By Ali Shareef

The financial crisis of the past few years has resulted in some deep soul-searching as we struggled to understand why what seemed to be the bedrock of financial stability came crumbling down. First Wachovia, the nation’s number four bank holding company, then Fannie Mae and Freddie Mac, followed by Merrill Lynch. It did not stop there; the Feds bailed out American International Group (AIG) for $85 billion and Washington Mutual became the largest bank failure in history. As the nation searched for a solution to the recession which started in December 2007, politicians debated bailout plans, CEOs lined up for government handouts, and perhaps, just perhaps, as we beat around the proverbial bush, we overlooked the root of the problem: interest or usury itself.

Given the prevalence of interest-based transactions today, it may be bewildering to indict interest itself as a problem. It seems logical, at face value, that a lender should gain some benefit for his risk in providing a loan. However, history has demonstrated that even if this practice of interest was initiated with the best of human intentions, it degraded into the worst of unabashed exploitation of the poor. It became the age-old mechanism that was used since the beginning of time to bind those who don’t have to those who have.

This appetite for profit even at the expense of those most impoverished is nothing new and has existed well before our time. An appetite that was recognized from one end of the world to the other—from ancient China to the Middle East—and manifested itself in the prohibition of interest. A surprisingly large number of ancient civilizations were against the practice of charging interest on loans.

Undoubtedly, capitalists will rise up and denounce this as a step back for the progress of humanity and civilization. However, we must ask: are we really more civilized now than when we exercised restraint in our appetite to consume and take advantage of others?

The Old Testament says: “’If he has not exacted usury nor taken any increase, but has withdrawn his hand from iniquity … And executed true judgment between man and man; If he has walked in My statutes and kept My judgments faithfully — He is just; He shall surely live!’ says the Lord GOD.” (Ezekiel 18:7-9)

“If he has exacted usury or taken increase — Shall he then live? He shall not live! If he has done any of these abominations, he shall surely die; his blood shall be upon him.” (Ezekiel 18:13)

Although Jewish scholars differ as to the meaning of these injunctions, it is clear that the very nature of interest was considered reprehensible—to the point that people who practiced it were cursed.

Even in early Christian history, we find that charging interest was considered “detestable to God and man, damned by the sacred canons and contrary to Christian charity” by Pope Sixtus V.

Lateran III decreed that people who charged interests on loans would “receive neither the sacraments nor Christian burial.”

In Islam, the Qur’an is unequivocal about the evil of interest:

“Those who consume interest cannot stand [on the Day of Resurrection] except as one stands who is being beaten by Satan into insanity. That is because they say, ‘Trade is [just] like interest.’ But Allah has permitted trade and has forbidden interest. So whoever has received an admonition from his Lord and desists may have what is past, and his affair rests with Allah. But whoever returns to [dealing in interest or usury]—those are the companions of the Fire; they will abide eternally therein. Allah destroys interest and gives increase for charities. And Allah does not like every sinning disbeliever.” (Qur’an 2:275-276)

This is a tenant that many Muslims still adhere to. During the early Islamic civilizations, a variety of banking principles were introduced that did not resort to interest. Many of these principles are still applied today and many Islamic banks were largely unaffected by the recent subprime woes.

As the recent financial meltdown indicated, an interest-based economy results in the economy being built on thin air. Banks counted on interest on loans from borrowers to meet their operational costs. However, with the spike in fuel prices and unemployment, borrowers were unable to meet their payments. Faced with decreased cash inflow, falling home prices, and rising foreclosures, banks became bankrupt. When the House of Representatives rejected the $700 billion bailout plan on September 29^th 2008, the ensuing panic caused the Dow Jones to fall almost 778 point—the most ever for a single day since the Great Depression in 1929.

The reason why interest is so abhorrent is the preying of the lender on the borrower. The rich become richer and the poor become poorer. Who are the victims of the recent mortgage crises? Is it the Wall Street fat cats who sought millions in bonus even while the money for the bail-out was being coughed up by the Feds, or the struggling tax payers who must shoulder this burden?

For every dollar accepted by anyone in interest, inevitably there is someone who is struggling hand to mouth to pay that dollar in interest. Where does the bank get the money to pay depositors the returns on savings? People who are paying interest on their loans! A $100,000 loan at a fixed rate 15-year mortgage of 5.0 percent will accrue nearly $42,380 in interest—nearly half the loan itself!

Elimination of interest-based banking levels the playing field for the lender and the borrower alike. Islam is opposed to a guaranteed return for one of the parties at the expense of the other. One principle of Islamic banking entails that if a loss occurs, it is shared by both the lender and the borrower through a partnership. For example, if a person wants to start a business, the bank finances the startup costs and becomes a partner, thereby sharing in the profits from that business rather than charging interest on the loan. The person who started the business pays the original principal amount back in incremental payments. This lack of a guaranteed return forces lenders to be more aware of their lending practices, and decreases the lax lending practices that were one of the reasons for the financial failure. Another practice Islam especially prohibits is speculative investments such as futures—expected profit before the commodity is even available—which was another reason for the financial collapse.

The devastation of the financial markets today affects a larger number of people today than it did thousands of years ago. In today’s global economy, when the U.S. markets stumble, markets from Europe to Asia teeter in response. Interestingly, the prohibition of interest becomes more pertinent today than ever before.

In the face of the spiraling financial descent that we faced, and from which we have not yet fully recovered, it is not possible that a loving and merciful God would not provide guidance on how to conduct an aspect of humanity as important as commerce. He has warned us throughout history of the evils of our greed and has given us the knowledge to control it by prohibiting the use of interest. If we fail to recognize it and utilize it, then we have only ourselves to blame.

By Nada Shawish

Muslims Making a Difference: I | II | III | IV | V | VI | VII | VIII | IX | X | XI | XII

Xiyang Village, China—Sha Ximei feeds her cow in her small clay shed, and smiles with tired eyes. The crops on her farm don’t make enough money, so she has to travel to Pingliang city to take whatever labor jobs she can get to feed her family.

Jobs are becoming more and more scarce in China, especially for people living in rural areas. In the past, rural migrant workers like Sha flocked to the city to take jobs as day laborers in factories or construction sites.

Without education or funds to start something new, they don’t have much alternative.

But with the recent economic downturn, and demand for Chinese products reduced internationally, these jobs have been cut and people are forced to return to their farms. Now, when Sha can get work in the city, it’s very hard to get there and it’s usually only for a single day.

With these kinds of jobs, Sha can barely put food on her family’s table.

Farmers like Sha make up the majority of people living below the poverty line—nearly 90 percent of China’s poor live in rural areas. And China has the second-largest population of impoverished people in the world—245 million Chinese live on less than $2 per day. You’re either rich or poor in China, and that economic gap is only getting wider.

“We don’t have enough money to survive,” Sha said.

But Sha has an idea.

She wants to have an income that she can count on, so she borrowed some money from relatives to buy a cow that can produce milk and other goods to sell. She hopes to raise a herd.

Raising livestock in China can help her family earn a good living—enough to support her son’s education one day.

But Sha needed to buy a few more cows and supplies to get started. These cost money that she didn’t have, and loans are hard to come by.

Microfinance has become an increasingly vital tool in promoting sustainable livelihoods in impoverished communities in the last 30 years.

Microfinancing and microcredit programs have existed in China for more than 20 years, but China’s microfinance institutions haven’t had much success. And while China looks for a microfinance model that works internally, complicated bank formalities make acquiring loans especially difficult for poor farmers like Sha.

While banks can provide larger business loans, many banks and local credit agencies in China won’t help small businesses that need smaller loan amounts.

So financing remains a major obstacle for people who want to improve their lives in places like rural China.

Islamic Relief’s Pingliang Islamic Microfinance program is giving people in China the opportunity to create means of earning a living that are sustainable. The Islamic Microfinance program makes it possible for poor people, especially poor people in rural areas, to get interest-free credit that they can invest in income-generating projects and education.

The Islamic Microfinance program is born out of the microfinance idea and is inspired by Islamic values. The people are the owners of their work and their profits, meaning that the role of the lender is minimized. The loans are interest-free, and the borrowers, China’s rural poor, can reinvest more of their profits back into their own business, to help them get out of poverty faster.

With her interest-free credit, Sha has been able to buy the cows she needs, along with supplies and veterinary care to keep them healthy. She’s even getting training in how to grow her herd and care for the animals on her farm.

The goal of sustainable livelihood projects like Islamic Relief’s Pingliang Microfinance program is to create a sustainable means of generating income. And these types of projects are proven to reduce poverty in a lasting way.

The United Nations has consistently found that sustainable livelihood projects are better than other types of humanitarian aid projects at reducing poverty long-term. This is because they are tailored for each community and family, helping people build the situation they need to earn a reliable living. People with sustainable livelihoods are better able to rebound after a disaster, and are better equipped to grow over time. They’re empowered to improve their own lives and help create jobs for others in the community.

1.4 billion people worldwide live in extreme poverty, but why? Solutions are possible.

For Sha Ximei, the support to start her new way of life has been heaven-sent.

“Thank you so much to all those kind-hearted people who have given their support to make this possible on my farm.” Sha presses her lips together and nods. “This is my opportunity to help my situation.”

Brother Suhaib, I was planning to go to Hajj this year, but I have a feeling that feeding the starving children in Somalia could be more rewarding at this moment. What is your opinion on this? JazakAllahu khayr.

The Answer:

Imam al-Haramayn said, “There are times when establishing a community obligation is better than an individual one.” This is one of those times. The Shaf’i madhab holds that a person is allowed to delay his hajj since it is a wajib muwa’si (expanded obligation). While the Malikis differ with them. The Shaf’i opinion is what I follow based on the fact that the Prophet ﷺ (peace be upon him) delayed his Hajj. Barakallahu fik akhi (may Allah bless you).

By Suzan El-Ajou

What are the congruencies between Islamic business ethics and the Fair Trade principles?

With one-fifth of the world’s total population identifying themselves as Muslim¹, and with the consideration that they are active participants in world markets, it is imperative to include the Muslim community in business affairs and look for ways to reach out to them. By looking into the similarities between Islam and Fair Trade, there are many ways the two can cooperate with one another to ensure success in business ventures for all parties involved. By making fair trade opportunities relevant to the Muslim community, it is also essential to encourage them to take a bigger part in these opportunities as they are in line with the Islamic belief system and further facilitates their goal of helping humanity.

The Roots of Fair Trade and Islam

For the purposes of this article, the definition used for fair trade will be:

“Fair Trade is a trading partnership, based on dialogue, transparency and respect that seeks greater equity in international trade. It contributes to sustainable development by offering better trading conditions to, and securing the rights of, marginalized producers and workers – especially in the South. Fair Trade Organisations [sic], backed by consumers, are actively engaged in supporting producers, awareness raising and in campaigning for changes in the rules and practice of conventional international trade.” (Khan & Thaut, 2008)

The roots of Fair Trade can be traced back to churches in North America and Europe since the late 1940s. The goal was to provide relief to refugees and other poverty stricken communities by selling their handicrafts to Northern markets. Producers in the developing world were offered high returns through direct trade and fair prices. In the United States, Alternative Trade Organizations (ATOs) have followed this model with Fair Trade handicrafts, and an Equal Exchange was formed in 1986 to import Fair Trade coffee to the US market.²

Islam lays the groundwork for all aspects of a Muslim’s life. The compilation of revelations used for this can be found in the Qur’an. In practicing the religion, the Qur’an is supplemented through the reported authentic words (Hadith) and actions (Sunnah) of the Prophet Muhammad ﷺ (peace be upon him) and by the Shari`ah (Islamic system of law). Shari`ah, which takes its roots from the Qur’an, considers “details of required duties and outlines all types of human interactions. It essentially constitutes what elsewhere would be considered criminal, personal and commercial law.”³

The range covered in these sources extends from the highly spiritual to material matters, including business. Islam not only considers business to be an acceptable pursuit, but also a dignified activity. Before becoming a Prophet, Muhammad ﷺ himself was a merchant in Mecca. Khadijah, a rich businesswoman in the region during the time, was married to Muhammad ﷺ, thus signifying the importance of the pursuit of business in Islam.⁴

Islamic Business Ethics

Central to Islam is the emphasis of just interactions – “Deal not unjustly, and you shall not be dealt with unjustly” (Qur’an, 2:279), and “God loves those who are fair and just” (Qur’an, 49:9). While individuals face problems having to do with ethical issues in the realm of business, Islam requires that Muslims act in a way that will ensure socio-economic justice at all times. Throughout the Qur’an there are verses echoing this sentiment: “And give full measure when you measure, and weigh with a balance that is straight” (Qur’an, 17:35); “Do not withhold from the people the things that are their due and do not commit mischief in the land, causing corruption” (Qur’an, 11:85).

Indeed, Islam discourages all sorts of prejudices, oppression and discrimination. Prophet Muhammad’s ﷺ last sermon is a living legacy where he declared “all mankind is from Adam and Eve, no Arab has any superiority over a non-Arab; no dark person has a superiority over a white person and no white over a dark person. The criterion of honor in the sight of God is righteousness and honest living.”⁵ This is important when considering the societal interactions between people.

According to the Prophet of Islam ﷺ, “the best earnings are from a blessed sale and the product of a man’s own hands.” A sale would not be considered to be a “blessed one” if it has an element of deception or cheating of any sort in it; the character of a Muslim trader must be upheld at all times.

For Muslims, although business ventures are highly regarded, pursuing them in a haste manner is not. In fact, Islam encourages individual initiative, drive, efficiency, and enterprising attitudes along with a right to make profits and own private properties; it condemns greed, unscrupulousness and an attitude of disregard for the rights and needs of others. An excessive accumulation of wealth should not be the ultimate objective for a Muslim.⁶

The Fair Trade Model

By giving farmers and farm workers direct access to international markets, and the tools and resources they need to succeed and thrive, Fair Trade makes sustainable local development possible. Fair Trade has empowered farmers to earn significantly higher incomes, and to build health, education and women’s programs that benefit an estimated of five million people worldwide. Fair trade extends a hand to the inhabitants of developing nations. While it is not a charity, it gives a needed boost in areas where the global economy has failed.

Fair Trade Certification empowers farmers and farm workers to lift themselves out of poverty by investing in their farms and communities, protecting the environment, and developing the business skills necessary to compete in the global marketplace.⁷ This model serves as an alternative to the system of capitalistic trade where barriers are created to maintain the status quo. Fair Trade gives opportunities to farmers that would otherwise not be able to enter global markets.

The Overlap

In order to understand the similarities between Islam and Fair Trade, contrasting the principles between the two instead will serve as the best framework. Along with the principles selected, there will be a corresponding Qur’anic verse or Islamic teaching addressing the concern.

IFAT (International Fair Trade Association) prescribes the standards that Fair Trade organizations must follow in their day-to-day work.⁸ The first principle requires transparency and accountability; as highlighted above, “And give full measure when you measure, and weigh with a balance that is straight” (Qur’an, 17:35). This shows the importance of not being deceptive in your dealings which includes a level of transparency. Second are the principles requiring the promotion of fair trade and payment of a fair price; in the Qur’an we find, “And we task not any person except according to his capacity, and with us is a record which speaks the truth, and they will not be wronged” (Qur’an, 23:62). This stresses that authority and responsibility must both be present to result in a fair deal for everybody, buyers and sellers alike. The next principle promotes gender equity; the Prophet of Islam ﷺ married a rich businesswoman, lending proof that in Islam it is both accepted and encouraged for women to take part in the pursuit of business. Another proof is that there is also no distinction made in Islam between men and women with regards to the rights of life, liberty, ownership, dignity, and of education.⁹ Another principle encourages bettering environmental practices and the application of responsible methods of production; similarly, Islam has detestation for conspicuous consumption. No one is authorized to destroy or waste God-given resources. This also addresses the principle concerned with: the social, economic and environmental well-being of marginalized small producers and does not maximize profit at their expense.¹⁰ Islam requires an attitude where fellow humans are to be taken as brothers and sisters. This furthers the notion that one’s advancement at the expense of his or her brother or sister is unacceptable within the teachings of Islam.

What does this mean for Muslims?

It is evident through examination of several Islamic principles that the ideology of Islam is, in fact, congruent with that of the Fair Trade model for business. Muslims are encouraged to participate in markets with a consciousness of God in mind; they are required to be just and help their brothers and sisters provide for themselves. While the principles of Fair Trade include transparent management and relations that aim to promote fairness and respect between trading partners, Islam holds these as well and within the context of the Fair Trade model Muslims can help to expand this into even more markets than the ones currently available.¹¹  Fair Trade allows farmers in developing nations to enter into markets and raise their standard of living through fair opportunities which are fully compatible with Islam, thus affirming the congruency of both.

Uddin, S. (2003). Understanding the framework of business in Islam in an era of globalization: a review. Business Ethics, 12(1), 23-32. doi: 10.1111/1467  8608.00302.

Khan, AA, & Thaut, L. (2008). An islamic perspective on fair trade. Islamic Relief, 13.

Fair Trade USA: FAQs.

Part I | Part II

You don’t have to be a scholar or an economist to see that usury was at the heart of the global financial crisis.  Everybody wants a “guaranteed” return on his or her money, but Allah (swt) is the only One who can guarantee anything.  The world’s greed for interest, coupled with its lack of risk tolerance (or lack of faith), made triple A-rated mortgage-backed securities look like good safe investments a few short years ago.  After all, who’s not going to pay their mortgage?  We now know the answer to that question.

Lost your job?  Got sick or hurt?  Can’t pay your mortgage?  Can’t sell your house because the value has plummeted to less than what you owe on it?  No matter how many years you’ve paid your non-Islamic mortgage on time, the minute you can’t, the bank forecloses on you.  They pocket all that interest you paid for all those years, sell your house, cash, for pennies on the dollar, and start all over again, giving some other sucker a high-interest loan on its full appraised value.  Like a casino, they win and you lose.

Long before I embraced Islam, I noticed that even the Bible warned against interest and instead encouraged investing in people:

“If you should lend money to my people, to the afflicted alongside you, you must not become like a usurer to him.  You must not lay interest upon him.”  (Exodus 22:25)

“Cast thy bread upon the waters: for thou shalt find it after many days.”  (Ecclesiastes 11:1)

“He who is kind to the poor lends to the Lord, and He will reward him for what he has done.”  (Proverbs 19:17)

It seems that Prophets throughout human history advised  those blessed with wealth to take a chance with their money and trust in God for the increase.   The system of interest-free lending that the Prophet Muhammad ﷺ revealed—and upon which Islamic Finance is based—reads a lot like traditional Investment Banking.  So does Mufti Usmani’s description of a Shariah-compliant financial product called Musharakah (an Arabic word that literally means “sharing”).  It sounds to me as if Allah (swt) wants the lender and the borrower to be partners, sharing in the profits and losses of trade.  If the borrower is successful, the lender profits in kind.  If he fails, Allah (swt) accepts the lender’s loss as a charity (according to his intentions):

“And whatever you lay out as usury, so that it may increase in the property of men, it shall not increase with Allah; and whatever you give in charity, desiring Allah’s pleasure—it is these (persons) that shall get manifold.”  (30:39)

When I was a stockbroker in the 1980s, there was a lot more Investment Banking activity than you see today.  If you owned a business and you needed capital, you didn’t necessarily have to go to a commercial bank for a business loan.  You could go to a Wall Street investment bank and “go public,” by selling shares of your business to investors.  If your business did well, everyone who bought the shares of your IPO, or Initial Public Offering, could make many times what they invested.  If it failed, however, they could lose their entire investment.  It was all about taking a chance.

These days, it is considerably harder for businesses to raise capital through Investment Banking.  Google, VISA and Tesla are among the few well-known successful IPOs in recent years.  In the US, people are losing jobs because small businesses can’t get loans because banks aren’t lending.  If commercial banks aren’t lending like they used to, clearly investment banks aren’t helping businesses “go public” like they used to.  In fact, if you aren’t an already-successful business prepared to raise somewhere in the tens of millions of dollars in capital, most investment banks won’t even look at you.

Wall Street was created shortly after America’s birth, in order to put people to work by putting their money to work, taking a chance by investing in people’s businesses.  These days, no one wants to take a chance anymore, and everyone wants a “guaranteed” return on his or her money.  When the “housing bubble” burst, and even the most seemingly “guaranteed” investment—mortgage-backed securities—went belly-up, you would think that the world would finally get it:  that man can’t guarantee anything.  Nor can he create something from nothing.

When you buy shares of a company’s stock, you are, for all intents and purposes, loaning that company your money with no guarantee of getting it back.  When that company makes a profit, your stock goes up.  If it loses money, your stock goes down.  Life in this dunya is full of ups and downs.  Masha’Allah.

“Sons of Adam speak against [the vicissitudes of] Time, and I am Time, in My hand is the night and the day.” (Muslim)

Of course, not all stocks are halal.  Islamic Banks would obviously not finance companies that deal in pork products, pornography, alcohol, gambling or anything that is haram.  Shariah-compliant financial institutions are overseen by councils of scholars who adhere strictly to the Qur’an and Sunnah in making decisions.  While no organization run by man is perfect, it is clear that banking with Islamic Banks is a more pious alternative than the status-quo institutions that put the world in crisis.  Believers may have no control over whether their government complies with Shariah law, but if they have access to Islamic Banks, they can certainly control whether their money is borrowed and leant according to Shariah.  If Islamic Banks are following the Qur’an, they are lending  believers’ money as if lending it directly to Allah (swt):

“Who is he that will lend to Allah a goodly loan so that He may multiply it to him many times? And it is Allah that decreases or increases (your provisions), and unto Him you shall return.” (2:245)

“Indeed Allah took the covenant from the Children of Israel, and We appointed twelve leaders among them. And Allah said: ‘I am with you if you perform As-Salat and give Zakat and believe in My Messengers; honor and assist them, and lend a good loan to Allah, verily, I will expiate your sins and admit you to Gardens under which rivers flow (in Paradise). But if any of you after this, disbelieved, he has indeed gone astray from the Straight Path.’”  (5:12­)

“Who is he that will lend Allah a goodly loan: then (Allah) will increase it manifold to his credit (in repaying), and he will have (besides) a good reward (i.e. Paradise).”  (57:11)

“Verily, those who give Sadaqat (i.e. Zakat and alms), men and women, and lend Allah a goodly loan, it shall be increased manifold (to their credit), and theirs shall be an honorable good reward (i.e. Paradise).”  (57:18)

“If you lend Allah a goodly loan (i.e. spend in Allah’s Cause), He will double it for you, and will forgive you. And Allah is Most Ready to appreciate and to reward, Most Forbearing.”  (64:17)

“Verily, your Lord knows that you do stand (to pray at night) a little less than two thirds of the night, or half the night, or a third of the night, and also a party of those with you. And Allah measures the night and the day. He knows that you are unable to pray the whole night, so He has turned to you (in mercy). So, recite you of the Qur’an as much as may be easy for you. He knows that there will be some among you sick, others traveling through the land, seeking of Allah’s Bounty, yet others fighting in Allah’s Cause. So recite as much of the Qur’an as may be easy (for you), and perform As-Salat and give Zakat, and lend to Allah a goodly loan. And whatever good you send before you for yourselves (i.e. Nawafil non-obligatory acts of worship: prayers, charity, fasting, Hajj and ‘Umrah), you will certainly find it with Allah, better and greater in reward. And seek Forgiveness of Allah. Verily, Allah is Oft-Forgiving, Most-Merciful.”  (73:20)

The Prophet Muhammad ﷺ also outlawed derivatives like commodities futures, as they involve betting on the future, or hoarding foodstuffs people need in order to wait for a higher price:

“If anyone keeps goods till the price rises, he is a sinner.”  (Muslim)

“He who brings goods for sale is blessed with good fortune, but he who keeps them till the price rises is accursed.”  (Ibn Majah, Darimi).

“If anyone withholds grain for forty days, thereby desiring a high price, [he has] renounced God and God has renounced him.”  (Razin)

“Whoever pays in advance the price of a thing to be delivered later should pay it for a specified measure at specified weight for a specified period.”  (Bukhari)

Only Allah (swt) knows the future.  The Prophet ﷺ also spelled out the loan guarantee that only Allah (swt) can make:

“He who grants a respite to one who is in straightened circumstances or who remits his debt, will be saved by God from the anxieties of the Day of Resurrection.”  (Muslim).

“If anyone accepts others belongings meaning to pay back, God will pay back for him, but if anyone accepts them meaning to squander them, God will on that account destroy his property.”  (Bukhari)

“Every fault but a debt will be forgiven to a martyr.”  (Bukhari)

“A believer’s soul is attached to his debt till it is paid.” (Shafi’i, Ahmad, Tirmidhi, Ibn Majah, Darimi)

“May Allah’s mercy be on him who is lenient in his buying, selling, and in demanding back his money.”  (Bukhari)

Besides dealing in interest and trading in haram businesses, the biggest difference between Wall Street and Islamic Finance seems to me to be, once again, people vs. profits.  Many publicly-traded companies pollute the environment, make harmful products, or overwork, underpay, injure or even kill their workers, all in the name of maximizing profits.  My understanding of to “lend Allah a goodly loan” is to use one’s wealth to develop earth’s resources by putting people to work safely and paying them properly, with the hope of a reward from Allah (swt) according to one’s intentions.

One need only study the outcome of the sovereign debt crisis in Europe vs. the sovereign debt crisis in Dubai to see the benefit of Shariah-compliant instruments such as Sukuk Bonds.  While far from perfect, those instruments brought the UAE to a relatively soft landing, compared to the still-unfolding developments in Europe.

Even the way in which banks decide where to invest people’s money has become less focused on people’s needs, and more focused on banks’ need to “guarantee” profit.  Back when I was a stockbroker, almost all stock-picking was based on fundamentals.  Financial analysts made recommendations to buy or sell a stock based on the basics of that company’s business:  its management team, market capitalization, market share, earnings-per-share, balance sheet, business model, etc.  Today, technical analysis, or stock research that tries to forecast the direction of a stock price by studying trends like changes in price and volume over time, has overtaken fundamental analysis as the main method of figuring out whether an investor should buy, sell or hold a given stock.  Every day in the business news media, market strategists fall over themselves (and often contradict each other) to interpret moving averages, advance-decline lines, support and resistance levels and other statistical factors, in a sophisticated but flawed effort to “scientifically” predict the future.  A future that only Allah (swt) knows.

I mentioned the increasing use of technical analysis to illustrate the gradual shift away from human factors in investing, and towards a reliance on statistical models and raw numbers.  I remember years ago a TV commercial for Janus mutual funds that touted how their analysts visited a construction site to physically count the number of cables a company was installing.  This was billed as their “hands-on” approach to determining if a company was a good investment.  Contrast that with today’s Ameritrade commercials that promote things like “heat mapping” and “advanced charting tools.”  It’s as if no one cares any more about the human element of business.  Managers decide where investors should put their wealth by looking at charts, graphs and algorithms of the past, instead of looking at where that wealth will employ the most people at the best pay, which would in turn create the most demand, which is what drives an economy.

In the debate over the Bush tax cuts for the rich, those who favor them expiring on schedule, as well as those who favor extending unemployment benefits to those still out of work understand the Keynesian economic principle that helping the poor stimulates the economy.  Many of those in favor of permanent tax cuts for the top 1% argue that such cuts would spur job growth.  History tells a different story.  Both methods increase the US federal budget deficit.  Relief money for the poor gets spent immediately and the increased demand keeps people working and even creates jobs.  Meanwhile, tax cuts for the rich get saved in banks and investments, which only helps the bottom line of the banking industry in terms of commissions, fees and, yes, interest.  History also shows that the amount of those tax cuts that the rich spend on luxuries does little for the overall economy.

A glaring example of this is what is happening with the banks as of the time of this writing.  Instead of lending to businesses and consumers, banks are hoarding cash and buying Treasury bonds.  So they’re lending to the government, to make “guaranteed” money off interest, but they’re not lending to you and I.  And even when they do, it’s not to share in our profits but to make us guarantee theirs—when we pay them far higher interest than what they pay to get the money they lend to us.   Yet if we lose our jobs and can’t pay, they put us out of business and put us out of our homes no matter how much we’ve put into them.  Banks borrow their money for next to nothing, but they want everything from the people who need that money the most.  Meanwhile, the largest ones got bailed out handsomely (with the people’s money) when they got in trouble.

But the deeper issue is about society as a whole.  Allah (swt) made usury haram for a reason.  It enriches those who have money at the expense of those who need it.  We suffer as an Ummah when we can’t get money to launch our businesses, or go to school, or buy big-ticket items like a home or a car.  We go to banks because we think we don’t have a choice—and the result is that all our hard-earned money goes to institutions that make their money from the usury they charge when they lend out the money we deposit.

If you think about it, every Muslim doing business with a traditional bank is, in a very real way, funding usury.  Which is haram.  Non-Islamic banks have no reason to care about the financial needs of the Muslim community, and may even fund activities that are destructive to Muslims.  Aren’t the financial needs of the Believers the very reason the Prophet (ﷺ) revealed the hadith on usury in the first place?

Imagine what would happen if every Muslim in the world who had a bank account suddenly withdrew all their money and put it into an Islamic Credit Union, or a Shariah-Compliant Investment Company?

What if your business was financed with an interest-free loan you paid back according to your profits?  No profits, no payments.  The more you profit, the greater the dividend to your lender.

What if your student loan payments were based on the salary of the job you got once you graduated?  What if that loan was forgiven as long as you couldn’t find work?

What if your home mortgage allowed you to own a greater percentage of your home with each payment you made?  The more payments you made, the more of the home you owned.  If you couldn’t pay, the home would get sold and everyone would walk away with what they put in.

Only Allah (swt) knows if these high ideals of Islamic Finance can be put into practice in precisely this way in the real world.  But what if when you borrow money you’re not just a number, but a human being and a beloved member of a community that takes the time to get to know you, your family, and your needs?   What if your lender was your partner—instead of your slavemaster?  What if the institution that financed your business, your home and your education rode with you through life’s ups and downs, and didn’t make money unless you made money?  Call me naïve, but I think this is what our Prophet ﷺ had in mind.

Again, I’m no scholar.  I’m just a recent revert to Islam who couldn’t help but notice that there’s a credit crisis going on that was caused by banks dealing in usury.  Those dealing in usury want to create money out of nowhere with their Wall Street wizardry.  And they expect borrowers to guarantee their profits, when only Allah (swt) can guarantee anything.  So it would seem to me that if Believers don’t eat pork, drink alcohol or gamble, neither should we support usury by keeping our money in banks.  Maybe if we all moved all our money to Islamic credit unions and Shariah-compliant financial institutions, jobs might get created, real assets might get created and, inshaAllah, wealth might get created.  And even if it didn’t, we would at least stop enabling usury, which is haram.  Thus avoiding the painful chastisement promised by Allah (swt).  And thus pleasing Allah (swt) because any money we lost in the process would count as charity.  But what do I know?  Allah (swt) knows best.

Part I | Part II

When I recently consolidated a student loan I had taken out many years ago, I noticed that the amount I owed was more than double what I had originally borrowed.  I’m still in school, so I don’t have double the education from when I first took out the loan.  I definitely don’t have double the income.  Even before I knew anything about Islam and how it forbids usury, I knew something was wrong with that picture.  And that there was a bigger picture involving a whole world in debt crisis.

I had a “eureka” moment when I first read the warnings in the Qur’an and Sunnah about usury.  The logical connection I made between those warnings and the global economic crisis can only be described in terms as simple as a children’s adventure story—lest they go right over all our heads like so many complex derivatives transactions and we as an Ummah fail to make the one simple transaction that might finally begin to change our condition in the world.

Like “putting two and two together,” it’s as if I had been walking around my entire life with the broken half of a ring inscribed with a secret message that couldn’t be read without the other half.  The first half of the message of that ring was my experience on Wall Street.  The missing half, the key to the secret, I finally found a generation later in the Word of Allah (subhana wa ta’ala – exalted is He) as revealed to the Prophet Muhammad ﷺ.

I am neither a scholar nor an Imam.  I only embraced Islam, and read the English translation of the meaning of the Qur’an for the first time four years ago.  I can only recite 13 surahs (chapters) from memory, and I am still both a student of the Islamic  financial  system and a student of the Deen of Allah (swt).  But 20 years ago I was an NASD-registered stockbroker with an investment banking firm known for its IPOs (Initial Public Offerings).  I have sold life insurance and annuities and bought investment properties.  And I had a front-row seat for an economic crisis that wiped out the value of a portfolio of prime real estate I took a decade to build, which in January 2006 appraised at 1.2 million US dollars.  I know first-hand how banks operate.  And it’s nothing like what the Prophet Muhammad ﷺ said that Allah (swt) prescribed for mankind.

The prohibition of interest and the laws of halal trade and lending that Allah (swt) revealed in the Hadith, as well as in the Qur’an itself, appear to me to describe a system of shared profit and loss between lenders and borrowers.  A system that looks a lot like what we know today as Investment Banking of common shares of stock.

The foundation of Wall Street, and every financial market on the planet, is the principle of risk is proportionate with reward.  Just like, “In God We Trust,” the very words “risk is proportionate with reward” imply a leap of faith.  The entire world does business according to this un-provable, unscientific law of sowing and reaping.  You cast thy bread upon the waters of commerce with the understanding that thy bread may never return; or that it may come back multiplied many times over—like a handful of loaves and fishes that end up feeding the multitudes.  The greater the chance of loss, the greater the potential profit.  The more you can afford to lose, the more you stand to gain.  Just like in life, nothing is guaranteed but death.

The first law of becoming a licensed securities broker in America is you may never tell a client, “I guarantee.”  Every piece of sales literature of every type of regulated investment product sold in the US must include the language, “Investing Involves Risk,” along with, in some cases, “…Including the Risk of Loss of Principal.”  The idea that an investor may lose his or her entire investment—or may profit handsomely—is what makes a market.

Stocks, as well as bonds, are considered staples of a diversified investment portfolio.  But while stocks represent a share in the profits and losses of a business enterprise, bonds are interest-bearing loans “guaranteed” by the borrower, or “guarantor.”  Bondholders are the first in line to receive the proceeds of a company in liquidation, while stockholders are the last in line and may receive nothing at all.

So who can guarantee a “guaranteed investment?”

During the time of the Prophet Muhammad ﷺ, most people were self-employed.  People raised crops or livestock,  fished the seas, made clothing or textiles by hand or transported the goods of others by ship or caravan.  They brought their produce or their hand-made goods to the marketplace to barter for other goods, or to sell for money.  Those blessed with an abundance of money could then finance the businesses of others.  Among the many societal wrongs the Prophet ﷺ was sent to  rectify was the deceitful way in which some businesses were being conducted—and the unfair way in which money was being leant.  We all know trade is halal and usury is haram, but do we know why?

Allah (swt) said in the Qur’an:

“Those who swallow down usury cannot arise except as one whom Shaitan has prostrated by (his) touch does rise.  That is because they say, trading is only like usury; and Allah has allowed trading and forbidden usury.  To whomsoever then the admonition has come from his Lord, then he desists, he shall have what has already passed, and his affair is in the hands of Allah; and whoever returns (to it)—these are the inmates of the fire; they shall abide in it.” (2:275)

“Allah does not bless usury, and He causes charitable deeds to prosper, and Allah does not love any ungrateful sinner.” (2:276)

“O you who believe! Be careful of (your duty to) Allah and relinquish what remains (due) from usury, if you are believers.”  (2:278)

“O you who believe! Do not devour usury, making it double and redouble, and be careful of (your duty to) Allah, that you may be successful.”  (3:130)

“And their taking usury, though indeed they were forbidden it, and their devouring the property of people falsely, and We have prepared for the unbelievers from among them a painful chastisement.”  (4:161)

The Prophet Muhammad ﷺ said:

“Gold is to be paid by gold, silver by silver, wheat by wheat, barley by barley, dates by dates and salt by salt, like for like, payment being made on the spot. If anyone gives more or asks for more, he has dealt in usury. The receiver and the giver are equally guilty.”  (Muslim)

“A time is coming to mankind when only the receiver of usury will remain and if he does not receive it, some of its dust will reach him.”  (Ahmad, Abu Dawud, Nasai, Ibn Majah).

“When a man makes a loan to another, he must not accept a present.” (Bukhari)

“A dirham which a man knowingly receives in usury is more serious (a crime) than thirty-six acts of fornication.”  (Ahmad, Daraqutni)

Here in the US, most people with incomes have a bank account or at least some relationship with a financial institution.  We cash our paychecks, pay our bills, save our money and finance our purchases through banks.  Banks that make most of their money off interest which, according to the Qur’an and Sunnah, is as haram as pork, alcohol, gambling and even fornication!

In his book An Introduction to Islamic Finance (2002), Justice Muhammad T. Usmani describes the difference between profit-based share investments (like stocks) and interest-bearing loans (like bonds):

“Interest predetermines a fixed rate of return on a loan advanced by the financier irrespective of the profit earned or loss suffered by the debtor, while [shares of stock] do not envisage a fixed rate of return.  Rather, the return [on shares of stock] is based on the actual profit earned by the [business].  The financier in an interest-bearing loan cannot suffer loss while the financier of a [company’s stock] can suffer loss, if the [business] fails to produce fruits.  Islam has termed interest as an unjust instrument of financing because it results in injustice either to the creditor or to the debtor.  If the debtor suffers a loss, it is unjust on the part of the creditor to claim a fixed rate of return; and if the debtor earns a very high rate of profit, it is injustice to the creditor to give him only a small proportion of the profit, leaving the rest for the debtor.

“…In this way, the rate of interest is the main cause for imbalances in the system of distribution, which has a constant tendency in favour of the rich and against the interests of the poor.”

Of course, Islamic Finance exists for those with access to it.  Shari`ah-compliant investment products are available in Muslim and even some non-Muslim countries.  Even countries as westernized and interest-based as the UK have Islamic banks, or traditional banks with Islamic Finance divisions.  The problem is, we’re not using them to the extent where they could do us any good.  We may eat halal, but we bank haram.  We put all our money in regular banks, then wonder why we struggle to get business loans, student loans, home loans and credit cards—and struggle even harder to pay them off in a bad economy.  I urge everyone to read The Case Against Interest by Abu Ubaydah Andrew Booso, which is not only a brilliant, detailed discussion of both the historic and current consequences of interest, but it’s a large part of what inspired me to write this post.

My intention is not merely to re-hash Br. Abu Ubaydah’s powerful argument against usury and the way in which it attempts to “create” money from nothing.  With Allah’s help, I also want to offer a simple, common-sense way to implement the solution in his concluding paragraph:

“Indeed, the current crisis should be a deep warning to theorists of Islamic economics to show high aspiration to develop leading theories and practices for all people, rather than continuing to play a limited role for a niche market, whilst the majority of people face the inequities of the current system. Such brave theorising and practice might mean also challenging some other religiously believed tenets of conventional economics, such as money creation and paper money.”

The problem is not whether Muslims have Islamic Banks in the countries where we live.  The problem is whether we understand that if we don’t, we need to start building them—with at least as much urgency as we devote to building new  masajid—as if our lives depend on it.  Considering (1) the consequences that Allah (swt) makes clear for those who deal in usury, and (2) the consequences already facing the millions of people who have lost everything to a global economy addicted to usury; our entire future, in this world as well as in the Hereafter, is  at stake.

It’s no secret that those of us with businesses need capital, those of us in school need student loans and those of us with jobs can’t always pay cash for a car or a home.  So where does our money come from?  It starts with Allah (swt) creating something from nothing:

“And He it is Who sends down water from the cloud, then We bring forth with it buds of all (plants), then We bring forth from it green (foliage) from which We produce grain piled up (in the ear); and of the palm-tree, of the sheaths of it, come forth clusters (of dates) within reach, and gardens of grapes and olives and pomegranates, alike and unlike; behold the fruit of it when it yields the fruit and the ripening of it; most surely there are signs in this for a people who believe.” (6:99)

One need not be an economist to know that a nation’s economy exists because it grows crops, or raises livestock, or catches fish, or mines for metals or precious stones, or drills for oil or natural gas, or manufactures goods, or builds structures, or harnesses energy from the sun, wind, water or nuclear power, or provides professional services such as medicine, law, education, tourism, hospitality, etc.  Allah (swt) provides us with the knowledge and the resources and we then go out into the land and use what we learn to develop what we’ve been given. Of course, it takes labor to farm, fish, explore, manufacture, build, etc.  Unless you’re going to enslave people and force them to work, you have to pay them.  Once investors invest capital in a business, that business can then pay people to do work.  I’ll leave for another debate the ethics (and economics) of pay vs. profits, and how some businesses profit enormously by squeezing as much productivity as possible out of as few workers as possible.  Capital puts people to work producing the goods and services people need and want, and when people have enough income to buy those goods and services, an economy is created.

The moneylenders of ancient times were well aware of these principles of market dynamics and formulated their diabolical scheme accordingly.  The history of usury, which Br. Abu Ubaydah so effectively breaks down, is murky and enigmatic at best, but its destructive effects on society couldn’t get much worse.

In The Case Against Interest, Br. Abu Ubaydah clearly describes how usury, like alchemy, is one of man’s many attempts to create something out of nothing.  As the credit crunch in the US and the debt crises in Europe have demonstrated, you can’t just borrow your way to prosperity.  You have to create real assets by paying people to do real work, so they have enough money to buy (and pay off) the goods and services that keep an economy going.

Those early moneylenders believed that money itself was a commodity to be bought and sold like food or livestock or precious metals.  They created what eventually became a global system of lending that forces the borrower to guarantee his or her repayment, plus interest, regardless of their own success or failure during the life of the loan (of which there is no guarantee).  Those lenders were often unscrupulous men comparable to the loan sharks or payday lenders of today.  They would loan you the money you needed, but whether you succeeded or failed—it didn’t matter.  You had to pay it back at a rate of interest that varied according to their perception of your ability to repay (like a credit score).  Your interest would compound periodically over the life of the loan, so that by the time you paid it back you ended up paying many times what you originally borrowed.  And if you couldn’t pay it back, the lender could legally take everything you owned.  Sound familiar?

What I discovered through the experience of this global financial crisis is that a home, like a commodity, is only worth what someone is willing to pay for it.  If few people are buying homes, because few people can afford them or because few can get approved for them, then simple supply-and-demand dictates that home values will drop.  In a normal market, the demand for housing increases with population growth.  There’s only so much land on which only so many homes can be built.  Therefore, as a population increases, so should the demand for (and thus, the price of) homes.

During the “housing bubble,” that demand was artificially inflated when banks started lending to sub-prime borrowers, and encouraging prime borrowers to treat their homes like ATM machines they could pull money from like a magician pulls a rabbit out of a hat.  Some would argue that the government “forced” them to lend to risky borrowers, but no one ordered banks to make “interest-only” sub-prime loans that started with a low, affordable payment but ballooned to a much higher payment within a few years; nor were they “forced” to lend to people with no income, no job, no assets and no good credit.  And neither were they “forced” to repackage and sell those sub-prime loans to Wall Street.

As record numbers of people became first-time homebuyers, or refinanced their existing homes with these interest-only loans, home prices skyrocketed and homebuilders could barely keep up with demand.  Historically, real estate has almost always appreciated in value, so it was thought that home prices would never go down.  Borrowers (myself included) were told “Get this loan now and in a year you can re-finance into a fixed-rate loan when the value of your home goes up!  Long before the payments go up.”

Meanwhile, the banks would slice and dice these high-interest loans and sell them to investors as high-yield mortgage-backed securities and collateralized debt obligations.  They paid corrupt ratings agencies to give these securities triple-A ratings, which made investors think they were safe investments.  Many of the mutual funds, pension funds and foreign governments that bought these securities had their own internal rules that said they could only put people’s money into A-rated investments.  To make these risky securities an even “safer bet,” Wall Street banks and insurance companies sold credit default swaps, which were like gambling bets that gave investors a payout if borrowers defaulted on the underlying mortgages.  It was like a casino getting a gambler to bet on red and black at the same time.  No one ever imagined the ball would fly off the roulette wheel and land on the floor!

When people’s payments started going up, sometimes doubling or even tripling, many could no longer afford to pay them.  Their incomes were not rising nearly as fast, if at all.  They began defaulting, which began to bring down the value of millions of other homes.  Or, when they tried to re-finance with a new loan, either their credit was bad (from the payments they had missed) or their home was worth less than the amount they had borrowed.  Either way, they were denied.  As more and more people defaulted on their loans, three things began to happen:  (1) the banks had less and less income coming in, (2) home values plummeted as foreclosures rose, and (3) investors started cashing in on those credit default swaps.  No one imagined that so many of those “insurance policy” CDSs would ever be exercised.  As their cash reserves were depleted by the day, banks large and small began failing, one after the other.  The ones who survived or were bailed out by the government began to cut back or stopped lending altogether.   The rest is history.

Many times in Ramadan we talk about how the pangs of hunger cause us to reflect about the needy all over the world. Fasting motivates us to help them and to give thanks for what we have. Sometimes our rhetoric is so strong that we even convince ourselves that this is true. Unfortunately for most of us in the West, it’s not true. We are very talented at explaining things and understanding their logical underpinnings, but very rarely do we actually feel them. Yes, we are leaving the realm of the Western rational mind and entering into the world of the spiritual heart. But do we actually feel what we say? Or do we just memorize nice responses and eloquent explanations?

We feel hunger in Ramadan – but how many of us have actually looked into the eyes of a child who is starving? How many have felt the pain and suffering of a mother who has not eaten properly in months and is trying to find something to sustain the lives of her children? How many feel the pain of a father who roams from place to place looking for work, hunger pangs stabbing at his insides, until he loses all hope? These are real scenarios. This is real talk. It’s very easy to talk rosy talk; it’s very difficult to make changes to the way that we live our lives. The first step is to feel. The suburbs of America should not make us forget the people downtown or the people overseas.

In the Qur’an God instructs us, “O children of Adam, take your adornment at every masjid, and eat and drink, but be not excessive. Indeed, He likes not those who commit excess.” (Qur’an, 7:31) I think this is perhaps the most overarching and practical advice that we can take. Eat, drink, live life, but do not be wasteful. To do so is to belittle one’s blessings. To do so is to deny the struggles of others. To do so is to stop feeling.

20,000 people die every day across the world from extreme poverty and its consequences. These are deaths that are preventable. We’re not talking about moderate poverty here. We’re talking about people who cannot find the most basic fundamentals for their existence. They cannot find food, shelter, medicine.

It has been mentioned before on this site and elsewhere that the structure of Islamic law has major objectives that it seeks to fulfill. The utmost of these is to bring benefit to humans and prevent them from harm. The actualization of this is often expressed by the traditional scholars of Islam in the form of five necessities that must be protected:

1. Religion
2. Life
3. Intellect
4. Family
5. Wealth (usually referring to property rights and the permissibility or impermissibility of particular financial transactions, not necessarily the elimination of extreme poverty)

I would like to propose, although it needs much more research, that it is possible that the elimination of extreme poverty is also from the major objectives of Islam. Anyone can quickly notice how extreme poverty wreaks absolute havoc on every one of these five necessities. We also know in Islamic law that “anything that is required in order to carry out an obligation is also an obligation.” The famous example of this is since prayer is obligatory, wudu (ablution) is also obligatory since you cannot carry out the first without the second. In this case it is not possible to protect these five necessities unless extreme poverty is eliminated.

We also know that Allah lays out the most basic fundamentals for civilizational development in the 106^th chapter of the Qur’an, Surat Quraysh: “Let them worship the Lord of this House, who has fed them, [saving them] from hunger and made them safe, [saving them] from fear. ” (Quran 106:3-4) There are also many statements of the Prophet ﷺ that show the relationship between poverty and disbelief and wherein the Prophet seeks refuge in Allah from poverty. Perhaps in another article this can be developed further.

What to do? I do not have concrete answers. We need to develop and grow as a community and come up with answers to this question. Maybe some readers can share success stories or ideas of how to deal with this major problem that we should seek to solve in our generation. My only immediate advice other than what is mentioned above is to read The End of Poverty: Economic Possibilities for Our Time by Jeffrey D. Sachs. This book presents the reader with an overview and understanding of the problem and provides us a foundation upon which we can start to converse as to its solutions.

The Wisdom in Prohibiting Interest

Yusuf Qaradawi writes in The Lawful and Prohibited: “The strict prohibition of interest in Islam is a result of its deep concern for the moral, social, and economic welfare of mankind.” In view of succinctness, he then summarises the wisdom behind the prohibition that Razi articulated in his Tafsir:

“First: The taking of interest implies appropriating another person’s property without giving him anything in exchange, because one who lends one dirham for two dirhams gets the extra dirham for nothing. Now, a man’s property is for (the purpose of) fulfilling his needs and it has great sanctity, according to the hadith, ‘A man’s property is as sacred as his blood’ (transmitted by Abu Na’eem in Al-hilbah.) This means that taking it from him without giving him something in exchange is haram.

“‘Second: Dependence on interest prevents people from working to earn money, since the person with dirhams can earn an extra dirham through interest, either in advance or at a later date, without working for it. The value of work will consequently be reduced in his estimation, and he will not bother to take the trouble of running a business or risking his money in trade or industry. This will lead to depriving people of benefits, and the business of the world cannot go on without industries, trade and commerce, building and construction, all of which need capital at risk. (This, from an economic point of view, is unquestionably a weighty argument.)

“‘Third: Permitting the taking of interest discourages people from doing good to one another, as is required by Islam. If interest is prohibited in a society, people will lend to each other with good will, expecting back no more than what they have loaned, while if interest is made permissible the needy person will be required to pay back more on loans (than he has borrowed), weakening his feelings of good will and friendliness toward the lender. (This is the moral aspect of the prohibition of interest.)

“‘Fourth: The lender is very likely to be wealthy and the borrower poor. If interest is allowed, the rich will exploit the poor, and this is against the spirit of mercy and charity. (This is the social aspect of the prohibition of interest.)”

With all due respect to Shaykh Qaradawi, the latter part of his second argument has been refuted by the advance of industrial development in the West, which has been buttressed by the giving and taking of interest. Therefore a person could argue that ‘interest’ makes societal economic sense. Such is the case that Shaykh ‘Aashiq Illahi, in his commentary of Qur’an 2:275, in his Illuminating Discourses on the Noble Quran, states that this is one of the very disputes put forward in opposition to orthodox scholars who uphold the prohibition of riba. Illahi says that “people have grown accustomed to taking usury” due to “the institution of banking,” and they “ridicule the Ulema [religious scholars], saying that ‘their’ prohibition of usury has led to the decline of the Muslims while other nations have progressed far more rapidly.” While this argument can be made, one can rebut it by pointing out that such an understanding lacks profundity, for it fails to see the overall societal harm caused by interest; whereby such an advocate has been beguiled by the wealth of a few, without seeing the general harm, both economic and spiritual.

A person who ignores the Divine command in this matter, and simply argues in favour of interest on the basis that it works because of what we see in the West, has failed to be profound or fully compassionate. For those of us who live very comfortably in the West, alhamdulillah (all praise is due to God), we must not fail to see the global price paid for our luxury. We didn’t just become rich by charging interest, but interest allowed us to militarise so that we could conquer other parts of the world in order to gain wealth. We didn’t export interest as a method of economic enrichment to the people of the Americas, Africa, Asia and Australasia; but instead we were able to plunder to the detriment of millions on the basis of our interest-based development – to use ‘development’ in this sense is to really use the term in a base manner. Therefore interest was a means to this economic advance only because it provided, and provides, the mechanics to militarise and aids the urge to conquer. In all honesty, one must re-evaluate whether our economic methods have really led to ‘progress,’ or whether our wealth is worth the price of most people of the world living in what we would consider to be poverty. Indeed, ‘Uthmani in the Historic Judgment and Meera in The Theft of Nations have spoken of the enslavement of the ‘Third World’ by global banking; and Joseph Stiglitz in Globalization and its Discontents, Noreena Hertz in I.O.U. The Debt Threat and Why We Must Defuse It, Ali Mohammadi and Muhammad Ahsan in Globalisation or Recolonialisation? The Muslim World in the 21^st Century and M. Umer Chapra in Islam and the Economic Challenge have indicated the huge failure of banking and Western management to help the ‘Third World,’ together with the issuing of interest-based loans that also dictate deeply damaging terms and conditions which are enforced upon them in their times of genuine need – the ‘Third World’ that we largely colonised and then retained economic control of after colonising, and whose resources we plundered and continue to indirectly or directly control.

‘Uthmani states, in The Historic Judgment, that “the evil consequences of interest were never so evident in the past than they are today. Injustice in a personal consumption loan was restricted to a debtor only, while the injustice brought by the modern interest affects the economy as a whole.” He then lists four main adverse effects of interest on global economics as things currently stand, in reality.

Firstly, he quotes Chapra who spoke to the Pakistani court in the case on interest as a juris-consult, touching on the fact that the banking system reinforces ‘the unequal distribution of capital,’ in a manner that does not serve ‘maturing smaller companies or venture capitalist’; hence, as Chapra quotes from Lester Thurow, the system favours the ‘lucky rather than smart or meritocratic.’

Secondly, there is an ill effect on production because, generally, people are encouraged to take loans so as to live beyond their means, and ‘the rich people do not borrow for productive projects only, but also for conspicuous consumption’; as is also, says ‘Uthmani, the case with government borrowing, where they borrow for ‘lavish expenditure and for projects motivated by their political ambitions rather than being based on sound economic assessment.’ He notes that in Pakistan the budget for 1998/99 showed that 46 percent of government spending was ‘devoted to debt-servicing, while only 18% is allocated for development which includes education, health and infrastructure.’

Thirdly, there is an adverse distribution in which ‘64.5% total advances went only to 0.4243% of total account holders, it means that the profits generated mostly by money of millions of people went almost exclusively to 9,269 borrowers’; hence, as pointed out, the role of interest is to transfer money from the poor to the rich, whether from the ‘Third World’ to the ‘developed world’ or average depositors to the wealthy.

Fourthly, and this is crucial, the interest-based system has led to the ‘expansion of artificial money and inflation.’ ‘Uthmani laments that ‘primary books of economics’ can, often, treat the fact that ‘banks create money’ with complacence, and he asserts that the ‘apparently miraculous function’ is an ‘illusion.’ He writes:

“But the net result [of fractional reserve lending] is that the modern banks are creating money out of nothing. They are allowed to advance loans in the amounts ten times more than their deposits. The coins and notes issued by the government as a genuine and debt-free money have now a very insignificant proportion in the total money in circulation…The spiral of loans built upon loans is now the major part of the money supply. Taking the example of UK according to statistics of 1997 the total money stock in the country was 680 billion pounds, out of which only 25 billion pounds were issued by the government in the form of coins and notes. All the rest, i.e. 655 billion pounds, were created by the banks. It means that the original debt-free money remained only 3.6% of the whole money supply while 96.4% is nothing but a bubble created by the banks…[and] it means that 96.4% of the aggregate money circulated in the country is nothing but numbers created by computers, having no real thing behind them. The position in USA is almost the same as that in U.K.”

Furthermore, on a more local, Western basis, we must not underestimate the cost of interest’s prevalence in light of the third and fourth points made by Qaradawi from Razi above. Who of us could honestly deny that our affluent society is not beset by these ills? Are we generous? Is poverty being eliminated in our own lands? Just look at events following on from a disaster of some sort: Do people willingly rush to simply contribute to various charities, or do they need to get something in return, like a singing or comedic performance, or maybe a sporting exhibition?

Indeed, the idea of issuing a non-interest loan makes many wonder, ‘Well, what’s in it for me?’ Moreover, one sees the cutthroat nature of lenders when it comes to reclaiming their loans. How many people are thrown out of their homes, or made homeless, because they couldn’t repay their mortgages? Now I accept that there is a systemic problem when it comes to home-buying, and the matter of people wanting to live beyond their means, but the fact remains that all parties could do with wanting a little less. The recent consequences of the sub-prime mortgage disaster are a clear warning to us all. Nevertheless, a prudent loaning system in the context of a caring society would mean the extension of wide grace to those who have entered an unforeseen economic predicament not of their making.

Zuhayli, in Financial Transactions, expounds on the distinction that should be afforded ‘Islamic financial institutions.’ He states the ‘principles of mercy and forgiveness when clients face financial difficulties,’ based on the Qur’anic command, ‘If the debtor is in 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’ (2:280). Zuhayli contrasts this ‘with conventional banks, who in their blind pursuit of profits will be quick to repossess the properties of the debtors that were presented as collateral for their debt.’ He adds that Islamic financial institutions do not have a ‘primary goal’ of profit-making, ‘but the endorsement of social goals of socio-economic development and the alleviation of poverty,’ and thus ‘avoid excessively speculative or untruthful transactions.’ Furthermore, they ‘aim to provide their services to all economic groups, while conventional banks are not accessible to the poorer classes,’ so the Islamic institutions provide ‘greater social harmony due to the upward mobility of those who lack resources, and can be invigorating for the economy by giving opportunities to the young and the energetic entrepreneurial classes.’ Zuhayli does state that ‘Islam does not forbid anyone from making reasonable profits,’ but he talks of this reasonableness in terms of 20% or 33%. In fact, one sees many instances of vastly profitable trade, both personal and general, based on Islamic law that had great societal benefits from the time of the Companions’ emigration to Madina to the successful economic policies of Sultan Abdal-Hamid II of the ‘Uthmaniyya up to the early twentieth century – for the latter, see the instance of economic growth enumerated in Shaw and Shaw’s History of the Ottoman Empire and Modern Turkey, volume 2.

For a person led by high Prophetic morals, the inner diseases of stinginess and avarice are deeply shameful. If we were truly honest, I don’t think we could say that we are a naturally generous people; and such a spiritual disease can be intrinsically connected to the taking of interest, and the psychological impact it has on one and society as a whole. Qaradawi notes:

“Thus, in a society in which interest is lawful, the strong benefit from the suffering of the weak. As a result, the rich become richer and the poor poorer, creating socio-economic classes in the society separated by wide gulfs. Naturally this generates envy and hatred among the poor toward the rich, and contempt and callousness among the rich toward the poor. Conflicts arise, the socio-economic fabric is rent, revolutions are born, and social order is threatened.”

Naturally, a person would ask, ‘Where is the alternative?’ I can’t say it exists on a societal scale anywhere. However, as with any economic theory, I can point to where it has previously worked in a holistic fashion in the Muslim world; and Chapra in Islam and the Economic Challenge and ‘Uthmani in An Introduction to Islamic Finance have many important points on how it could work in a modern context. Nevertheless, there is a great deal of evidence to point out how the current system is not working; and, as is the case whenever dealing with a dominant system, we are forced to make mostly suggestions, and that is our case here. Nevertheless, there is great potential for these economic reforms if the Muslim world co-operated on a large scale, as expressed by Mahathir Mohamad, then Prime Minister of Malaysia, in his address to the ‘Gold Dinar in Multilateral Trade Seminar’ in Kuala Lumpur, 23 October 2002 (as included by Meera in Theft of Nations). However, this requires a global and widespread profound spirituality and high scholarship that understands the civilisation-building imperative of Islam. At present, these aspects seem to be lacking in the Muslim world; and to God we ask for success.

The Dire Consequences of Money from Money and Interest Rates in an Economy

‘Uthmani argues, in The Historic Judgment, that it is a modern mistake to treat money as a ‘commodity,’ hence ‘a merchant can sell his commodity for a higher price than his cost, he can also sell his money for a higher price than its face value,’ or lease it and charge rent. However, he argues that Islamic law treats money as being different to a commodity in that, firstly, it is not to be a ‘subject-matter of trade’ for it is merely ‘a medium of exchange and a measure of value’; and, secondly, ‘if money has to be exchanged for money or it is borrowed, the payment on both sides must be equal.’ Therefore it should have been logically concluded that ‘money should not be taken as an instrument that gives birth to more money.’ He uses the work of John Gray, from the latter’s False Dawn: The Delusions of Capitalism (1998), to highlight how the misunderstanding of the nature of money has led to a ‘foreign exchange’ market of:

“The astonishing sum of around $1.2 trillion a day, over fifty times the level of the world trade. Around 95 percent of these transactions are speculative in nature, many using complex new derivative’s financial instruments based on futures and options…This virtual financial economy has a terrible potential for disrupting the underlying real economy as seen in the collapse in 1995 of Barings, Britain’s oldest bank.”

An interesting update to Gray’s research would be found in the current banking crisis that has engulfed the entire globe. The greed factor that is sadly inbuilt to the workings of the speculative system have led to currencies and economies being undermined, and real people’s lives being crushed, as they are the collateral damage of other people’s games and avarice. Naomi Klein, in The Shock Doctrine: The Rise of Disaster Capitalism, has spoken at length on countries being ‘victims of pure panic, made lethal by the speed and volatility of globalized markets.’

It has now become a popular understanding that the current economic crisis is simply to be blamed on the bankers, and that they can be regulated. However, ‘Uthmani has in this matter relied upon Michael Rowbotham’s The Grip of Death: A Study of Modern Money (1998), but ‘Uthmani has himself said:

“Although the conventional Quantity theory of money has suggested many devices to control the money supply, including the control of interest rates by the government, these remedies are not the cure of the disease. They are temporary measures and they themselves have their own side effects that subject the economy with shocks of the business cycle.”

‘Uthmani then quotes an illuminating passage from Rowbotham:

“This (monetary management) a government does by lowering or raising interest rates. This alternately encourages or discourages borrowing, thereby speeding up or slowing down the creation of money and the growth of the economy…The fact that, by this method, people and businesses with outstanding debts can be suddenly hit with huge extra charges on their debts, simply as a management device to deter other borrowers, is an injustice quite lost in the almost religious conviction surrounding this ideology…

‘Many past borrowers are rendered bankrupt; homes are repossessed, businesses are ruined and millions are thrown out of work as the economy sinks into recession. Until inflation and overheating are no longer deemed to be a danger, borrowing is discouraged and the economy becomes a stagnating sea of human misery. Of course, no sooner has this been done, than the problem is lack of demand, so we must reduce interest rates and wait for the consumer confidence and the positive investment climate to return. The business cycle begins all over again…”

Nevertheless, the problem is compounded because, in the words of ‘Uthmani, ‘the baseless money created by the banks and financial institutions itself has now become the subject of speculative trade through the derivatives in the form of Futures and Options in the international markets.’ Therefore whilst before, ‘Uthmani writes, ‘claims over money have been treated as money’, we now have ‘claims over claims’ that are now being treated as money. He notes that estimates put the figure dealt-with in this manner, at the time of writing at the end of the 1990’s, at ‘over one trillion US dollars,’ ‘whereas the combined GDP of all the 188 countries of the world is around 30 trillion US dollars only.’ Furthermore, ‘almost 80% of this trade is in the hands of some two dozen big banks and hedge funds.’ ‘Uthmani then quotes James Robertson’s Transforming Economic Life: A Millennial Challenge:

“The money-must-grow imperative is ecologically destructive…(It) also results in a massive world-wide diversion of effort away from providing useful goods and services, into making money out of money. At least 95% of the billions of dollars transferred daily around the world are of purely financial transactions, unlinked to transactions in the real economy…

“‘Why should they [people] lose their houses and their jobs as a result of financial decisions taken in distant parts of the world? Why should the national and international money and the finance system involve the systematic transfer of wealth from poor people to rich people, and from poor countries to rich countries?…Why do young people trading in derivatives in the City of London get annual bonuses larger than the whole annual budgets of primary schools?”

To the latter question, we could add: Why are sports’ events and sportspeople paid more than doctors and nurses? And the list in a similar vein could go on.

Interestingly, the current economic and banking crisis has led certain Western commentators to speak of the greater stability exhibited in this time by ‘Islamic banks’ – a term that we should treat with caution in light of ‘Uthmani’s balanced appraisal of the pros and cons of the present status quo in his Islamic Finance. One such academic to write about this issue has been Rodney Wilson. He has written of how the non-interest method of ‘Islamic banking’ has shown itself to be ‘resilient’ in the face of the current crisis, and how the ‘risk sharing’ nature of Islamic finance does not have the hallmarks of the sub-prime lending scandal (which was exploitative of the poor, and where the banks tried to risk huge profit-making at the expense and chance of the poor people who were open to such dangerous loans). Moreover, he writes that the strength shown by ‘Islamic banking,’ based on ‘deposits’ rather than ‘being funded by borrowings from wholesale markets,’ has led to it being seen as ‘a viable alternative to conventional banking’; as well as being ‘less cycle prone’ (which was highlighted above by Rowbotham, in particular, to be the case with conventional methods). I would say that such benefits are evident from witnessing a very limited role of Islamic values being utilised in the present banking world; and one can only imagine the widespread justice that could ensue if Islamic values dominated economic practice. Indeed, the current crisis should be a deep warning to theorists of Islamic economics to show high aspiration to develop leading theories and practices for all people, rather than continuing to play a limited role for a niche market, whilst the majority of people face the inequities of the current system. Such brave theorising and practice might mean also challenging some other religiously believed tenets of conventional economics, such as money creation and paper money.

Conclusion

We live in an apathetic age, which is perhaps made worse by our luxury and detachment from the reality of the majority of those living lives in the world. Moreover, the prevalence of spiritual ills makes it hard for us to taste the states of higher consciousness demanded by the revelation of God. As is the case with so many modern horrors – from poverty, to environmental destruction, to unjust killing – it is sad that the Muslims are not productively at the forefront of opposing such injustices in light of the Prophetic imperatives of, “None of you [truly] believes until he wishes for his brother what he wishes for himself” (Bukhari and Muslim); and, “Whoever of you sees an evil action, let him change it with his hand; and if he is not able to do so, then with his tongue; and if he is not able to do so, then with his heart – and that is the weakest of faith” (Muslim) – for a commentary on these narrations see Ibn Rajab’s Compendium of Knowledge and Wisdom, Jamaal Zarabozo’s Commentary on the Forty Hadith of al-Nawawi and Imam Nawawi’s Complete Forty Hadith, in which the latter explains that ‘brother’ here includes those who disbelieve in Islam. Part of our apathy is not finding out the truth about important matters, and one cannot act if one does not know. When one reads Islamic history and sees the figures who rose above the ills of their time in line with the Prophetic example of spiritual excellence and societal service, then one is always in hope of Divine deliverance through worldly support; yet one knows that the affair is always His, Glorified be He! As we can understand from the words of Ibn ‘Ashur quoted earlier, one expects the spiritually enlightened to be those who manage to rise to the challenge of serving society in a comprehensive sense. Indeed, one can confidently assert that one only expects such effort from those whose dispositions have been truly nurtured in the shade of the Qur’an. The spirit of activism is literally the heart of the matter. Yet this spirituality is the Prophetic one that seeks the best for society, and is not a spirituality cut off from actively seeking the good for the brotherhood of humanity. For it is clear from the evidence that the dangers posed by interest and where it has led to are perilous for us all; and the establishment of an equitable economic order is what befits humans, unlike treating human beings as some animal species, whereby the law of the jungle is allowed to reign supreme. Part of our ennoblement is the desire of the strong to raise the weak; and if we do not do that, then where is our human distinction, especially if we ourselves have contributed to another’s miserable plight?

The prohibition of interest in Islam is a Divine ruling; hence a Muslim seeks to submit to it. Nonetheless, there are two crucial aspects to such submission. Firstly, we believe that all Divine rulings have wisdom, even if we are not cognisant of the wisdom. Secondly, with abstinence of and opposition to interest, as with any act of obedience done with profound reflection and inner awareness, there is huge potential of high spiritual benefit in both this world and the next, by the will of God. Nevertheless, the opposition to interest can also be seen in the context of the Islamic imperative for Muslims to be at the forefront of pushing the agenda for global social justice. A collective observance of the prohibition is a defence against societal and economic corruption, which ultimately can smite the good and bad alike, without differentiation. Sadly, in the face of the defences of interest based on economic theories founded on a false understanding of the reality of humanity and the general acceptance of interest, one will be able to apply to the issue of interest the following words that Leo Tolstoy wrote against current theories of art in his What is Art?

“If a theory justifies the false position which a certain part of society is in, then, however baseless and even obviously false the theory may be, it will get adopted and become the belief of that part of society…However baseless theories of this sort may be, however contradictory they may be to everything mankind knows and recognizes, however obviously immoral they may be, they are accepted on faith, without criticism, and are preached with passionate enthusiasm, sometimes for centuries, until the conditions they justify are done away with or the absurdity of the theories becomes too obvious.”

An Introduction to Interest

Shaykh Muhammad Shafi, in The Issue of Interest, enumerates the many Quranic verses that prohibit riba, such as 2:275-6 and 2:278-9. The latter includes the stern warning: “O you who have believed, fear Allah and give up what remains [due to you] of riba, if you should be believers. And if you do not, then be informed of a war [against you] from Allah and His Messenger. But if you repent, you may have your principal – [thus] you do no wrong, nor are you wronged.” Shafi explains how riba is translated into Urdu as sud as though they ‘are one and the same thing in Arabic and Urdu,’ but ‘riba carries a general and wider connotation and the prevailing phenomenon of sud is a kind or type of riba. The prevailing phenomenon of sud refers to lending of a specific amount for a specific period on a specific rate of profit or increase, and no doubt this is riba. But riba is not limited to this and has a much wider connotation. It includes many transactions of sale, purchase, where there is no element of credit.’ This discussion can be directly applied to a similar mistake in English if we only understand riba as interest. In summary, interest is, in the words of Shafi, ‘the compensation or the excess paid for an extension in the tenor of the loan’ as  ‘the offer by the borrower that he will pay an extra sum of money if the lender extends the moratorium for repayment.’

In specific response to those who might claim that it is acceptable to merely receive interest from a bank, Shaykh Hussain Hamed has written:

“Bank deposits are considered loans by law and by the consensus of jurists, and “any increment in a loan is riba,” as the Prophet ﷺ states in his hadith. In reality, banks deal freely in people’s deposits; they unilaterally dispose of them by using them in lending to other people for interest. At the same time, banks are committed to pay that money back with interest. These are the characteristics of loans as stated in law, with no regard to how such interest is estimated, what its percentage is, or what the name given to it is. It is no matter whether such extra money given on the capital is called benefit, gain, earning, interest, reward, gift or whatsoever. What matters are the actual results effected by the contract between the bank and the dealers, because contracts are governed by the results they entail. Rulings are generally given to real matters not to hypotheses. Moreover, the claim that banks are just investors by proxy that invest money deposited therein in legal projects has already been refuted by law, Shari`ah [Islamic law] and by experience.”

[The full explanation of the details regarding riba is beyond the scope of this article, but one would be well-advised to view the in-depth explanation in Shaykh Wahbah Zuhayli’s Financial Transactions in Islamic Jurisprudence.]

Imam Qurtubi, in his Tafsir on Qur’an 2:275-9, relates the strongest condemnations of the practice of riba narrated from the hadith and pious early generations, especially in relation to God’s declaration of ‘war’ against the people of riba and how God obliterates riba. He further states that 2:279 indicates that practising riba is a major sin and there is no disagreement upon that. Indeed, he narrates that Ibn Khuwayzimandad stated that the belief that riba is lawful is an act of apostasy. Muhammad Shafi, in his Ma’ariful Qur’an in commentary of 2:279, says, ‘So severe is this warning that any other warning of such severity does not appear anywhere in the Qur’an in relation to any other sin, no matter how great, except kufr (disbelief), of course.’

Over the ages, the matter of interest has been treated with abhorrence and condemnation. In the West, this disgust goes back to the Greek philosophers. John Kenneth Galbraith, in A History of Economics: The Past as the Present, notes how Aristotle ‘strongly condemned the taking of interest’ because, in Aristotle’s (384-322 B.C) words, ‘money was intended to be used in exchange, but not to increase at interest.’ Galbraith explains the reasoning for this dislike: ‘interest was an unworthy extraction from the less fortunate arising from possession of the money by the more fortunate.’ He notes that ‘interest continued to be strongly condemned throughout the Middle Ages’ until it was later ‘redefined as a payment for productive capital – when it became compellingly evident that the one who borrowed money made money out of doing so and should, in all justice, share some of the return with the original lender’, and then it was considered ‘reputable.’ At that point, Galbraith states that the ‘religious precept and the accepted ethic were then, not exceptionally, adjusted to this circumstance’, ‘but the taking of interest for personal needs or use continued to have a slightly unwholesome, even suspect, reputation.’

Galbraith notes that ‘early Christian doctrine strongly condemned the exaction of interest; as with the Greeks, it was seen as extortion by the fortunately affluent from the unfortunate, unwise or impoverished who were pressed by needs and obligations beyond their means.’ Moreover, this orthodox condemnation of interest is shown by Galbraith to extend to the leading Christian theologian Thomas Aquinas (1225-1274), as exhibited in his Summa Theologica. However, Galbraith argues that ‘mercantilism involved…a marked break with ethical attitudes and instructions of Aristotle and of Saint Thomas Aquinas and the Middle Ages in general’ due to the influence and dominance of merchants in society, and that the charging of interest ‘lost its evil or dubious connotation’; and with it, in the words of Galbraith, ‘religious faith was accommodated to economic circumstance and need.’ He adds that ‘both Catholic and Protestant church doctrine’ changed their stances, ‘however reluctantly and gradually.’ [Galbraith explains that ‘merchant capitalism’ or ‘mercantilism’ is said to cover ‘three hundred years, from very roughly the middle of the fifteenth century to the middle of the eighteenth, with the end vividly marked by the beginning of the Industrial Revolution, the American Revolution and the publication of Wealth of Nations by Adam Smith [in 1776].’]

Both Shaykh Taqi ‘Uthmani in The Historic Judgment On Interest: Delivered in the Supreme Court of Pakistan and Ahamed Kameel Mydin Meera in The Theft of Nations: Returning to Gold have brought forth a number of passages from the Old and New Testaments that order people not to charge ‘interest,’ such as Exodus 22:25. Now ‘Uthmani presents Qur’an 4:161 as the evidence that the Tribe of Isra’il was prohibited to charge interest. Meera states that all ‘three Abrahamic faiths – Judaism, Christianity and Islam –…strongly condemned the practice of charging interest.’ The latter assertion becomes a somewhat difficult argument to sustain when one takes Judaism and Christianity from within what has become their tradition, as opposed to taking a Qur’anic method towards explaining their faiths.

Firstly, as pointed out by Israel Shahak in Jewish History, Jewish Religion: The Weight of Three Thousand Years, numerous Biblical verses are ‘understood’ in what Shahak calls ‘classical Judaism’ or latter-day ‘Orthodoxy’ in a manner ‘quite distinct’ to the ‘literal meaning’ or understood by a Christian or reader of the Old Testament. Shahak argues that these forms of Judaism are bound more by Talmudic law than the Biblical text. In the case of interest, Shahak argues that Talmudic law only initially banned Jews from charging interest from fellow Jews; but, over time, innovative legal stratagems were devised to even get around this latter prohibition.

Secondly, as highlighted by Taqi ‘Uthmani in his What is Christianity?, one has to understand the wide scope for legal reform within Christianity in light of Paul’s renunciation of the Law of the Torah in favour of just faith in Jesus, which conflicted with the earliest conveyors of Jesus’ disciples and is pivotal because Paul is, as stated by ‘Uthmani is the latter work, really the ‘founder of present day Christianity’ – if one takes a Biblical method then one is forced to become ‘bewildered’ like Michael Baigent and Richard Leigh in The Dead Sea Scroll Deception in trying to accurately determine the details of the life of Jesus (upon him be peace). Hence this foundational spirit of freedom exhibited by Paul has led Christians to freely amend laws and attitudes over time, for even if they reject some of Paul’s positions, they can still use his methodology and apply it as they see fit. Tom Holland, in a recent documentary on Paul for Channel Four in the UK, entitled ‘The Bible: A History’ and aired on 28 February 2010, felt it was apt to end his programme with, ‘That all you need is love’ – after arguing in favour of the thesis that the central method of Paul’s invitation of faith to non-Jews, like Greeks and Romans, was to emphasise that they could dispense with the Law, and just suffice with loving Jesus (upon him be peace). Thus Holland mentions that the roots of changing the Law can be seen in Paul himself; furthermore, even if Paul and the Church adhered to current ‘morals,’ they could be ever changed on the basis of ‘love.’

The acceptance of interest is now almost universal, and it is intrinsically linked to the modern banking system; and the latter is crucial for what we see as development in the West. For example, look at the industrial development of Britain and the crucial role played by the establishment of the Bank of England. Dan Snow’s BBC series entitled ‘Empire of the Seas: How the Navy Forged the Modern World’ – in an account that is essentially supported by Galbraith in Money: Whence it Came, Where it Went and Tarek El Diwany in The Problem with Interest, but Snow makes broader connections – shows that Britain’s affluence is due to the facility of interest-based loans administered through the establishment of the Bank of England in 1694, in order to raise funds for the King to develop the navy for military engagement with the French. In this scenario, the newly-formed Bank agreed to pay 8% on loans of £25 from the people; then the massive wealth raised by the keen accepters of this offer was loaned to the King by the Bank. This method was far more popular than raising taxes, but it also was the beginning of the national debt. Nevertheless, the financial revolution was to spur on the industrial revolution, as the influx of newly-available money led to industrial innovations and bolstered agricultural produce that were created to feed and aid the navy. Snow talks of these matters coupling with the belligerent and war-mongering pursuit of booty by the English, and a strategy of ‘relentless aggression,’ which also included the conquering of lands by force for the opening up of wealth and the utilisation of the slave trade (especially in the Caribbean). Consequently, Britain achieved ‘global supremacy’ when defeating the French in 1759. Thus it is difficult for us English to view interest and banking in a cold impartial light when it is so deeply embedded in the economic comfort that we so enjoy now; and anything murky, especially widespread bloodshed, is slightly disconcerting to the image of purity we so seek to construct about ourselves.

Wisdom and Cause in the Sacred Law

In The Lawful and the Prohibited in Islam, Shaykh Yusuf Qaradawi argues that God, al-Rahman al-Rahim (The All-Merciful, The Compassionate), prohibits and permits for ‘people’s well-being,’ for He is not ‘arbitrary’ in regard to legislation. He adds:

“Accordingly, He has neither permitted anything except what is pure nor has He prohibited anything except what is impure…If something is entirely harmful it is haram [forbidden], and if it is entirely beneficial it is halal [lawful]; if the harm of it outweighs its benefit it is haram, while if its benefit outweighs its harm it is halal. This principle is explained in the Qur’an in relation to wine and gambling: ‘They ask thee concerning wine and gambling. Say (O Prophet): In them are great sin and some benefit for human beings, but the sin is greater than the benefit…’ (2:219). By the same logic, if it is asked, what is halal in Islam? The answer is, the good things. Good things are those which moderate people acknowledge to be wholesome and which are approved by human beings in general without relation to the habits of a particular group. Allah Ta’ala [God the Exalted] says: ‘They ask thee what is lawful to them (as food). Say: Whatever is good is lawful to you…’ (5:4). He also says: ‘Today whatever is good is made lawful to you…’ (5:5).

“The Muslim is not required to know exactly what is unclean or harmful in what Allah has prohibited; it may be hidden from him but be apparent to someone else, or its harm may not have been discovered during his lifetime but may be understood at a later period. What is required of a Muslim is simply to say, ‘We have heard and we shall obey’ [Qur’an, 2:285]. Do we not observe that Allah prohibited the eating of pork without the Muslims being aware of the reason for its prohibition apart from the fact that the pig is a filthy animal? Centuries passed, and then scientific research discovered the presence of parasites and deadly bacteria in its flesh. Yet even if scientific research had discovered nothing in pork, or if it had discovered much more than this, the Muslim would still continue to believe it to be unclean.”

Furthermore, by way of emphasising the above from Qaradawi, Muhammad Shafi says in commentary of Qur’an 2:275 in Ma’ariful Qur’an:

“When He declares something to be halal, and something else to be haram, you should immediately realize that there must be some loss or harm or evil in that which has been declared haram, even if one does or does not see through it. This is because the actual reality of this whole system, and the benefit and harm that lies therein, can only be encompassed by the same ‘Alim (the Knower) and Khabir (the Aware) from Whose reach of knowledge the minutest particle of the world cannot escape. The individuals or groups in this world can identify their expedient gains and their losses, but they cannot claim to have encompassed the entire range of benefits and harms affecting the whole wide world. There are things that appear to be beneficial for a certain person or group but, when looked at in the perspective of the whole nation or country, the same things prove to be harmful.”

Shaykh Ibn ‘Ashur, in his Treatise on Maqasid al-Shari’ah, argues in a manner that really does not require commentary, for it succinctly sums up the whole affair:

“From a comprehensive thematic analysis of the textual sources of the Shari’ah pertaining to the objectives of legislation, we can draw the following conclusions. Both its general rules and specific proofs indicate that the all-purpose principle (maqsad ‘amm) of Islamic legislation is to preserve the social order of the community and insure its healthy progress by promoting the well-being and righteousness (salah) of that which prevails in it, namely, the human species. The well-being and virtue of human beings consist of the soundness of their intellect, the righteousness of their deeds as well as the goodness of the things of the world where they live that are put at their disposal…If He had not intended the orderly running of the world, He would not have ordained punitive laws to deter people from perpetrating corruption nor permitted them to enjoy the beautiful and good things of life…Human beings have a natural propensity for perfection. However, their actual achievement of perfection develops only gradually in tandem with their spiritual purification and moral uplifting.”

A righteous soul, believing that their Lord is All-Wise in His rulings, might easily confuse wisdom and cause; and therefore permit or deem unlawful on the basis of wisdom, whilst contradicting the ruling established by the necessary cause or causes, hence reaching an incorrect conclusion due to failing to observe a sound jurisprudential method. This is outlined by Taqi ‘Uthmani in the Historic Judgment in his differentiation between ‘illa and hikma. He establishes that ‘illa in this issue of interest is:

“The basic feature of a transaction without which the relevant law cannot be applied, whereas Hikmat is the wisdom and the philosophy taken into account by the legislator while framing the law or the benefit intended to be drawn by its enforcement. The principle is that the application of a law depends on the Illat and not on the Hikmat…To cite another example, the Holy Qur’an has prohibited liquor. The Illat of its prohibition is intoxication but the Hikmat of this prohibition has been mentioned by the Holy Qur’an in the following words: ‘The Satan definitely intends to inculcate enmity and hatred between you by means of liquor and gambling, and wants to prevent you from remembering Allah. So would you not desist?’ (5:91)…It is in the same way that after mentioning the transaction of Riba, the Holy Qur’an has mentioned the Zulm [inequity] as a Hikmat or a philosophy of the prohibition, but it does not mean that prohibition will not be applicable if the element of Zulm appears to be missing in a particular case. The Illat (basic feature) on which the prohibition is based is the excess claimed over and above the principal in a transaction of loan…Another point worth mentioning here is that the Illat of a law is always something determinable by hard and fast definition which leaves no room for a dispute as to whether the Illat is or is not available. Any relative term which is ambiguous in nature [like Zulm] cannot be held to be the Illat of a particular law because its existence being susceptible to doubts and disputes…”

To be continued in the second part.

Ever notice how attached to shopping people have become? How buying new things is now a common hobby? This phenomenon can be condensed into one simple, elusive word: overconsumption. Within the last few decades, it has completely engulfed the American economy. Today, Americans are seemingly obsessed with the superficial. They consume their money until they are in debt, and yet they still want more and more. It becomes a kind of addiction, and like Imam Amir Abdel Malik said, for them “more is not enough.” Even the government has placed itself in an immense fiscal crisis by overspending.  And why is that? Why have so many American Muslims become possessed by consumption and the thought of materialistic gains?

It is the media that is popularizing this interest in a superficial mentality, and the Shaytan is the ultimate infiltrator behind all of this. He has been able to control the minds of the youth by indoctrinating them through the media, inconspicuously teaching them rebellion, carelessness, and materialism. He has succeeded in teaching Americans to do as they wish, nurturing their desires and promoting selfishness and the ideology of “survival of the fittest.” It is evident that young adults in America have been highly influenced by a superficial agenda, and it has caused many Muslims to deviate from Allah’s path. These false worldly desires are created by the Shaytan, and they are all a part of his insidious plan to deceive mankind.

But it isn’t just American Muslims and it isn’t just Americans. It’s a global phenomenon. The whole world is being possessed by it. Heidegger, an influential German philosopher called this ideology “the forgetting of being.” It means to forget one’s soul, to forget one’s self and one’s moral values. It is disappointing that so many of us have forgotten what’s truly important.

Now, none of this is to condemn the idea of spending from the wealth Allah have given us. In Surat Al-Baqarah, in the first few ayahs, Allah states:

“This is the Book about which there is no doubt, a guidance for those conscious of Allah – Who believe in the unseen, establish prayer, and spend out of what We have provided for them.” (2:2-3)

We are told to spend on our necessities, on our families – but there is a difference between consumption and overconsumption. A Muslim can tell when he has become a victim of overconsumption when he has difficulty parting with his money in times of giving charity.

My intention is not to rebuke one’s interest to dress nicely; it is to remind that the Rasool ﷺ taught us moderation in everything we do. A Muslim should know when he’s spent enough on himself, and instead contribute to the Islamic injunction of altruism. Because when a Muslim gives zakat for the sole purpose of pleasing Allah, he is purifying his soul just by the act of giving. The Rasool’s ﷺ example was one of immeasurable philanthropy. He lived simply and tied a rock around his stomach to suppress his hunger. This demonstrates how The Rasool ﷺ valued his soul, humility, and his connection to Allah, rather than worldly pleasures.

Being of the youth myself, I can state without hesitation that most of our hobbies consist of the following things: eating out at restaurants, going to the movies, playing video games, surfing the internet and – most commonly – shopping. And there is nothing wrong with Muslims having fun and enjoying their lives. But when these habits become the significance of one’s life, when it interferes with their prayers, and with their connection to Allah, this is when they have become a victim of extreme consumerism and the Shaytan. Their carelessness in the test of life will deepen, and they’ll chase money and popularity. They’ll want it intensely. And when one becomes entangled in the superficial, his materialistic values will supersede his spiritual connection to his Lord.

It is the Muslim’s job to find the logical balance when being a consumer. Do we really need another pair of expensive designer jeans?  Because if one does, then he or she has allowed themselves to yearn for material things more than Allah, and they will love, want, and worship those things more than Allah. This is how one falls away. But where will it take us?

We should not let the superficial mentality overtake us because behind it is the Shaytan. And it doesn’t matter if we didn’t get the most exclusive and expensive pair of designer shoes. Allah judges based on the soul, and the more one purifies his soul by evading the superficial, the more he increases his spiritual wealth. In the end, the spiritual wealth will take us to the best of places.

In Surat Ash-Shams Allah states,

“And [by] the soul and He who proportioned it and inspired it [with discernment of] its wickedness and its righteousness, He has succeeded who purifies it, and he has failed who instills it [with corruption].” (91:7-10)