Part I | Part II
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.
Interest is haram but a reality. Its lovely to think in theoretical terms but as Br. Suhaib said recently on his UC Berkely speech at the GTU, that people have to talk about practicalities. Buying a home with in the bay area without a loan; you either have millions in the bank or you just won the lotto. Two bedroom condos are still going for 500K+ in foster city and elsewhere..
And I agree interest is a killer. The US is accruing 35 billion dollars in interest every week.
They should kill interest overnight and come up with a repayment schedule. But that a dream; it not going to happen unless Allah(swt) interferes in world affairs. Allah(swt) has never taken a role in human world affairs directly; only through his messengers(pbuh) and by destroying the whole tribe, country etc. Ad, Thamud etc. Also since the Last messenger(saw) has come and gone we aren’t going to see the mass conversion of the US congress/world financial system to Islamic financial reform.
To the statement that we have to talk about practicalities, and that it’s nearly impossible to buy a home these days in the bay area without a loan (unless you’re loaded), I ask, what’s wrong with renting until you can afford to purchase a home, even if it takes 10-15 years? You’re not simply throwing away your money when you rent, you’re avoiding riba, which certainly is not a waste… Unfortunately, many people use this “practicality” argument to justify purchasing homes in expensive areas or homes larger and more lavish than their means (eg. it’s easy to go for a home that’s 20-30% more than what you should be buying based on your income if you’re using a 30 yr mortgage anyway…). The irony is that it doesn’t end up saving you that much money when you compare the amount you paid in rent over time with the amount of riba accrued (especially true with regards the lengthier mortgages), especially if an unforeseen personal circumstance causes you to refinance.
I feel that purchasing a home using a traditional mortgage is pretty scary actually (with regards to whether it’s haram or not). One has to ask themselves, do I really have to buy this home, at this cost, in this location? Can I live a quality life by renting? Or moving 20 miles away? Etc..
Unless renting (or purchasing a less expensive home) will force you to live in a dangerous part of society, I don’t see how anyone can justify buying a home using riba (I’m no mufti, but if I were I would definitely base rulings on riba taking into account socioeconomic circumstances). In other words, if you can live a quality, safe life while renting, I believe it’s best to go ahead and rent until you can afford to truly buy a home.
“And whoever fears Allah – He will make for him a way out. And will provide for him from where he does not expect. And whoever relies upon Allah – then He is sufficient for him. Indeed, Allah will accomplish His purpose. Allah has already set for everything a [decreed] extent.” [at-Talaq 65:3-4]
Allah has clearly prohibited Riba, and I am sure whoever fears Allah, Allah will provide a way for him..May be Allah will enable him to make Hijrah to a place where he can get a home without Riba or some other way..
There are many Islamic Loan Businesses that have started over the past years that will give you a loan for a home through an Islamically Correct System. Guidance Financial is an example. These groups are backed by scholars for providing funding for those who cannot afford it. My parents used this method. Whether you debate if groups like Guidance Financial are correct is your investigation.
There are scholarships and also interest-free ways to get loans for college. If you still cannot afford it, then we must live within our means. Harvard would be great, but who said Florida State University can’t produce brilliance too.
At the end of the day, where there is a will, there is a way. There is a lot of options out there available to live an interest-free life, as much as possible. Pay credit cards before interest deadline arrives. Borrow money from sound sources, interest-free. Buy a vehicle with interest-free time frame and pay it out before that time is over.
It’s just a matter of how important it is to you. Allah knows best and He is the best of judges.
I’m curious what the author thinks about the general concept of paper money that is not backed by gold and is thereby, failing to hold its value. Inflation is taxing people’s wealth in ways that simply doesn’t seem very just and Islamically acceptable.
What do the scholars have to say of instances where hyperinflation causes the paper money to become worthless in the span of a few days? Years of sweat and labor down the tube for the impoverished masses while the bigwigs safely stashed their money in offshore accounts.
Why isn’t this denounced in the same manner as riba?
Bro Mike, I believe Abu Ubaydah’s purpose in the article was to teach us about the history of riba and the wisdom behind it’s prohibition in the shari’ah. Not necessarily to give a ruling on whether it is permissible to take out an interest-accruing home loan based on necessity.
Assalamo alaykum. Jazak Allah Khair for the much-needed article on riba – it is shocking but true that some Muslims actually do not think twice about it and consider it permissible.
I think you may be taking Imam’s Suhaib’s speech out of context here when it comes to something as clearly and explicitly forbidden in Islam as usury. There is really no second opinion on riba being haram as it is explicitly mentioned in the Quran and hadeeth – just like there can be no second opinion on the ruling on fornication or adultery. The important thing to keep in mind is as Br. Abu Ubaydah mentioned: “we believe that all Divine rulings have wisdom, even if we are not cognisant of the wisdom”. As Allah says that whoever gives something up for the sake of Allah, He replaces it with something that is better (than what the person gave up).
For the scenario that you mentioned about owning a home by using riba, the important question to ask is is it worth it? Is it worth it to earn Allah’s anger and wrath both in this world and the hereafter by using haraam means to achieve ‘happiness/success’ in this world? The answer to this question is a function of one’s iman, knowledge and wisdom. And Allah knows best.
Brother Mohamed. You’re logic on this matter is impeccable, simple and refreshing. May Allah guide you, may Allah provide you means to spread Islam.
Are college loans haram? If someone got accepted in Harvard, should they give up that opportunity and go to a cheap state school instead to avoid riba?
I agree with TD and Max. I just recently bought a car and had to take a loan out (but still paid a large deposit). There’s no way around the interest. Not in today’s world.
To. Br. TD
The problem is crappy 2bd condo in the bay area is 500,000(not a house).
Renting is as expensive as a mortgage payment or sometimes even more.
To accumulate 500,000 in the bank after 30 yrs is not impossible but improbable
due to bank fees, inflation, And cost of land will probably go up. You will still need a mortgage on it for less maybe but yeah… you will.
A house that is asset you can save in and then spend the rest of live with worrying about shelter. Once mortgage is paid off. say on a 500K property. 1% property tax. is 5000 bucks a year; about 400 bucks. Your old now, you and spouse. So you spend maybe 1500 a month food, bills etc. 2000 a month * 12. is 24,0000 dollars only.
Social Security and saving will can cover that.
What we can do is limit credit cards, buy cheap ass used cars. Use debit cards with visa etc when paying at restaurants etc. Carry cash can be problem in western societies. You might be marked for mugging, profiled as drug dealer etc. Banks report when people take out or deposit large sums of money, Now days a even more than thousand in cash and they will start asking polite questions.
Interest has become part of daily living life. Supposed Islamic banks use interest rates to calculate their service charges. They calculate cost of operations plus cost of capital(i.e. interest) plus profit. And that is there service charge.
A true islamic bank does not charge cost of capital.
Finally someone has brought up such an important issue. This matter is rarely talked about by the Muslim community or at Khutbahs, I am even shocked that some imams have concluded that buying one house with “riba” is okay. Yet they have NO basis for this fatwa. The Quran has made no exceptions for taking or giving “riba”. The Quran clearly states that many will be confused with this prohibition, arguing that “riba” is like “trade or investing” but Allah has allowed “trade” and forbidden “riba”. Basically, there is a fine line between investing for profits and lending money with interest, but the consequences are drastically different. One promotes economic development, the other economic enslavement.
For example, houses prices are ridiculous for the very fact that there are interest-based loans available. Before these loans were widely used, people could actually save up the money to buy their homes, which was no more than $50-$100K. But before putting out all the arguments on why it’s still better to buy a home than to rent, remember that anyone with a mortgage is still “renting” since the bank owns the house until you pay it off, which very few families actually do during their lifetime. How many families do you know that does not have mortgage payments still even after 20 years of owning their home?
Riba allows the super rich to enslave everyone else, as we have clearly seen through the World Bank and IMF’s enslavement of developing countries. Also the banks gain free reign to do as they please which we recently witnessed from this current financial crisis where the banks literally stole more than $700 Trillion from the Public Treasury and no one did anything about it. They took the world hostage by playing on our fears and selfish greed.
Remember, he who controls the nation’s money supply, controls the nation. Allah has forbidden Riba to prevent the inequity and concentration of wealth to the few. Yet, we as a society have sold our own economic freedom to these “banks” because of our impatience and desires to consume today rather than save for tomorrow.
Hence Riba is an affront to every kind of social justice, and thus a declaration of war with Allah and His Prophet, who abhor oppression and injustice. Let us not be like the people Allah warns us about who “who have bartered Guidance for error: But their traffic is profitless, and they have lost true direction,” 2.16
By removing Riba from our lives, Allah will bless us with the Akhira, a home that lasts forever. Allah has asked us to make this bargain with Him.
“O ye who believe! Shall I lead you to a bargain that will save you from a grievous Penalty? That ye believe in Allah and His Messenger, and that ye strive (your utmost) in the Cause of Allah, with your property and your persons: That will be best for you, if ye but knew!” 61.10
We strive with “our property” by earning it in halal ways, and by spending it in halal ways. When we forgo the immediate benefits of home buying (if it involves interest based loans), then we are sacrificing for the sake of Allah and not perpetuating the unjust economic system.
Imagine if everyone stopped borrowing based on interest and spending within their means. The economy would not stop, it would just not have the instability it has today of boom and bust.
To Brother mike,
Your comment proves my point actually. First, the notion that owning a home makes more financial sense than renting is obviously still debatable. Many Americans bought homes thinking they were making a sound investment for the future only too watch as the value of their homes decrease below their original values. How can one be sure that wouldn’t happen again? You mention that owning a home gives one a sense of security – clearly that was proven to be mearly a false sense of security when the housing bubble burst. Even if there were no subprime mortgages you still can’t be sure a local “housing crisis” won’t happen to you. A natural disaster can render you spare your home yet decrease its value due to surrounding damage (New Orleans) or your local economy change substantially forcing people to move elsewhere for jobs (Detroit).
The first line of your comment is what actually proves my point. Do you HAVE to live in the Bay Area? Are there absolutely no jobs or education options anywhere besides the Bay Area? If not, then perhaps you truly are “mut’tar” (have no other option) like the one who is forced to eat swine or starve to death, and inshallah if we are forced into such an extreme circumstance Allah has mercy on us for committing such a despised act (like riba).
No my point, was not just the Bay Area,,, Anywhere where there is jobs and a Muslim can live comfortably. You won’t find house’s in the 100K area… Take any metro area that is right recovering sort of. ie. jobs are popping here and there.
To Br. TD – Salam aly kum
Most Muslims are not going live in the Ozarks Mountains. My point, talking about interest without talking about solutions like talking about the weather.Its pointless. Br. Shuaib was talking that these days we don’t have scholars who can analyze the quran and hadith and come up with solutions for us. He mentioned slowly it has happening but it’s still very basic. The Old Scholars actually to tackle the problems of the day and come up with Islamic solutions. And those solutions varied but relied on the base of the Quran and hadith.
What I am saying is telling me that I have been a bad boy is no solution. Tell me how to be a good one with relative ease. Islam is not about being unduly punishing. That is what the current scholars’ need to realize and wake up. Give me solution that works easily for me. If something is illegal but solves a problem and not enough people die from it; it will happen again and again. Drunk driving kills 50,000 Americans a year. Still after laws, fines, jail time… Still people drink and drive.
So what I am saying; I know the weather outside its bad. Give me an umbrella. But nobody is handing us an umbrella… just telling us the weather sucks. Big deal.. I know. I know all too well.
[…] Part I | Part II […]
assalamu alaikum wr wb,
Riba is clearly haram as stated in the Quran and Sunnah of the Prophet PBUH and it is destructive to an an individual, community, economy, society, and the entire so called “civilized” world as was exhibited directly by the financial crisis. The main issue becomes the applicability and elasticity of the shariah based upon the circumstances.
As for those who say there is no way to avoid it this is simply not true although the Prophet PBUH did allude to a time when every believer would be touched by the dust of riba.
Love and Fear of Allah SWT and what is clearly halal, clearly harm, and what is in the grey areas, creative financing, and staying within your means are absolutely critical. Also, educating yourself regarding the financial transactions from an Islamic and secular perspective will do wonders for you with the intent of preserving your religion and preserving you from a declaration of war from Allah SWT and His Prophet PBUH and getting the goods and services in this life which you deem as necessary (education, home, cars, medical operations, etc).
I have personally negotiated 0% interest purchase contracts on cars for myself and family members just by understanding basic finance and the general rules of Islamic financial transactions such as 1) the prohibition of usury 2) owning what you are selling 3) not combining two contracts into one, etc. The difference in pricing was a $50.00 transaction fee and the contract (retail sales agreement) showed 0%.
Also you must ask yourself, why do so many car companies offer 0% interest financing for 48, 60, or 72 months when the economy and federal/prime rate has been reduced to such a low rate (why does the fed reduce the prime rate in the first place when an economic crisis occurs? Hint: They know Riba is haram and destructive also)
In terms of home finance/mortgages, I can safely say after studying several of the Islamic finance companies and their conditions and contracts, that they are built upon assumptions (resale of loans to Fannie Mae/Freddie Mac, deduct the interest income expense from your yearly taxes, neither being a true partnership model or cost plus profit (mudarbah model), selling that which you do not own by providing the capital (a.k.a non banked owned or no title transfer), that are purely based upon riba (althought intent is 1/3 of the law) and it is for this reason that many of the truely pious and knowledgeable jurists have not given their stamp of approval or fatwa in terms of permissibility regarding this issue. Others have uttered the permissibility and if they are subject matter experts in the field of Islamic finance, law, and transactions, then they will be rewarded even if their fatwas are not in the proper place (this is based upon the hadith of the Prophet PBUH regarding the ijtihad of the hakim). It is the situational applicability, and the general maqasid of the shariah, the political circumstances that some have used as evidences for permissibility in addition to not having alternatives (you can definitely rent) and finally the general fiqh rule of with hardship must come ease.
So, in a general sense we must be tolerant and well mannered when asking questions of these Islamic authorities and must have some understanding of the logic behind the fatwas that were issued, especially for the students of knowledge and other Imams and Shiekhs that may differ with the opinions that are a matter of ijtihad.
In addition, it is due to some of the jurists wisdom that if they were to give the so called “green light fatwa” that Muslims would no longer find or establish institutions from the ground up (similar to bayt al maal) that are pure in their establishment from the ground up. Allah SWT is pure and only accepts that which is pure.
I have personally been renting for more then 10 years with the open eyes of looking for a permissible alternative or saving enough capital to purchase a home outright, building my own home with my own two hands, starting a small business buying and selling, and if Allah permits and if I work towards it in due time inshallah it will come to fruition.
There are several fatwas that have been issued that provide permissibility of a contemporary mortgage transaction for the purposes of buying a home (in order so that the Muslims establish themselves in the land, out of necessity for a single home, etc.) and interest bearing loans based upon the current circumstances of Muslims in many countries, however not without their conditions, stimpulations, and methodologies which the majority of the Muslim masses have taken as an open buffet whether or not the shoe fits in their specific situation.
We must ask Allah SWT to provide us sustenance and provisions from that which is pure instead of that which is inherently impure and we must seek real life practical solutions to these issues.
We must also seek knowledge and alternatives and bring about the revival of the financial system in the United States and elsewhere as this is an Islamic concept. The revival is in all aspects from religious, economic, social, environmental, manners, etc. as the shariah of Allah SWT is all inclusive as Allah SWT says in the Quran “We have left absolutely nothing out of the Book”
Agreed! You took the words right out of my mouth. May Allah reward your efforts and grant you fruition in dunya and akhira. Good for you. I have been renting for three years and would never think to buy a hosue until i can pay outright cash for it. May Allah provide us with sustinence.
Ahmad, you gave me a brilliant idea here. I didn’t know if it was possible. Would you mention the name of the dealership.
Salamu alaikum Br Ahmad,
JazakAllahu khairun for sharing your insight and personal experience with us. May Allah make it easy on those trying to avoid riba for His sake, while although definitely a challenge here in the US, definitely not impossible as you’ve demonstrated.
Brother Mike, You’re mistaken brother… there are homes available for reasonable prices in areas with good jobs all over the US. This is especially true after the housing bubble burst. I have many friends who live in California and feel those living there are sort of in a bubble of their own, not realizing how affordable a quality lifestyle can be outside Cali. My friend’s home in Cali for instance is the same square footage (2950) as my parents home in Michigan but costs more than three times as much ($700,000 versus $220,000)
WS. Both have swimming pools and are located in among the top school districts in their respective states! I’m not exaggerating at all and can show you listings on zillow to prove it. All I’m saying is when confronted with the decision to use riba or not we should ask ourselves, is there really no other option? (Like the example I used about the person who must eat pork or starve to death. For whatever reason, we fear the punishment for eating pork or drinking alcohol far more than using riba – that has always baffled me).
With regards to presenting solutions rather than simple pointing out problems, I agree that’s what our community currently needs, but that’s an entirely different (and lengthy) discussion. I was compelled to share my two cents after you implied brother Suhaib Webb condones riba in your first post. To my knowledge the responsible scholars in the US (brother Suhaib included) are against bashing those with mortgages simply because some, especially those with lower incomes, can’t escape rundown neighborhoods and create a better future for their children by moving to safer areas with better school districts, etc, unless they purchase a home in the better neighborhood with a mortgage. I agree that in those circumstances we shouldn’t be quick to judge those who may be utilizing riba. The problem I’ve noticed unfortunately is professionals with advanced degrees end up interpreting these scholars opinions to mean they can go ahead and buy that expensive home in the best neighborhood when it’s within their means to rent in a decent area until they can afford to buy years later.
In metro detroit the Jewish community is among the wealthiest in the world. What they’re great at is helping those out with lower incomes until they can move up in society on their own. One example of what they’ve done is provided an incredibly large amount of cheap rental options in Jewish neighborhoods for recent immigrants, students, lower-income families. These rental properties are oftentimes endowments to nearby synagogues or Jewish schools. I would like to see Muslim communities in Michigan are beginning to do that as well on a small scale, and inshallah efforts such as these, along with supporting local Muslim businesses instead of saving a buck at Walmart, eating at Muslim-owned restaurants, etc will be a positive step towards wealth-building in the Muslim community.
Brother Mike, I commend you on challenging the readers of this blog to come up with solutions, which I agree is more important than merely pointing fingers. Jazakallahu khair.
You know what..i am renting and live a great neighborhood. you dont need to take a mortgage to find a safe place to live. You cant compare those who are starving and have no option to eat pork. It’s not apples for apples..We are not starving. IN fact, we are living in the richest nation on the planet. Even in these rough times….which aren’t really rough compared to third world countries who have no electricity or running water. Also blaming the muslims for being disorganized is not an excuse…Everyone is responsible for themselves.
Salam Br. TD
I wish the Muslim community was like the Jewish Community in their protection of its community. Its has improved over the last 8 years to persecution; which is shameful.
But I guess its appropriate as the Jewish people learned these skills after a long time. I have also found Muslim people while helping somebody out may advantage of them too. I went through that and felt violated. I know its not just Muslim, it happens with all communities. You first abuse the one you know. Its psychological fact.
However, does Michigan have any jobs? Micheal Moore has been ranting about the state of unemployment and lack of good jobs in that state..
Thanks for the discussion.
Salam aly kum
I notice many muslims are looking for excuses saying there is no way around riba with the current modern world we are living in. Some muslims have even surrendered and said there is no choice….One person mentioned i just took out a loan to buy a car i had no other choice. There is another choice…You just chose not to take it or even consider it. I personally just bought a car too. I saved my money for three years and bought a car from the auction and paid cash for it…No interest. How did i do that..i bought a used car. I also saved a lot of money not going to dealer who over charge and nickel and dime anyway. As for house loans….there is a choice. RENT! You get to sleep knowing you dont have a loan hanging over your head. As for credit cards….low and behold there are specific credit cards who charge no interest. I know. I have one. There are halal options out there…You just have to suck up your pride and take them. THere are those who claim to love the PRophet and Allah but yet they hate what they have brought. If you really love Allah, you would make the effort. WHen you make excuses, you are only deceiving yourself. But, you can’t deceive Allah. For those who mention inflation and inflation….Allah didn’t say he was going to war with those who use paper money and live under inflation…he said he was going to war with those who deal with INTEREST! Stop making excuses, and start taking solutions. THE HALAL solutions…If you really love Allah , you do your effort and depend on ALlah. REMEMBER**** ALLAH SAID….you (the muslims) are the best of mankind, you forbid what is wrong and you enjoin what is right. THat’s what distinguishes us from the christians and jews….It’s not difficult to sacrifice to live up to Allah’s standards….
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Good work once again..
I am looking forward to your next post. 🙂