If a person lends money to someone and then demands profit
on it, then this is called “interest”. At first sight, there does not seem to be
any difference between it and rent. However, a deep deliberation reveals the
stark difference between the two: rented out items can be used while keeping
them intact. However, money cannot be used in this way; it is in fact used up
and after spending it, it is needed to be produced again. Therefore, if
something in addition is demanded over the original amount, this in fact becomes
an oppression. Since this difference between interest and rent is subtle, and
human intellect can falter in understanding this difference, the Almighty has
delineated the truth in this matter. In the sharī‘ah He has given mankind
through his prophets, He has informed them that demanding an increase over the
lent amount is unjust and hence not allowed. It is for this very reason that
interest has remained prohibited at all times and in all the sharī‘ahs revealed
by the Almighty. The Qur’ān has explicitly forbidden it. There is no difference
of opinion in this matter.
However, the religious legality of the system of banking
which prevails in our societies has recently come under discussion. It is
contended that since the bank only receives a portion from the profit of a
commercial venture it had financed on the basis of a loan hence the very reason
for which interest was regarded as prohibited does not exist in the banking
system. This view has been put forth by some scholars of Egypt and Syria.
Mawlānā Wahīd al-Dīn Khān (b. 1926 AD), a celebrated scholar and preacher from
India too, has corroborated it to some extent in his book Fikr-i Islāmī. In my
opinion, this view of the scholars can be considered intellectually convincing;
however, it is essential for this that the following remedial measures be
introduced in the banking system.
Firstly, if a commercial venture financed by a bank loan
needs to be discontinued for some reason, the demand for profit by the bank
should cease that very day. It should only demand the principal amount. As a
result, the whole transaction will be of the nature of principal-secured
financing which obviously cannot be objected to.
Secondly, in a loan given for non-commercial purposes
except for inflationary adjustments, no interest should be demanded on it.
If these measures are taken, then the banking system becomes just to a great
extent. However, there are two more questions which arise.
Firstly, what is the ruling on people who do not charge interest but procure an
interest-bearing loan to meet their personal and business needs?
Secondly, should saving schemes through which governments acquire loans for
their needs from people and also give them profit be regarded as prohibited?
The answer to the first question is that no objection can
be raised on paying interest because the prohibition of interest is based on the
Qur’ānic principle of akl al-amwāl al-bātil (devouring wealth through unfair
means), and a person who pays interest does not devour the wealth of some other
person through unfair means. In fact, he pays a part of his legitimately earned
wealth to the borrower in lieu of the loan he provides. The issue of interest is
mentioned at more than one instance in the Qur’ān. Not at one place has the
Qur’an condemned those who pay interest. In fact, it calls them oppressed and
asked the lender to give them time if they are facing financial constraints.
Those who regard paying of interest as prohibited do not base their view on any
verse of the Qur’ān or any implicit or explicit deduction from any of its
verses. They base their view on a Hadīth narrative which says that the Prophet (sws)
has cursed the person who consumes interest and makes others consume it. The
words of the narrative are: آكِلَ الرِّبَا وَمُؤْكِلَهُ … لَعَنَ النَّبِيُّ
In this narrative, the word مُوْكِل is used for a person who makes others
consume interest. Linguistically, it can refer to a person who pays interest and
also to people who are the agents of professional lenders and in this capacity
hunt for potential customers for their masters. If lending on interest becomes a
business, then such agents are its essential need; without them, the business of
lending interest bearing loans cannot be run. If the narrative relates to such
people, then there is no complexity in the narrative because this is blatant
co-operation with evil (ta‘āwun ‘ala al-ithm). As agents of interest-lenders,
those who prepare agreements and documents for them and act as witnesses, their
matter too is no different. The service provided by bank staff of these times is
of similar nature. However, people who acquire interest-based loans cannot in
any way be regarded as guilty of co-operation with evil (ta‘āwun ‘ala al-ithm).
This expression can only be used for an act done by perpetrators of a sin and
for those who reap the benefits of this sin. Those who acquire interest-based
loans do not acquire it to help the devourers of interest, they obtain loans for
their personal and business needs. If this is co-operation, then it is not more
than the co-operation done by our scholars and righteous individuals when they
deposit their own wealth and that of their institutions in banks. If interest is
prohibited at the state level and all forms of interest transactions are brought
to an end, then such people who still pay interest can be regarded as criminals
who have breached a law. If the Hadīth narrative cited above refers to them,
then the directive should relate to the scenario just stated – when interest
transactions had been prohibited in the time of the Prophet (sws).
The answer to the second is that the referred to saving
schemes are not like general interest transactions. The reason for this is that
through these schemes, a government borrows money from the lenders not on their
conditions but on its own conditions. Not only this, it ascertains the rate of
profit itself as well and also keeps increasing or decreasing it on its own
discretion. Although this is not exactly the same as returning a loan taken from
someone with some addition to the principal amount without the lender demanding
this addition, yet this arrangement is something close to it. It is known that
interest has been forbidden because it can result in oppression and
exploitation. However the intensity of this oppression and exploitation is
greatly reduced in this arrangement. For the pious, it is befitting that they do
not benefit from such schemes. However, if the general masses especially the
orphans, widows and retired personnel who are apprehensive in investing their
wealth in business ventures benefit from these schemes for their essential
expenses, it is hoped that they will not be held accountable for this by their