Interestingly in the UK, something is emerging regarding University Education Fees:

“The issue is changing for new students starting higher education after 2012. Interest on student finance is charged at the rate of inflation plus 3% during the period of study. The interest rate then varies after graduation, between the rate of inflation only and inflation plus 3%, according to earnings.

The National Union of Students (NUS) and the Federation of Student Islamic Societies (FOSIS) have been working together to produce an alternative system that is equitable for Muslim students and is acceptable under scriptural law. The government recently announced that Muslim students in England will be able to access an alternative student finance system which is compatible with Sharia law. At the time of writing, this new system was being developed and it was likely that the funding system would be available from 2016 (at the earliest)”

Insha-Allah whatever this financial plan is, it could be the start of something revolutionary and it may even give the non-Muslims an incentive to revise their attitudes towards Riba and/or possibly make them enter Islam. One can only hope insha-Allah 🙂

the practical problem today in the East is a lack of absolute funds to cover everyone’s need, whereas in the West it is merely the lack of infrastructure. so in your case you may need to resort to a scholar’s advice to determine the priorities.

however do not confuse the current situation with the universal conclusion that there can never be an interest-free solution that can possibly be devised for someone to obtain education. this is false. there is a reason why you are funneled into interest loans systematically, and that reason is to bind your future earnings to a financial institution’s profit ledger. whereas the society and the government gains from an educated populace, this has been enough reason for many governments, religious or secular, to fund or subsidise further education to the qualified without asking for money out of you afterwards. there is no actual need for someone to profit from a venture which ultimately benefits the society such as education, just as there is no need for you to have a different police force, army, firemen etc. service level depending on how much you personally are able to pay. were the society so inclined or interested, there would be government grants, zakat funds, waqaf education funds, interest-free loans, mutual investment loans, etc.

in a particular situation, it may be that you are genuinely forced into something you would rather not have to do, but i hope you don’t assume that this is because islam does not provide a solution. it does – it is the society you live in that does not want to allow it for you, or if it is ambivalent, nobody has made the initiative to create the infrastructure yet.

All of these issues, can be resolved in a more transparent financial system than one resting on interest. Need to pay payroll and bankroll/simplify small, day-to-day transactions? This is a service the banks provide, therefore this effort and overhead should be quotable and chargeable as a service charge, rather than be funded from interest which is not related to the service at all.

The case is similar for insurance schemes, where the conventional company makes its profit through premiums for as long as you’re fortunate enough not to have an accident or otherwise claim the insurance, pitting the company against the insured. yes, the premiums pay for salaries and effort to administer the insurance, but this can equally be more directly and transparently charged as the fund management fee, which is a payment exactly for the services rendered.

please do not confuse the necessary activities that happened to be funded by the money raked in by interest charges, with whether interest is the best and most appropriate means to acquire the funds in the first place. and please do not be confused between banning interest, and banning all lending.

fraud is when a system creates injustice because someone cheats within it, i.e. the system is *not* working as intended because of human failings. it is an example of a good system when it works as intended, and you need safeguards to *prevent it from being broken*, meaning all you need to do is to preserve its good functioning. but if the system even when *working as intended* creates a bias towards injustice that will accumulate over time, and needs to be “fixed” to *reverse or reduce accumulated injustices every now and then*, this is not a system that should be accepted, let alone encouraged unless absolutely unavoidable to prevent an even greater evil. please understand the difference between the two.

I got a student loan for my education, as my family couldn’t possibly afford to pay for my sister and I in college. After graduating I got a job in the financial industry (which is obviously based on riba/interest/usury). Ofcourse as a good muslim I had the option to turn down the job, but realistically…what were my other options? I had a looming student loan to pay off. I married my husband the same year, and he also works in the financial industry. Together, we were able to purchase our first home within a few years of getting our jobs. Of course we had the option to not buy a house, and continue renting. But the company we were renting from was obviously also involved in riba-related activities in some way or other.

We also own two cars…one is leased, one is financed. Considering that we were only able to afford a house far off in the suburbs, although public transportation was an option if we had 2 and a half hours of commute-time each way- a total of 5 hours each day commuting, because we are prohibited to pay interest on our vehicles.

And now I am in graduate school…my undergraduate loan finally paid off. But I now receive a grant from a corporation that is built on the principles of riba/interest/usury. Ofcourse I had the option to refuse the grant and not go for grad school at all.

But really…realistically…do we have a choice? I really truly hope someone can give me an answer.

Thank you for elevating the discourse on this critical aspect of our lives in this dunya.

As the Fed lowers rates to near zero, I wonder if it is not the hand of Allah (swt) making them think it’s their own idea! “They plot and plan, and Allah too plans; but Allah is the best of planners.” (8:30)

As-salaam 3alaykum wa ra7matullahi wa barakatuhu,

i just do give a comment for those who do not have much time to read those long answers and debate-orientated comments.

Riba’ is haram according quran. Riba’ is not an interest but it could be part of an interest. If a bank gives a loan to you – like 100 dollars – then you have to pay 100 dollars back plus the interest for the service the bank has rendered. If you do pay more than the service the bank has rendered to you than it would be not justified and it would be a Riba´. The amount for the service of the bank has to be very small ..

The financial system of IMF is based on Riba´ – it is the reason for economic problems, poverty, unemployment..wars etc.

I do hope it was a short and brief comment..

wa salam

“The Qur’anic prohibition of taking “al-Riba” is clear and categorical. To my knowledge, nobody disputes this. But the controversy arises over the distinction between al-Riba and interest…

In order to give an answer whether Riba and interest are one and the same, one has to understand the meaning of al-Riba in its correct historical perspective…the use of the definite article “al” before “Riba” is indicative of the fact that Riba refers to that practice of taking in increase of the amount due from the debtor which was prevalent amongst the Arabs and was familiar to them at the time of the revelation of the Qur’an.

…a number of jurists of great repute tried to define Riba of the Jahiliyyah. According to Mujahid: (d. 104H) “Riba of the Jahiliyyah, which God has forbidden, was that if a person owed a loan to another person he would say to him, ‘I would give you so much if you grant me extension of time.’ Imam Malik (d. 119H) says: “In the Jahiliyyah, the Riba was that when a person gave a loan for a specified period and that period expired, the lender would ask the debtor whether he would return the debt or increase the amount? If he made the payment it would be accepted, otherwise the amount of the debt would be increased and the debtor allowed an extension.””

M.A. Manan “Islamic Economics Theory and Practice” Sh. Muhammad Ashraf Publishers, Lahore 1970, 1991 ISBN 969-432-162-X

Salaam Br Zia,

Thanks for the clarification above–I really appreciated it and agree with your position that what is required is a deeper understanding of the many ways that interest-based transactions currently support, not just the financial and banking system, but the ‘real economy’ of companies and goods production and service provision. As you mentioned, this isn’t the same as supporting the legality of interest-based transactions–but we need to understand more explicitly how entangled our current modes of production and lifestyle is to the interest-based system and what will be lost should the system be made interest-free overnight.

Perhaps we also need to consider/imagine/plan/propose for what a phased approach to eliminating interest-based transactions would be, beginning with robust interest-free alternatives (some real-life examples are given in the comments but where they are absent, as I’m sure some currently transactions will never have Shariah-compliant alternatives, what we will be giving up). That would help to convert the vitriol we have today into a plan for action–which could hopefully win converts to a systemic evolution of the financial system beyond the setting up of isolated Islamic banks.

And another wondering in my head (and I am not a specialist in this by all means): the current interest-based financial system is very much based on the time value of money, which governs how corporations assess their borrowings/investments/risk premium. I wonder how much that is based on the fact that we have moved from a gold-based monetary system to fiat money and the associated introduction of runaway money printing and inflation. Within a system which drives inflation, it seems only logical that corporations try to protect themselves from a loss in real value of wealth by gaining through interest on their investments.

Ws.