And if, at anytime, any of the investors want to quit, they are given back their share of principal. 

Thanks for bringing up this important topic, sister Ruhi.

Salaam Alaikum and peace ..  Allah bless.


Related posts:

-  Riba sinful for both giver and taker
-  Apt origin of the term 'mortgage'
-  Hajj and loan
-  Comparing words of the Noble Quran with Hadith on usury
-  Forex and shares in Islam
-  Hidden history of Khazars
-  Why is bank investment different from riba as explained and prohibited in the Noble Quran

[N. Truth Seeker]

Very perceptively put, sister zeynab.  I can connect with you all the way through.  But if you try explaining to our brothers (even sisters for that matter), they'll have loud disagreements.  That's because they don't have the patience to stop and listen or read the facts of the matter, let alone reflect rationally.  The moment you make the first statement, they get carried away and begin exploding with rage.

[Ruhi_Rose]

Big thanks dear Sister.   Yeah, it's an old thread.  I and my husband read it many times and then got busy with some discussions with family and couldn't remember to express my thanks.    We were talking on this topic again this morning so I came here ...... 😐

[Zainab_M]

Very welcomed Sister Ruhi.