Usury: the banking system

Q659 :When, how and why was usury made forbidden? How is it possible to survive in today's commercial world where banking plays an important role without having to deal in interest which is charged by banks?

A659 : At the time of the Prophet Muhammad (peace be upon him) usury, or riba as it is called in Arabic, was widely practiced. It was frowned upon by Islam, without issuing a definitive ruling, for most of the time during which Qur'anic revelations were being sent down to the Prophet. However, there were numerous hints and implicit warnings in the Makkan Qur'anic revelations and the Hadith which suggested to the Muslim community at an early stage that usury was not viewed favorably in Islam. Later on, a firm prohibition was stated clearly in the Qur'an and in the Hadith which was clear to everyone. But the matter did not end at that. Clearer and sterner prohibitions were still to come. When you look at the relevant statements in the Hadith and the Qur'an, you are bound to conclude that usury is the single most clearly and categorically forbidden deed, second only to associating partners with Allah. I will give you a few of the relative statements. "Believers do not devour usury in doubles and multiples, and fear Allah so that you may prosper." (3;130) "Allah has made trade lawful and usury forbidden." (2;275) "God curses the one who devours usury, the one who pays it, the one who writes the contract between them, and the two who witness the contract." (an authentic Hadith) "Believers, fear Allah and abandon all the remains of usury, if you be true believers. If you do not, then be notified that a war is declared on you by God and His messenger. If you repent, you may have only your principal amounts, wronging no one and without being wronged by anyone." (2;278-9) You cannot fail to notice the prohibition is total and given immediate practical effect by the Prophet, starting with outstanding usurious transactions belonging to his own uncle. Moreover, the prohibition applies to everything that relates to usury, even the writing and the witnessing of its transaction. The Prophet even curses those who are willing to give such assistance, even though they themselves are not parties to the transaction. This is because the Prophet wants to give us a sense of the seriousness of this matter. But the gravity of prohibition is best seen by the Qur'anic statement which declares war on those who continue to devour usury. Needless to say, such a war has only one winner. The reader also asks why was usury forbidden. I think the answer is clear to everyone. Usury is a system which seeks to exploit the need of the less fortunate in order to give unearned profit to those who have plenty. It creates a society in which injustice is perpetuated. In former times, the picture of the usurer was one which met with universal disapproval. That is because the usurer was one who got rich as a result of the financial ruin of others. In order to get wealthy, he sent many victims down the road to utter ruin and despair. Islam is a religion of justice and, therefore, it could not approve of the injustice associated with usury. It would not have been a religion revealed by God, the All Merciful, the Compassionate, if it did not outlaw usury altogether. I understand fully the point you are trying to make when you ask how is it possible to survive in today's business world without ever receiving interest or paying it. What they do [to survive] is to limit their operations to realistic means. They do not borrow more than they can easily repay without having to add interest to it. They do not seek excessive wealth. They only want to lead a decent living. That is certainly possible, and becomes even easier if more and more people are willing to do the same. The advice I have just given you applies to individuals. But the Muslim community as a whole is required to devise a system for business which has nothing to do with usury. When they do, they ensure social justice and they earn something much greater than that, namely, Allah's pleasure. People do not have to be millionaires in order to lead a decent comfortable life, but with Allah's pleasure, they are much richer than all the millionaires in this world put together.

Our Dialogue ( Source : Arab News - Jeddah )