The economic law of Islam is based on the Qur’ānic philosophy of creation: the Almighty has created this world as a trial and test for man; every one has, therefore, been made to depend on others for his living. No one in this world can live independently as regards his needs and requirements. People of the highest rank must turn to the most ordinary to fulfill them. In other words, every single person has an important role to play without which this world cannot continue. This role depends upon his abilities, intelligence, inclinations as well as his means and resources, which vary from person to person. It is because of this variation that a society comes into being. Labourers and workers, artisans and craftsmen, tillers and peasants are as indispensable as scholars and thinkers, savants and sages, leaders and rulers. Each person is an integral component of the society and contributes to its formation according to his abilities. The Qur’ān says:

“We have apportioned among them their livlihood in this world [in such a manner that] We have exalted some in ranks above others so that they can mutually serve each other. And better is thy Lord’s mercy than what they are amassing.” (43:32)

By creating various classes of people, the Almighty is testing mankind whether the big and the small and the high and the low create a society based on mutual co-operation and respect or create disorder in the world by disregarding the role each man has been ordained to play. The latter attitude would, of course, lead them to humiliation in this world and to a grievous doom in the Hereafter. The Qur’ān says:

“We are trying you by giving you happiness and sorrow, to test you, and unto Us ye will be returned.” (21:35)

Consequently, it is necessary for everyone to acknowledge that scholars and savants, workers and labourers, all are indispensible components of a society. No doubt, the role played by each and the services performed by each are different, but no one can be regarded as petty or ignored in establishing a healthy society. Everyone deserves to be given respect and honour and all the necessary means to prosper. A healthy and a sound society can only be created not by eliminating the various classes but by acknowledging their existence and providing equal opportunities and ready justice to all.

Basic Principle

It is for the creation of a healthy society that the Almighty has revealed this economic law. The basic principle on which it is founded is based on two premises:

First, the foundation for the well being and stability of an economy is not ‘saving’ but ‘infaaq’.

Second, for this well being and stability all forms of interest must be completely abolished.

‘Infaaq’ is a special term of the Qur’ān. It means that a person who has been blessed by wealth and riches in this world by the Almighty should spend in the way of Allah on his fellow beings just as he spends it on himself. The Qur’ān regards ‘infaaq’ the most important deed after prayers and an obligatory directive for all Muslims, as has been stressed in many places. To quote Sūrah Baqarah:

“O ye who believe! spend out of [the bounties] We have provided for you, before the Day arrives when there shall be no bargaining, nor will friendship be of any use and nor will intercession be of any avail. The disbelievers of this Day are, in fact, the wrongdoers.” (2:254)

The Qur’ān requires of its believers to generously spend whatever remains, after fulfilling their personal and business requirements of the present and future, on the needy as well as on other enterprises of national and religious interest. Consequently, the Qur’ān has made it clear that if a person while remaining indifferent to these needs of the society keeps even a penny with himself then this would be hoarding wealth---something which shall lead him to the raging fire of Hell in the Hereafter:

“Give glad tidings of a grievous doom to those who hoard up gold and silver and spend it not in the way of Allah. On the Day when their gold and silver shall be smelted in the flames of Hell and their foreheads, their flanks and their backs will be branded with them. These are the riches which you hoarded. Now taste of what you used to hoard.” (9:34-35)

The Qur’ān, on the basis of its above concept of infaaq, unequivocally states that in certain situations like an enemy invasion and jihaad, if a need arises people should wholeheartedly give whatever they have after fulfilling their essential needs. The Qur’ān says:

“They inquire from you that how much should be spent [for this purpose]. Say: whatever is left over [after your needs have been fulfilled].” (2:254)

It is self-evident that ‘interest’ is the direct opposite of ‘infaaq’. The Qur’ān, therefore has explicity forbidden it. The spirit of infaaq creates high qualities like sympathy, courage, seflessness, and generosity while the incentive of interest creates such condemnable qualities as cowardice, selfishness, callousness and cruelty. The Qur’ān has used the word ribaa for it. It implies a fixed increase which a lender demands from the borrower just because he has given him the permission to use his money for a certain period. The Qur’ān has vehemently prohibited it:

“Those who devour interest shall rise up on the Day of Judgement like the man whom Satan has driven to madness by his touch, because they claim that trading is like interest and [how strange it is that] Allah has permitted trading and forbidden interest. Consequently, he who received this warning from the Almighty and desisted [in obedience thereto] then whatever he has taken in the past belongs to him and his fate is in the hands of Allah. And those who repeat [the offence] shall be companions of the Fire and will abide therein forever.” (2:275)

“That which ye give in ribaa in order that it may increase on [other] people’s wealth has no increase with Allah; but that which you give as zakat, seeking Allah’s countenance, it is these people who will get manifold [in the Hereafter] of what they gave.” (30:39)

This severity is evident in many traditions as well. Jabir (rta) narrates:

“The Prophet has severely condemned the devourer of interest and the one who pays interest and those who write an agreement [for such lending] and the two who are the witnesses over this document and has said: All of them are equal.” (Muslim, Kitab-ul-Buyoo’)

The Prophet (sws) has emphatically directed to refrain from borrowing in barter as well1:

“If you lend gold then take back the same type and the same amount of gold and if you lend silver then take back the same type and the same amount of silver; for he who desires more, then this is what is interest.” (Muslim: Kitab-ul-Buyoo’)

“If you lend gold in exchange for silver then there is a possibility of interest in this. Similarly for wheat in exchange for another type of wheat, barley in exchange for another type of barley, date for another type of date. Indeed if the exchange is done on the spot, there is no harm.” (Muslim: Kitab-ul-Buyoo’)

It should be borne in mind that whether a loan is acquired for personal use or for business or welfare purposes, the real meaning of ribaa is not ascertained on these bases. It is an indisputable fact that in the Arabic language the word ribaa, irrespective of the aim of the lender and the condition of the borrower, just implies the fixed increase acquired on a loan. The Qur’ān itself has clarified this in the following verse:

“If the debtor is in difficulty grant him respite until it is easy for him to repay and if you write off [the debt], it is better for you, if you only knew.” (2:280)

My mentor Imaam Amin Ahsan Islahi comments on this verse in the following words:

“Today some naive people claim that the type of interest which prevailed in Arabia before the advent of Islam was usury. The poor and the destitute had to borrow money from a few rich money-lenders to fulfill their personal needs. These money-lenders exploited the poor and used to lend them money at high interest rates. It is only this type of interest which the Qur’ān has termed as ribaa and forbidden. As far as commercial interest is concerned, it neither existed at that time nor did the Qur’ān prohibit it.

This verse categorically refutes this ‘allegation’. When the Qur’ān says that if the debtor is in difficulty he should be given respite until he is able to pay back his debt, it clearly points out that in those times even the rich used to acquire loans. In fact, if the style and stress of the verse are correctly understood, it becomes clear that it was mostly the rich who used to procure loans. Indeed, there was a strong chance that the debtor would find himself in difficulty even to pay the original amount. The money-lender therefore, is directed to give him more time and if he forgoes the original amount it would be better for him. The words of this verse strongly indicate this meaning. The actual Arabic words of the verse are: wa in kaana zoo ‘usratin fa naziratun ilaa maisarah. The particle of condition in (if) is not used for general circumstances, but, in fact, is used for rare and unusual circumstances. For general circumstances the particle izaa is used. In the light of this, it is clear that the debtors in those times were generally affluent (zoo maisarah) but in some cases they were poor or had become poor after acquiring the loan in which case the Qur’ān has directed the money-lenders to give them a time rebate.” (“Tadabbur-i-Qur’ān”, Vol 1, Pgs 638-639)

He has concluded this discussion by saying:

“Obviously, the affluent would have turned to the money-lenders not to fulfill their personal needs, but, of course, their business needs. So what is the difference between these loans and the commercial loans of today?” (“Tadabbur-i-Qur’ān”, Vol I, Pg 639)

Since the prohibition of interest totally elimates any incentive of profit in lending money, therefore, as an obvious outcome, no institution which provides capital on loan can be established. In other words, this prohibition actually shields an Islamic society from the evils of a capitalist economy. Consequently, in our opinion, interest-free banking and other similar projects through which commercial loans are provided, are totally against the objective for which the Qur’ān has forbidden interest.

There is no doubt that this prohibition of interest entails that people from their own wealth and from the wealth of those who trust them can indeed pool their money on the basis of profit and loss sharing and invest it in business projects, but they should not have the facility to acquire loans which, in the present banking system, they are able to obtain thereby giving rise to the evils which originate on account of concentration of wealth in few hands.

No one can deny the fact that the whole framework of a capitalist economy rests on the pillar of banking. The Qur’ān, therefore, by prohibiting interest, does not merely prohibit a type of fiscal transaction, it actually razes down the framework of capitalism, which can only exist if the spirit of the law which prohibits interest is violated without actually violating the law2.

(Translated from Ghamidi’s “Meezaan”)

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1. It must be kept in mind that our jurists have erroneously derived the concept of ribal-fadhl from such traditions. We are afraid that the narrators have mixed up the correct words of most of these traditions which has given rise to it. However, the above two traditions, in which the words have very nearly been correctly stated, should be considered as the basic ones in this regard and as is obvious from their meaning are themselves based on the tradition: “Ribaa is only in transactions of loan.” (Muslim, Kitab-ul-Buyoo’)

2. It is by not understanding this fact that the various economic models proposed in recent times by our learned economists are no less than comical fantasies which, we are afraid, can have no place in the world of reality.