Interest and Islam

In the Name of Allah, the Gracious, the Merciful

                          Interest And Islam

By Mohammad Shafi J. Aga

Muslims – I mean all those who claim Islam to be their Religion – generally believe that Allah has prohibited interest. They believe that the prohibition covers all kinds of interest on moneys borrowed or lent, by banks, other corporate bodies or individuals.

Some of the Muslim religious leaders go even to the extent of saying that working in a bank, too, is prohibited! Because, they say, it aids and abets the taking and giving of interest by the bank.

Not long ago, I found one of my own cousins quitting his secure job in a bank. He did so under the influence of the said such religious leaders. Maybe there are others like him who have quit or shunned bank jobs under the same influence.

But there may be thousands of other Muslims, the world over, working for banking institutions. How could all of them quit their jobs together? Such a step could create an economic void in the community. Going by the unwritten law of necessity, therefore, the religious leaders have come up with a solution for the Muslim bank employees.

The solution is somewhat on the lines as follow. The salaries that the employees receive, although unlawful, can be used for redemption of loans. So, what the employees should do is, take loans from their friends and use these to meet their household expenses. And then redeem the loans by means of their salaries. This process may be continued till the employees find alternate jobs.

You may think I am kidding; but I am not! I have far more respect for the Religion than to kid about it thus. When I first learnt about this ‘solution’, I became sure that its providers are thereby only denigrating Islam. I then started seriously reflecting on the belief that Islam prohibits interest. I had doubts about it even earlier.

I wondered why the religious leaders were targeting banks and bank employees only. The entire modern-day society is subsisting on interest-based transactions. No major industry or business is
established without taking interest-based loans. And what about the substantial funds that employees – those other than working in banks, even, – receive on their retirements? The funds had got augmented through interest money getting accumulated year after year.

I then decided to study the relevant verses of the Qur’aan myself. The Qur’aan (also written as Koran) is the fundamental religious book in Islam. That Allah, and not man, is the Author of this book in original Arabic, is one of the essential articles of the Islamic Faith. It is the last of the books claiming divine authorship, and the first such one to be revealed in this Historical age. Its original text has been preserved unaltered for the last over fourteen centuries since it was revealed.

An in-depth study – extending to over 2 years – of the verses, revealed to me that the Qur’aan prohibits what it terms, in Arabic, as Ar-Riba. It revealed to me that the divine Book also duly contains a definition of the term. As per this definition, Ar-Riba is that increase in one’s material wealth or possessions, which one unjustly gets, during any transaction, by usurping what rightly should belong to others.

The Qur'anic injunction against Ar-Riba is, in other words, divine injunction against all economic injustices. Alongside this injunction, the Qur’aan states categorically, and significantly, that Allah has made business lawful. The two together, I believe, form the basic Islamic Principle of Economics.

I have recorded my detailed findings in an eBook entitled The Qur'anic Concept Of Ar-Riba. Suffice it to say here for the purpose of this short article, however, that interest charged by a good reputed modern-day bank, does not fit into the Qur'anic definition of Ar-Riba. A substantially major portion of such interest is for compensating the bank for actual expenses incurred by it. The rest, which is substantially a minor portion of the interest, constitutes the net profit of the bank.
Such profit is its rightful dues earned in the business of providing purchasing power to those who need it.

Interest as such is thus not prohibited in Islam. But if interest were taken at unjustly high rates, it would cross into the territory of Ar-Riba. It would then therefore get prohibited.

Mohammad Shafi J. Aga

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