Usury: the nature of

Q660 :In a previous answer on the question of riba, you stated: When a person borrows money from another, they specify a time for repayment. If the borrower cannot settle the loan at a specified time, he goes to the lender and asks him: "Would you agree to postpone settlement and I would pay you an extra sum? This may happen several times, with each postponement meaning an increase in the amount to be repaid." I would like to know the references from authentic writings where the above working of riba has been mentioned. This description is very helpful to differentiate between riba and banking transactions in our modern world. It becomes even more significant if we can deduce from this description that if the borrower repays the loan within the due time, as originally agreed, he repays only the sum borrowed, with no addition. In my view, bank interest does not contain the harmful and prohibited element inherent in riba, as mentioned in the Qur'an. Your comments will help me write my views, arguments and analysis with proper references.

A660 : The definition which you have correctly quoted is based on the writings of a number of very early scholars. In his commentary on the Qur'an, Imam Al-Razi says: "The usury based on time delay was the type commonly practiced in pre-Islamic days. A man would lend another person some money for a specified term stipulating that he would charge him a specified amount every month while the principal amount remained intact. When the agreed time arrived, the lender would request repayment. If the borrower cannot pay, he increases the monthly payment and the time of the loan." Al-Jassas says: "It is well known that usury in pre-Islamic days was simply a loan given for an appointed time with a stipulated increase. That increase compensated for delay. This is prohibited by God." Mujahid says: "In pre-Islamic days, when a man had borrowed money from another, he would come to him and say: I will pay you so and so if you allow me a longer period for repayment." Qatadah says: "The usury practiced in pre-Islamic days took the form of a sale made for a specified term. When payment is due and the buyer does not have the money to pay the seller, he agrees to pay him extra in return for a postponement." Imam Ahmad ibn Hanbal defines usury in the same terms, saying: "If a man had lent money to another and the time of repayment was due, the lender would say to the borrower: You either pay me now or increase the amount to be paid. If he does not settle the debt then and there, one agrees to increase the amount and the other extends the time for repayment." I have quoted you all these definitions which agree on the nature of usury. It is financial compensation for time delay. This is what is known as "increase in lieu of time extension." All scholars and all Muslim schools of thought are unanimous that this type of usury is strictly forbidden . There is another type, which is known as "increase in lieu of quality". This takes the form of exchanging two quantities of the same kind, such as dates for dates, wheat for wheat, rice for rice. A person may offer 1.5 kilogram of dates or wheat or rice, etc. in return for one kilogram of the same type but of higher quality. There is no doubt that there may be several types of the same produce and their qualities differ immensely. Prices could range from the very cheap to the very expensive, with the latter being two or three or four times as much as the price of the former. It is conceivable that people would like to barter some of their produce for a smaller amount of a higher quality type. But this again is forbidden in Islam. My reader says that he believes that he finds essential differences between such usurious practices and banking transaction. There is no doubt about that, but there are also essential similarities. Our attention should be drawn to the fact that in a loan obtained from a bank, a borrower pays a regular amount of interest which does not affect the principal. This is not dissimilar to the practice of pre-Islamic days when a borrower used to pay every month a certain sum to the lender, while the principal remained the same. Moreover, in a banking transaction, when the loan is repaid over a longer period of time, the amount of interest charged is also higher, although its rate may remain the same. I would also point out that there is no case of prohibition stated in the Qur'an more forcefully than the prohibition of usury. God warns the believers that they must desist from practicing usury or they would face a war declared on them by God and His messenger. If that is not sufficient to deter any believer from getting involved in usury, I do not know what would deter him. I know that some eminent scholars have argued that banking transactions and the system of interest is different from usury, or riba, as it is called in Islam. I have read much of what has been written on this point. There is no denying the fact that there are differences, but whether these differences are sufficient to make it permissible for a Muslim to deposit his money in a bank and receive interest on it is a debatable matter. Many readers have written to me on this point, because placing one's money in a deposit account is the safest way of keeping one's money and getting some returns on it, at least to compensate for the decline in monetary value. However, in all that I have read on the subject, I am not convinced that giving such a ruling can be justified. I would love to receive reader's views. However, it is perfectly permissible for a Muslim to take his money to the bank and ask that the money be invested in some permissible enterprise.

Our Dialogue ( Source : Arab News - Jeddah )