Tuesday, July 6, 2010

Riba - Usury

As some of you might know who follow my blog, I like to learn about the "alternative" interpretations in Islam.

I want to quickly go over what different interpretations I found on riba.

1) That riba actually means "excessive interest" and not just interest. (interpretation of http://www.submission.org/)

I don't get this impression myself and dismissed this, personally. But I suppose a person wanting to get a relatively reasonable loan might try to find a way by attributing this meaning. And to their credit, I don't feel the word riba is very well defined in Qur'an or hadiths.

2) Looking at verses 2:274 to 2: 280, we see that it deals a lot with charity. Read it for yourselves to know what this interpretation is talking about. Basically, this interpretation is that Allah is talking about interest on a loan given to a person in need of charity... Basically that if they need to borrow money, we are not to charge them interest and that the prohibition is for such cases, and not for commercial or business. That it would be OK to charge interest on a business loan for a person to improve his business, for example.

I feel that 100%, a loan to a person in need should not have interest and that the verse is clear on that. Not that you can charge some interest, but that there is NO interest to be charged. I can understand this interpretation because everything surrounding the part about riba is about charity. One of the clearest verses prohibitting riba says,
"Those who swallow usury cannot rise up save as he ariseth whom the devil hath prostrated by (his) touch. That is because they say: Trade is just like usury; whereas Allah permitteth trading and forbiddeth usury." (2:275)
Even by reading the surrounding verses (which is a good idea when trying to get an idea of the true meaning of an isolated verse), this verse is very clear about usury. And I feel it applies to ALL usury.

3) Of course, the most accepted opinion is that usury is interest and it is flat-out prohibited in any case.

My note on this is that I agree, but that it also seems like it should include charging fees for a person being late on a payment... See this verse:
"If the debtor is in a difficulty, grant him time Till it is easy for him to repay." (2: 280)

And the more I think about it, the more these Islamic ways of buying a house are so very similar to interest, but are more like fees that are included and cannot be raised... At least it's not "compounded over and over", which is something detested by Allah. (see 3:130) I will need to write a post on that and clarify my thoughts as I do because I don't know.

What are your thoughts on riba and on these interpretations?

4 Comentários:

Stephanie said...

Yes, it is very difficult to live in the West or I suspect any 1st world country without engaging in riba...as for the "Islamic loans" many times you end up paying more in the long run than if you simply had a low interest loan, so how is that better? It's all the same, you're paying more than what the actual price of the item is.
I personally feel it is nearly unavoidable especially if you ever wish to be a home owner or get an education. Most people don't have the cash to buy these things outright.
As for credit cards, yes they should be avoided at all costs and can get people into a lot of trouble, so I definitely see the wisdom of avoiding riba.
Another issue is insurance, as a lot of conservative Muslims feel that this is usury, but I personallly feel it is extremely irresponsible to go without health insurance (if in the US) or even life insurance if you have a family.
It's all about commonsense.

Candice said...

It's really difficult. I'm paying interest now for my student loans but it's not at all high and very reasonable. Without that, it would have been quite a bit harder!

And I imagine getting a home someday, but without interest, I surely never will! How can a person save up 150 000$ when they are paying hundreds in rent that they will never see again and could be paying back towards that 150 000$ loan?

With the way things work, it's almost impossible to do it another way than a loan... But I need to get back to the basics of a society without interest. It's a bit of a situation where if I believe the ideal would be for everyone to not do it, I shouldn't either. Not just because my way doesn't matter should I give up the principle of it. So I need to re-think. I always vote even if I feel my voice is not very important in the gant. I try to give a bit to charity here and there even if my 20$ donation to a big charity does not change the charity... Know what I mean? Very hard though...

About insurance... We pay for so much insurance here just in taxes. For example our "SAAQ" (car) that is included in our extra-high license and registration fees.

And it's obligatory in lots of cases. I think it's a bit less like interest and more like a service. For a fee, you get protection.

Anonymous said...

I agree with Stephanie ... when I looked at the "Islamic loan" option before we bought our house, the total amount we'd be paying was the same (or a bit more) than what a conventional mortgage (fixed price, not the adjustable rate one) would cost us!
I do think there has to be some fees paid, but it shouldn't be so much.

Muhammad Asad says: "With all this - as is evidenced by the voluminous juridical literature on this subject - Islamic scholars have not yet been able to reach an absolute agreement on the definition of riba: a definition, that is, which would cover all conceivable legal situations and positively respond to all the exigencies of a variable economic environment."

I think this topic is not totally black and white.

For me (this is my personal view) using a credit card is okay, as long as I pay it off monthly and don't accrue interest. The credit card companies make money from the merchants per transaction, so it's not like they don't make money when that happens.

Candice said...

I also think a credit card is OK if a person has an easy time with money and knows not to spend more than they have to pay back. I use mine all the time because it's just easier than cash or debit and I don't pay transaction fees, and I pay it back weekly through online banking. I've had the card for almost 6 years and as far as I know have not paid any interest.

I know a lot of people who simply are not good at managing money and cannot resist going over their limit and so it's tricky seeing as Islam tells us not to approach the haram. When you borrow from a credit card, you are close to interest because one mistake can make you unable to pay in time!

I'm so curious about Muhammad Asad. I quite value his opinion so I'm curious what his position on riba is; do you know??

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