Riba and the Pakistani Economy

the movement of Islam was in the time of Mohammad ( s.a.w ) & now has been anti-capitalist in nature - and has preaches the idea of social justice . Collection `Interest` or `Suud` is `haram` - as simple as that . Some Muslims or should I say most Muslims take intrest either by investing in governments national saving schemes which gives higher rates or interests or by mortgageing a house in west ( applies to brothers & sisters who lives abroad ) - these people mend the rules to suit there needs - while the book says something different .
As for my and my father(s) examples Alhumdullah, we had all our lives been away from this sin of interest - may Allah keep us and everyone away from this -

Nice Article Musa,

This is an area that needs attention by Muslim Scholars, Econimists, Financial Experts, Bankers etc to look at the term ``Riba`` and compare it with current financail transactions. These experts should look at all the currect financial transactions and figure out which of them comes under the riba category and which of them are considered riba free.

-Asfand

Yep - that`s what you pakis need to do right now - re-invent the wheel.... :)...

Riba, kafir, haram, halal.... The world has moved on - but pakis are still stuck in 7th century....the ``debate`` never ends...

Yes Mohar

We are trying to understand our religion. Because we believe that a better understanding of our religion will make our lives better here in this world and in hereafter.

Asfand

asfand #4

`` Yes Mohar

We are trying to understand our religion. Because we believe that a better understanding of our religion will make our lives better here in this world and in hereafter.

Asfand ``

In 7th century Arabia where was no state and no rules
it made perfect sense for a money lender to charge huge rates of interest.

What is a moneylender going to do when the borrower takes off to the neighboring kingdom ?

We are in the 20th century. To ban interest is to miss the time value of money. We are in the era of printed money. There is inflation.

Request to Horrible hinoods,
Pls keep away from these matters .... I 200% support the abolition of interest from Pak dharti.

they should put it in action from this day and hour and minute and second .....:)

> We are trying to understand our religion. ...
Still ?

Even the Western Banks are now jumping into this `Islamic Banking`. For pure coomercial reasons.

They get accounts of the emotional Muslims who wish to deposit the money with them & get no INTEREST.

they are only interested in sharing the Profit or Loss. So the Banks oblige them (Always?) with a bit of Profit. The same banks, when they loan out, they charge hefty `Service Charges` but take no interest.

Everyone is happy. The Muslim feels spiritual & the Bank makes money. Throw in some Arabic terms to make it all look authentic & religious.

it is a big hoax.

Unlike the RICH lenders of 7th century, now the lenders are millions of POOR people.

nhk

Musa,

Good attempt to understand the Riba principle. Godspeed to you. My two bits:

The question arises as to whether this is a viable economic model.

If seen in the overall context of the Islamic Society, it is not only viable but a vital ingredient. Capital, in Islam, is not an asset of the individual but on the contrary a liability towards Allah as bestowed by Him upon His discretion, and accountable as for its use in the minutest detail. Therefore, it neither carries a time-value nor is it a factor of production carrying any `rent`, but rather to be used towards the best interests of society at large, in manners prescribed, by those upon whom it is bestowed.

The question as to whether a massive increase in charity would decrease interest rates

Interest in any form is not allowed at all. Period. Like your example of `Islamic Ijarah`, the Islamic `banking` in vogue is nothing but pure Munafaqat. This works by twisting the interpretation of the prohibition of pre-determined profit to mean that fixed interest rate is prohibited, but floating interest rates are ok because these cannot be pre-determined. Therefore, Liobor (+) Ijarah, Sukuk etc. are all considered Sharii which is stretching the definition to fit the purpose. Besides, Islamic products are more expensive because of the additional documentation required and legal risks etc involved in stretching the definition.

..it is far from clear whether charity is in itself the mechanism for abolition of interest...

Charity is the prescribed social utilization of capital. The use for trade and commerce is quite distinct and seperate and the two should not be mixed. Tthere is no gradual mechanism or modality to abolish interest, but rather it was eliminated by decree following the shift in the entire conceptual perception of money.

It must however be noted that such a system can only be viable in a closed economy, with no need for reliance outside it.

Rgds

Muslims waste time, energy, effort and blood over the mediaeval laws of seventh century Arabia, while the rest of the world moves on.

Re: # 8

Zeemax

Both you and I are in agreement that riba was abolished via decree. OK. But we must be truthful and accept that riba has not been abolished by practice. Unless you can point to me an example of a contemprary non-riba based economy, which I think you would be hard pressed to find. One should say that such a time was also forseen by the Prophet (saw) who said:

``Hazrat Abu Hurairah r.a. reported that the Prophet (saw) peace and blessings be upon him said : A time will certainly come over the people when none will remain who will not devour usury. If he does not devour it, its vapour will overtake him`` ( Sahih Bukhari)

What interests me is any mechanism for abolition of interest because I felt that I could get upto this point and no further. So we both agree that charity is not, as it were, ``compensatory for interest``. Fine. So you say:

``there is no gradual mechanism or modality to abolish interest, but rather it was eliminated by decree following the shift in the entire conceptual perception of money.

It must however be noted that such a system can only be viable in a closed economy, with no need for reliance outside it. ``

But economies are not closed, they are necessarily open. Surely one of the principles of trade in Islam is not to seal ourselves off from the rest of the world. So we must look for a way out of this problem.

I appeal to market morality. You appeal to decree. But neither of these approaches are going to be taken up.

Musa

Re: # 4 asfand
[...We are trying to understand our religion..]

How long do you think it will take?.... I mean - it`s just one book and you guys have been reading it from page to page 5 times a day, everyday, for all your lives.....

But keep trying.... someday you will find out the bitter truth... that the book has no answers to your problems... the book is obsolete, has been so for a very long time....

Re: # 11

Mohar

When Asfand says ``we are trying to understand our religion`` he means that Islam is by its very nature a Faith which looks forward not back. In this context the contribution of Islam is to highlight the problem of riba which is a huge socioeconomic injustice perpetrated particuarly on the vulnerable members of society. Those who decry Islam are either blind to this phenomena or do not care. They should suggest their own alternative answers.

I mean, lets not forget that we had previously established that 300 million Indians live below the poverty line.

Re: # 12 oak
[...Islam is by its very nature a Faith which looks forward not back....]

LOL... I actually laughed out loud when I read that.... Tell me you are kidding.... :)

Oak,

Surely one of the principles of trade in Islam is not to seal ourselves off from the rest of the world.

Well, in Islam, there is no rest of the world. It is only Islam or nothing.

...economies are not closed, they are necessarily open. Surely one of the principles of trade in Islam is not to seal ourselves off from the rest of the world...

Just for the sake of argument, China did it for 50 years ... didn`t it? So it can be done if really necessary.

So we must look for a way out of this problem.

I don`t see it as a problem. It is forbidden in Islam, and for good reason. Without interest, there can be no inflation. Trouble is there can be no growth either as far as the modern economic theories go. That in my opinion is the real point to ponder i.e. how to achieve growth in a non-interest-based economy. Not how to keep relations with the rest of the world because there isn`t any.

....... while you are trying to understand your silly religion, send me your interest payments from your banks and brokerages and i will keep it in a safe place ......... once you have it figured out i will either return what you sent me (without haram interest) or i will keep the money and spend it on beer and dancing women (since it was haraam to begin with) !................

............the strippers on eight mile have more sense than you guys - as long as the money is green they don`t mind it being stuffed in their g-strings ............ what a bunch of morons !

#14 zeemax

Could you please define ```growth`` and how it is not possible with an interest free economy?

The way I understand it is that, a business enterprise has two ways to raise capital for growth and expansion. One, it borrows money from a financial institution and second, it floats its shares in open market or forms partnership. As a matter of fact all modern business use a hybrid of these two methods. But in either case the business enterprise pays back earned money back to financial institutions as interest or it pays dividends to its shareholders. In the first case the payback goes into the pocket of select few and in second case a large segment of economy benefits. In the first case, the payback is a must, no matter how the business does; so the business owners are under constant negetive pressure to perform well - and if need be lying and cheating, and cooking the account books is a inevitable, as we have seen in the Enron case; where not only the business managers but also the financial institutions robed share holders of their money in complacence with each other. But in the second case not only profits but losses are also shared. Since a large number of people have stake in the enterprise it is harder to cook books. So any growth is actually a ``real`` growth and it is across the board. This is not an idealist talk. The Arab traders pioneered this concept and concept was taken up by early Europeans who institutionalized the practice and formed stock exchanges and trader guilds. Later the corruption and greed settled in and stockholders roles were made to diminish and interest banking treaded in. It was not the need that mothered this bastered child, it was rather greed.

So I think, growth is possible without making money from money. I see an extremely diminished role of of financial institutions and banks in an interest free economy and this really bothers the hustlers and soodkhors who are so accustomed to making easy money.

I know it will drop many jaws but I think the institution of bank as a lender has no role in interest free economy. However, financial institutions are still needed for funds management, for example, where money is made by making smart investing and not by hustling.