Interest Based Loans (IBL) is called Riba in Arabic, Ribbit in Hebrew and Usury in Latin origin. It was introduced to the world around 7000 years ago. Jews were the first known for taking interests on loans. In the Old Testament, Jews were forbidden from taking Interest Based Loans (IBL) only from their follow Jews:
Do not charge a fellow Israelite interest, whether on money or food or anything else that may earn interest. You may charge a foreigner interest, but not a fellow Israelite, so that the Lord, your God may bless you in everything you put your hand to, in the land you are entering to possess. Deuteronomy 23:19-20
On this issue Quran blamed the Jews on this Double Standard:
For the iniquity of the Jews … That they took usury, though they were forbidden (Allah punished them) Al-Nisa 160-161
However, in the New Testament, Christianity takes an indirect position against Interest Built Loans:
Give to the one who asks you, and do not turn away from the one who wants to borrow from you. Matthew 5:42
Christianity, Judaism and also Buddhism discourage usury in one way or another. But what about Islam? Islam has taken a gradual approach in fighting usury. The first interest associated verse in the Quran was revealed in the early days in Mecca:
That which you lay out for increase through the property of (other) people will have no increase with Allah: But that which you lay out for charity seeking The Countenance of Allah (will increase): It is these who will get a recompense multiplied (Quran: Al-Rum 39).
This advisory verse was followed by another verse in Al-Imran, also in Mecca, which strongly forbids high interest rates:
O you who believe! Do not consume usury, doubled and multiplied, but fear Allah that you may (really) prosper. (Quran: Al-Imran 130)
It should be stressed that in Mecca and even until late time in Medina, there is no single verse from the Quran that forbids taking interests entirely. Only the high interest rates of multiplying factors have been prohibited, as clearly underlined by the verse of Al-Imran.
As an alternative, Islam was boosting for a long period the act of giving honest loans to the needy. This is exactly what the Christ Jesus had baptized for a longtime before he was raised up to Allah Glory to Him. This is also supported by the late revelation of the longest verse in the Quran; the loan verse (Quran: Al-Baqara 282). It was the only verse that sets the rules for taking and giving loans, and it coincided with the last year before the death of Prophet Mohamed PBUH. Only then, the final verse on Riba was revealed, forbidding all kinds of interest based on loans (Riba or Usury).
So contrary to popular believe, Riba was only forbidden entirely at the end of a very long process that lasted for more than 20 years of the Period of Revelation. In that duration, the first generation was given enough time to adopt values of honesty, keeping promises, adhering to covenant and respecting the law. It took two decades to build the personality of a proper Muslim: one who values charity, debt, relief, kindness and altruism. The unprivileged had their share of responsibility in this new environment, not paying your debt was regarded a major sin. One of the few cases where we see the prophet refusing to pray at funeral, was when the diseased had standing debt. It forced people close to him to pay the debt and clean his records or he will be punished in after life.
Once all the sectors of the society became ready, Islam finally had the revelation to forbid all kinds of interests:
O you who believe! Fear Allah, and give up what remains of your demand for usury, if you are indeed believers. If you do it not, take notice of war from Allah and His Messenger: But if you turn back, you shall have your capital sums; Deal not unjustly. And you shall not be dealt with unjustly. If the debtor is in a difficulty, grant him time till it is easy for him to repay. But if you remit it by way of charity, that is best for you, if you only knew (Al Baqara 278-279).
Interestingly, one would assume that modern Islamic banking would follow the same steps of the prophet and thus it is labelled Islamic. Unfortunately, it is far from that. “Islamic Banking” takes interest but on non- monetary items. Their argument is that interest was forbidden only with cash.
Interest in Arabic, Riba, means increase, and there was no evidence in the literature that restricted Riba to money. We see this concept clearly in the authentic hadeeth narrated by Abu Saeed Al-Khudari.
Exchange Gold with gold, silver with silver, wheat with wheat, barley with barley, dates with dates. All in the same measurement (weight or volume) and hand by hand. Whoever adds from both sides have made Riba.
To understand this narration, let’s look at the following use cases:
- Ø Gold can have different shapes and some are made in jewelry form. Regardless of what shape it has, when exchanged with gold, it must be in same amount.
- Ø Dates can be in different qualities and yet two sets of dates have to be in the same amount when exchanged. The one with better quality can opt to sell his set with money, and then buy the lower quality.
- Ø Whatever exchange is there, it all has to be the same moment, and hand by hand. This last statement eliminates most of business disputes nowadays, even what they called The Meltdown of 2008.
- Ø If it is not possible to exchange at the same moment, it becomes a loan.
- Ø If that loan is increased by sum, that is Riba
“Islamic Banking” advocates, ignore these authentic hadeeth, and verses in the Quran. They base their practice on a weak narration that deludes Riba being permissible as long it is not on a money loan. That weak narration is attributed to Amar Binu A’as, where he says:
“The prophet allowed me to take one camel for two camels paid back later. This was when we were preparing for Jihad. The increase will be paid from the Saka”
It is obvious there are a number of concerns in this narration:
- Ø First, it is a weak hadeeth, since its narration chain contains some unknown individuals.
- Ø It is contradicting with the clear guidelines in authentic hadeeth and Quran regarding Riba
- Ø Most clearly, it does not take into account the historical prospective of Riba Ban in Islam. Amar Binu A’as narration talks about preparing for Jihad. But not mentioning the time whether it was before or after last year of the prophet life. As explained before, Riba was not actually forbidden at the time of this narration before the last year of the prophet. Thus it cannot be used to support non-monetary Riba. If the opposite, and during the last year of the prophet life, this narration contradicts the clear verses of the Quran mentioned, and the Hadith explaining. In that case, narration of Amar Binu A’as is to be discarded.
An “Islamic Banker” will not call it Riba, his legislators will call it “Deferred Payment With Increase” which is a clear hoax, knowing that Riba literally means increase in Arabic. His marketing term is “Murabaha” meaning purchase with profit”. This is exactly what the Quran rejected 14 Hundred years ago.
Those who devour usury, will not stand, except as stands one whom The Evil One, by his touch, had driven him to madness. That is because they say: “Trade is Like Usury”. But Allah has permitted trade and forbidden usury … (Quran: Al Baqara 275).
Nowadays in the place of camels, we have home mortgages and new cars. Murabaha of the “Islamic Banking” will demand the buyer to always pay more than market value, since the payment is postponed at later time. What else is that to be called other than the Riba?!
A better and real Islamic transaction is Mudaraba which is similar to modern day investment. In Mudaraba an investor grants money to someone with business ideas for the goal of sharing gains. Where there is a lost, the investorr bears the burden. But “Islamic Banks” do not offer Mudaraba!
It is incredible, the contrasts between Mudaraba and Murabaha, in the way they affect the society. The second generates the inflation, and increases the gap between the rich and the poor, while the first creates jobs and revives the economy. Certainly, these two can’t and won’t coexist together, and most lenders will always prefer Murabaha over Mudaraba. That is why Islam has intervened and took a clear and strong stand against Riba of all kinds, and so did all major religions.
However, Jews and their cousin of “Islamic Financers” have found ways to forge the noble teachings, and they practiced Riba, using immoral justifications. On the other spectrum, the strict Muslims take a shortcut, by targeting nominal Riba alone, without the process the prophet took, and the devices he employed. Today, Murabaha flourishes while one hardly hears of any institution facilitating debt, relief, Zakaa, loans with no interest and Mudaraba. Furthermore, These “Islamic Banks” take interest rates that are 5 times or more high than the conventional banks.
Unfortunately, that is the case in Somaliland where many “Islamic Leaders” are holding a furious campaign to legalize the “Islamic Banks” and block Conventional Banks from the country, all in the name of Islam. There is no Muslim country today that has taken that irrational approach. The largest banks in Arab and Islamic world are Conventional Banks, and besides offering the so called Murabaha, they often have old-style branches.
A true Islamic bank would be the one traditionally known as “Bayt Al-Mal AL-Muslimin” which translates to a National Central Bank, owned by the government which takes Zakaa, taxes, and secures all public and private holdings. It is the one that regulates other banks and sets interest rates. Such bank can later start gradually lowering the interest rate to a zero after taking a long and thoughtful process similar to what the prophet did.
Currently there are only two private “Islamic Banks” in Somaliland and clearly they are using religion to create the wildest monopoly of its kind. Looking at the following facts:
- Ø There is no genuine intent to follow the Prophet Steps in Somaliland and over the world
- Ø None of the “Islamic Banks” give Islamic loans (with no interest)
- Ø None of the “Islamic Banks” offer Mudaraba
- Ø The ”Islamic Banks” in general, and over the world, do not hold even 1% of What Conventional Banks manage
Therefore, the question is not to take Riba or not, since they all do, the question is which banking system offer lower interest to the public? Which system will break the unbelievable harsh monopoly? What are the banks that have the capability to specialize in each sector and fund public and private projects? Which system is capable of major investments in education, agriculture, fishery and care of livestock and trade?
Which banking system can facilitate the establishment of publicly own companies, offering shares and bonds to our citizens, thus providing another channel of income? The answer to all those questions is Conventional Banks. Only these can help to unlock many of Somaliland’s resources and opportunities.
As the case with Islamic terrorist organizations, once again Islam is used for personal gains even if it means to corrupt Islamic values themselves!
Allah, Bless Somaliland
Mohamed Abdi Daud
