WHAT IS MIF?
Our religion Islam has provided guiding principles over all matter in all walks of life and these will remain enforced till the end of the living world. Any person with even the slightest knowledge of the Holy Quran & Sunnah of the Prophet (PBUH) is quite aware of the fact that language and tone of these becomes extraordinarily stern and admonishing while mentioning the concept of Interest (Sood/Riba).
It is because of this strong approach towards Interest, that RD has developed an Interest/Riba Free framework of doing business defined by and in compliance with Islamic Sharia principles. We call this framework as Mustafeed Islamic Facility (MIF). This framework and its code has been developed under the mentorship, counsel, advice and recommendations of bona fide Islamic Scholars and as such subsequently, governs the foundations of RD’s Installments Business.
WHAT IS RIBA?
By: Abdul Muqsit Turk
Riba is an Arabic word that is often translated as interest though some Muslim jurists do not agree with this translation as explained below.
Caliph Umar said that there were three issues, he wished, that the Prophet could have explained them in more detail. Two of them were about Inheritance Law of Islam and the third one was about Riba.
(Reported in Al-Tafseer Ibne Kaseer, Ibne Majha and Ibne Mardoodia)
At another occasion, he said that since some kinds of riba were not quite clear to them (Muslims at that time), therefore they had left almost 90 percent of otherwise permissible transactions in fear of involving in riba even unknowingly.
(Reported in Al-Kanz)
RIBA IN QURAN AND HADITH
Riba in Quran: The word 'Riba' means to increase, to grow, to multiply and to climb. However, in economic context, it is generally considered as a contractual increase on loaned money or commodity. This word as such or its variants have been used in numerous versus of Quran. There is, however, a complete consensus among Muslim jurists that only in the following eight verses of Quran, this word has been used in its economic sense: -
And from the riba-based giving (investment), you think as if your wealth is increasing at the cost of others (borrowers), but in the sight of Allah (from overall perspective), it is not increasing. On the other hand, when you give something in charity to please Allah, then your wealth is increasing (in the sight of Allah).
And for their (Jews’) devouring of riba even though it was forbidden for them, and for their (Jews’) wrongful appropriation of other peoples' property, We (God) have prepared for those among them who reject faith a grievous punishment. (al-Nisaa 4:160-1)
O Believers! Do not charge riba on top of riba and fear God so that you may prosper. (Aale-Imran 3:130)
People who indulge in Riba shall be raised like those who have been driven to madness by the touch of Devil. That is because they say that a riba-based transaction is just liketrading, while God has permitted trade and prohibited Riba. Hence those who have received the admonition(warning) from their Lord and have desisted accordingly, may have what has already passed, their case being entrusted to God; but those who revert to riba-based dealings, shall be the inhabitants of the hell-fire and abide therein for ever. (You must know that) God deprives riba from all blessings and blesses charity; He loves not any ungrateful sinners. (al-Baqarah 2:275-6)
O you (who claim to be) believers! Fear God and give up Riba that remains outstanding if you are true believers. Watch out! If you do not obey this commandment, then God declares war against you from Himself and from His Prophet. But, if you give up your outstanding Riba, then you can claim your principals. Neither should you inflict harm (due to Riba) to others, nor others should do harm to you. (al-Baqarah 2:278-79)
Riba in Hadith: On the topic of riba, there is a big number of ahadith. Here a selection of commonly quoted ahadith is reproduced that is divided, for Pedagogical purposes, under the following four titles: -
- Ahadith that reinforce the concept of Quranic Riba.
- The Prophet said: "There is no riba except in loaning." (Nasaee 4504)
- The Prophet said: "Verily riba is in loaning." (Muslim 2991)
- The Prophet said: "There is no riba in hand to hand (spot) transactions." (Muslim)
At the last Pilgrimage, the Prophet said: "All of the riba of Jahilliya is annulled. In this respect, the first riba I annul is the riba that the borrowers owe to my uncle Abbas; it is cancelled completely. (Muslim)
- After the prohibition of riba, all Muslims were clear not to indulge in it anymore. However, a dispute arose between two Muslim tribes about the settlement of outstanding interest on previously loaned capital. The dispute was put up to the Prophet who forbade demand and payment of that interest too. (See !Shafi 1996 p.28-9)
- Ahadith that refer to riba in barter trade.
- Abu Saeed Khudri said that once companion Bilal brought to the Prophet some good quality dates. The Prophet inquired as to where he got those dates. Bilal replied that he had some low quality dates. which he had exchanged in 2:1 ratio for high quality ones in order to present the latter to the Prophet. Upon hearing this, the Prophet said: “OH no! Oh no! That is Riba. That is exactly Riba. Do not do it again. If you want to do such an exchange, first sell your dates (for money or another commodity) and then buy other ones." (Bakhari 2145)
- he Prophet said: "While exchanging gold for gold, silver for silver, wheat for wheat, barley for barley, dates for dates and salt for salt, exchange like for like (in equal measure) and exchange at spot. Whosoever paid more than what he received or demanded more than what he gave, verily he dealt in riba. Both the payee and the receiver are equal in violating the Law of God." (Muslim 2971)
- The Prophet said: "While exchanging gold for gold, silver for silver, wheat for wheat, barley for barley, dates for dates and salt for salt, exchange like for like (in equal measure). Whosoever gave more or took more, verily he made a riba deal. However, you are permitted to exchange gold for silver, wheat for dates, or barley for dates as you wish (in equal or unequal measures) provided that, such an exchange is at spot." (Tirmizee 1161)
- The Prophet said: "Do not exchange gold for gold except it is like for like (in equal measure) and do not increase one over the other; do not exchange silver for silver except when it is like for like (in equal measure) and do not increase one over the other. Furthermore, do not exchange a commodity in hand with the one not in hand." (Muslim and Bakhari)
- Two traders asked the Prophet about their mutual barter trade. He said: "If it is at spot, it is all right. But, if it involves loaning then it is not permissible." (See Shafi 1996 p.90)
- The Prophet said to companion Jabir b. Abdullah: "In a credit transaction, it is not permissible to take two animals for one. However, if it is a hand to hand (spot) transaction, such an exchange is acceptable." (Tirmizee)
- The Prophet prohibited trading of animals for animals on credit. (Tirmizee 1158)
- Ibne Umar used to sell camels for dinars (gold coins) but used to receive payments in dirhams (silver coins). He asked the Prophet about the legitimacy of his act. The Prophet said that it was all-right to take dirhams (instead of dinars) provided that, the count of dirhams had been according to the then prevailing exchange rate and you had settled the accounts before leaving the market. (Nasaee 4506)
- Abdullah Ibne Amr states that the Prophet directed him to arrange a good number of camels for an expeditionary force. Abdullah did but could not get the desired number (with the cash at hand). Then the Prophet directed him to acquire more camels in exchange of those young she-camels they were expecting to receive later in alms (zakat proceeds). So, Abdullah acquired additional camels at the rate of one camel at hand for two camels to be paid later. (Abu Daud 2913)
- Ahadith that refer to implicit Riba.
- The Prophet said: "When one of you grants a loan and the borrower offers him a dish, he should not accept it; and if the borrower offers him a ride on an animal, he should not ride, unless the two of them have been previously accustomed to exchanging such favors mutually." (Ibne Majah 2423)
- The Prophet said: "If one of you extends loan to another fellow, the former should not accept any gift from the latter." (Mishkat)
- The Prophet said: "There is no riba in hand to hand (spot) transactions." (Muslim)
- The Prophet said: "A loan from which some benefits accrue to the creditor is one of the many different forms of riba." (Al-Bayhaqi)
- Ahadith that talk about the general concept of Riba.
- The Prophet cursed all those who take riba, who give riba, who write a riba contract and the two witnesses to a riba contract. He further said: "They are all alike (in guilt)." (Muslim 2995)
- The Prophet said: "On the night of my ascendance to the Heavens, I came upon people whose tummies were as big as houses that were filled with snakes visible from outside. He asked Angle Gabriel as to who they were. Gabriel replied that they were the people who received riba (in their lives)." (Ibne Majah)
Note. (Once Caliph Ali sold one camel in hand for 20 camels to be received later. (See Shafi 1996 p.126)
- The Prophet said: "Riba has 70 segments, the least serious being equivalent to the sin of a man who commits adultery with his own mother." (Ibne Majah 2265)
- The Prophet said: "As soon as a society deeply indulges in riba and adultery, wrath of God becomes due for it." (See Shafi 1996 p.79)
- The Prophet said: "In any society, when riba becomes common, it causes hunger and poverty in it. And in any society, when bribery becomes common, it makes it depressed (as compared to other nations)." (See Shafi 1996 p.79)
- The prophet counted the most heinous seven sins and riba was one of them. (See Shafi 996 p.71)
- The Prophet said: "Deceiving of an uninformed entrant into a city market is riba." (Kanz al-Ummal)
- The Prophet said: "The person who serves as an agent to bid up prices in open auctions is a cursed taker of riba." (Kanz al-Ummal)
ANALYSES OF EXISTING INTERPRETATIONS OF RIBA
Before analyzing different viewpoints one by one, it will be interesting to go through a general description of riba as reported in most of the writings on the subject. Traditionally, riba is divided into two parts, riba in loans (riba alnasia) and riba in excess (riba al-fadl). The word 'nasia' means to postpone, defer or wait and the word 'fadl' means to increase, add or exceed. Riba in loans is defined as a contractual increase, be it normal or excessive, on loaned capital that could be either in money form or in kind. All Quranic verses unanimously imply only this kind of interest. Other terms that are commonly used for riba in loans are riba of old times (riba al-jahiliyya), riba of credit, explicit riba and a price for time. On the contrary, riba in excess that is proven by ahadith only has following two forms: -
- Riba in Barter Exchange: It arises when the same variety or two different varieties of the same commodity are exchanged in unequal measures at spot or with a time lag.
- Implicit Riba: It arises when a person lends money without any explicit contractual increase over the principal but over time he draws some casual or regular favors from his borrower. Such favors may be of negligible money value like a ride on an animal of the borrower, a meal or a gift from the borrower.
However, in case of riba (Riba fadl or riba-hadith) in barter trade, there are still doubts what it exactly means, why it is prohibited and what are the commodities other than the six mentioned in ahadith to which it applies. More importantly, it is yet to be decided whether riba in barter trade is in the category of real riba or trivial riba. To dig down into riba in barter trade, it is therefore advisable to keep in view all possible forms of barter exchange. These are twelve in number, out of which first six refer to spot transactions and last six to loaning deals: -
- Same variety of the same commodity is exchanged at spot in equal measure.
- Same variety of the same commodity is exchanged at spot in unequal measures.
- Two different varieties of the same commodity are exchanged at spot in equal measure.
- Two different varieties of the same commodity are exchanged at spot in unequal measures.
- Two different commodities are exchanged at spot in equal measure.
- Two different commodities are exchanged at spot in unequal measures.
- Same variety of the same commodity is exchanged with a time lag in equal measure.
- Same variety of the same commodity is exchanged with a time lag in unequal measures.
- Two different varieties of the same commodity are exchanged with a time lag in equal measure.
- Two different varieties of the same commodity are exchanged with a time lag in unequal measures.
- Two different commodities are exchanged with a time lag in equal measure.
- Two different commodities are exchanged with a time lag in unequal measures.
And ALLAH knows best..........