“Narrated by Abdullah ibn Mas’ud The Apostle of Allah (peace be upon him) cursed the one who accepted usury, the one who paid it, the witness to it, and the one who recorded it.”* (Abu Dawood)

There has been a large amount of debate in Pakistan as to what exactly constitutes ‘riba’. Is it interest in all its totalities or does riba simply connatate excess? Indeed the question arises as to whether a complete interest free system can infact be legislated – in Pakistan at least that seems to have failed. In 1991 the Federal Shariah Court called for the ‘Islamization of the economy’ and found interest as synonomous with riba – a situation that was upheld by the Supreme Court in 1999. But by allowing get-out schemes such as “murabah” (buying and selling back to the client at a predetermined profit) the whole thing was turned on its head. Other schemes such as “musawamah”, where the buyer does not know the initial price only seem to ensure that the buyer fails to realise how much he is being overcharged. “Ijara” (leasing) seems more promising but only on paper. Lately ijara mortgages have come to the UK. Interested I sent off for the information, got out my calculator and sat down to do the maths. What happened? I would have ended up paying more for my ‘Islamic’ mortgage than I would for a conventional one. Interest by any other name.

To employ escape clauses to avoid the naming of our financing arrangements “interest” is not Sharii. The whole point has been missed - that the prohibition of riba was always seen as a counter-measure to exploitation. Riba is derived from raba which means to increase or to bring up. This word also has some positive connotations – for example – tarbiyyah, or education is a derivation, which is a duty upon every Muslim. However, in a financial sense, the form of the verb is taken to mean the taking of excess, normally rendered as “usury” in the English. Such an interpretation can be tentatively indicated by the Quran which condemns riba for its additions upon additions (3:130) or which mentions the devouring of wealth alongside riba (4:161). The hadith literature also expands the concept of riba to include the artificial inflating of prices, unfair exchange, the taking of favours from loanees and such like. Riba is seen as having “70 parts” (Ibn Majah). Although not specifically categorised as ‘riba’ other exploitative practices are explicitly condemned such as the unfair treatment of workers or exploitative trading relationships between rural and town areas. These could also be taken to be part of the ‘riba-based economy’ and thus riba has been categorised by jurists into two parts: riba al-nasai: interest on loans which is the primary form and riba al-fadl, or exploitative riba, an implicit form.

Taken in a wider sense then the prohibition of riba is a condemnation of abusive economic relationships perpetuated through economic exploitation. We cannot trumpet the ‘Islamic economy’ whilst the situation still exists. In Pakistan itself 33% of the population, some 51 million people subsist in the marginal existence below the poverty line. There is an infant mortality of 74 out of every 1000 births whereas only 47% of the population above 15 are literate. The situation is an indictment upon the class structure of Pakistan. Whereas we have an economic growth of 6-8% p.a. and Porsche coming to the country, prices of basic commodities are increasing. The providing of basic health care to all is sidelined on the list of national priorities. These are the very fruits of the riba system that suspect legalistic definitions fail to account for.

As Pakistan well knows, riba is practiced internationally to an alarming scale. In 2004-5 debt servicing accounted for almost 25% of government revenues - Rs. 210 billion whilst only Rs. 4 billion was expended by the government on health needs. When we consider that another 25% of government revenues is spent on defence needs we realise why civilian Pakistani governmental institutions are chronically underfunded. Tragically, Pakistan itself is well entrenched within the riba system with Rs. 170 billion being on servicing domestic debt. Ultimately this means that external debt whilst relatively well managed has been relatively stable at around over $35 billion USD since 1999. Whilst such a situation prevails the nation is indefinitely held hostage to a debt which it cannot get on top of. The country is left running the mouse wheel in an attempt to get out of the rat race.

The nation is plagued with the curse of riba on a day to day basis. Contractors cheapen and take shortcuts for the construction of buildings – witness the current claims against the construction of Margalla Towers in Islamabad. Investigations into the sugar scandal, allegations of hoarding driving up market prices, are instituted and dropped “for the wider good” when the situation becomes tricky. Visa frauds for human trafficking are an occasional rarity yet queue jumping in embassies on payment of a bribe is common experience. Corruption abounds in all its nefarious forms. Those of us who never have to dirty our hands can hardly claim to be paragons of virtue. More often than not we find the upper classes with the resources to do so living in a state of insidious obliviousness to their surroundings, veiled from the harsh economic realities of the country – Defence in Lahore is a case in point.

Whenever Islam defines a problem it also supports a resolution. Having established the difference between trade and riba the Quran puts forward the solution as that of firstly desisting from unscrupulous profiteering and secondly of increase in charity:

In the name of Allah the most Gracious, Ever Merciful:

“Those who gorge themselves on usury behave but as he might behave whom Satan has confounded with his touch; for they say, "Buying and selling is but a kind of usury" - the while God has made buying and selling lawful and usury unlawful. Hence, whoever becomes aware of his Sustainer’s admonition and thereupon desists may keep his past gains, and it will be for God to judge him; but as for those who return to it -they are destined for the fire, therein to abide! God deprives usurious gains of all blessing, whereas He blesses charitable deeds with manifold increase. And God does not love anyone who is stubbornly ingrate and persists in sinful ways.” (2:275-276)

Muhammad Asad’s translation is revealing because it highlights the aspect of sustenance in the word ‘rab’. Taken in this sense then the further clause “…God derives usurious gains of blessing…” indicates that the riba based economy is, in the final analysis, unsustainable. True sustenance comes from God alone and those who exceed the bounds of economic decency ultimately barter themselves for a paltry gain. To put the matter in perspective: the modern day American government for example finds itself engaged in war after war in order to maintain its standard of living. This is then both a cause and effect of its excessivity and may explain the ‘madness’ attributed to riba.

The inherent pragmatism of the Quranic approach is instructive. The Quran does not call for the refunding of previous riba dealings because to do so would open a chain of disputations to the detriment of the socio-economic structure. Rather the Quran’s focus is that of socio-economic stability – to desist from riba from the point of realisation. It is a measured approach, albeit underscoring the fact that riba has no place in Islam. The second characteristic that of charity is then highlighted as an alternative economic system. As Asad puts it:

“the former (sadqa) is morally the exact opposite of the latter (riba): true charity consists in giving without an expectation of material gain, whereas usury is based on an expectation of gain without any corresponding effort on the part of the lender”

The root word of ‘sadqa’ (charity) is truthfulness. Therefore an act of charity in Islam is seen as an act of truth. It is a physical expression of one’s belief. Although a distinction is often drawn between ‘zaka’ (alms giving/purity) and sadqa because zaka is seen as ‘obligatory’ whilst sadqa is ‘voluntary’ in reality they are both obligations within Islam. Zaka, however carries a fixed rate and time whereas the date and place Sadqa can be chosen individually. We can thus take zaka as purifying ones wealth whereas sadqa testifies to the purity of one’s economic motives.

The question arises as to whether this is a viable economic model. The question as to whether a massive increase in charity would decrease interest rates is speculative at best but may infact be irrelevant. It could indeed be speculated that an increase in non-interest based funding (sadqa rather than muraba etc.) may actually cause interest rates to become more competitive; yet one should remember that Islam does not seek to lower interest within a riba framework but to abolish it completely. So it is far from clear whether charity is in itself the mechanism for abolition of interest. The only viable mechanism seems to be an attempt at market morality. But there is a long way to go till that.

Until then the nation suffers.