Interest: Pooled to help the poor

Q290 :Many Muslims in India live below the poverty line. In case of an extreme need, a poor Muslim may either sell some of his essential belongings or pawn some items, normally with a non-Muslim pawnbroker, who charges a very high rate of interest. In the overwhelming majority of cases, the owner loses the article he has pawned, because he is unable to pay the advance and the interest to the pawnbroker. Some of us Indians working in the Kingdom have come up with the idea that we pool together the interest paid by the banks on our accounts in order to establish a facility whereby we lend poor Muslims who are in need of a loan, and we get those articles which would have been pawned as security for the loan. If the borrower is unable to pay back, we may sell the article given as security, and we pay the owner whatever remains of the proceeds after deducting the amount of the loan charging no interest whatsoever. Is this acceptable?

A290 : Social welfare is a very distinctive feature of the Islamic system. A Muslim community is required to look after the poor in that community. God has established the system of zakah, which is obligatory to every Muslim, once he qualifies as a zakah payer, so that the hardship of those who are in less fortunate circumstances can be eased. In this present day of ours, the Islamic social justice is not seen in practice, and there are several reasons for that. One is the fact that in some Muslim countries, the government does not bother about establishing a department for the collection of zakah from those who must pay it and its distribution to its rightful beneficiaries. In fact, governments in many Muslim countries prefer to operate an economic system which is bound to create great difficulties between those at the top and those at the bottom of the social ladder. By so doing, governments deprive their people of the great benefits that the Islamic system can provide. Moreover, we see the usurious banking system operating in the majority of Muslim countries. This leads to an even greater gulf between the rich and the poor. Therefore, in the absence of the Islamic system, any scheme which does not contravene Islamic principles and is designed to help the poor in the community is encouraged and commendable. If we consider this scheme which this group of Indian Muslims are planning to do, the only point that may be taken against it is that its source of funds is the interest paid by banks on the deposits of these Muslims. However, this objection should not be given more weight than it deserves. Those people do need to use the services of their banks. They do not put their money in bank accounts in order that they should earn interest. They do not wish to take the interest for themselves as they believe that they may not receive it for their own benefit. The banks offer this interest out of their own accord, in return for benefiting by the use they can make of the money deposited in them. Therefore, the interest given should be used for something that benefits the Muslim community, but not the owners of the money deposited with the banks. If this interest money is not taken, but left instead to the banks, then the banks may use it for something that could harm Islam or the Muslim community. Therefore, it must not be left to those banks. [It may be argued that the money should not be put in interest bearing accounts. It could be placed in current accounts against which the banks do not pay any interest. Such deposits will provide the banks with interest-free deposits;. thus helping the bank with their anti-Islamic or anti-Muslim objectives.] Nor is it permissible to destroy it on its receipt, because then we are destroying something that could be put to a beneficial use. This is not permitted in Islam. The third alternative of adding the interest to one's own money is also not appropriate, because scholars maintain that interest is forbidden to take for oneself. The only permissible alternative is to take the interest and use it for something that benefits the community. There are numerous schemes that could be thought of in this connection. This group of people have come up with this scheme in order to alleviate the hardship of some of the members of their community. These are the very poor who are forced when going through a difficult period to get an advance from a pawnbroker who charges them an exorbitant rate of interest. This is most likely to end in their total loss of the item given as security to the pawnbroker. They do need that article most certainly, but they are forced to abandon it and get for it a very petty price. If this hardship can be alleviated through the use of the interest given by banks, then it is infinitely better if the economy of the community is organized in such a way that it does not need to resort to such schemes. But until this happens, the Muslim community may think of the ways and means available to it in order to lessen hardship or improve its members' circumstances. This scheme involves taking security for loans, which is again permissible. However, I would like to advise those people that they should spare no efforts in trying to help those who need help. Thus, if a person gets an advance from them and he is unable to pay it back, then they should be given an extension of the loan period. Only when it is absolutely clear that the borrower cannot meet his obligation, then selling the security could be considered as an option. Since those people do not intend to charge any security for any balance that remains outstanding after deducting the amount of the loan, then there is nothing wrong with their scheme. May God bless them and guide them to benefit their community as best as they can.

Our Dialogue ( Source : Arab News - Jeddah )