Before attempting to understand the answer to this
question, it is important to keep certain general principles in mind:
i) In reformation of society in areas where not resorting
to a gradual change carries the strong risk of causing greater evil, it is
prudent and in consonance with Islam to adopt a gradual mechanism of change.
ii) Islam has not given any specific system for the
economy. It has only given some ethical directives to purge the economy of such
evils as cause or may cause oppression and, thereby, impair the purification of
man’s soul. Therefore, any strategy, procedure or system that does not violate
these ethical principles and is in line with their spirit is acceptable to Islam
for running the economy. It is needles to say that, as a common sense rule, the
system itself should be a sensible and reasonable one.
iii) ‘Ideals are often like stars. You can’t always reach
them, but you can use them to chart out your course’. That an ideal cannot be
achieved immediately is not reason enough to distort it. For if the ideal is
changed, then one can never reach the goal. No one in his right mind would
suggest that corruption should prevail in society. But just because we cannot
eradicate it fully right now, we should not have, say, only 60 percent
eradication as our ultimate target.
One of the greatest sins that an individual or a people
can commit is to change the Divine law or to interpret it wrongly. Even when
this is done unintentionally, the consequences are far reaching. There are times
when, owing to peculiar (and usually not-so-preferable) circumstances or owing
to the failings of a people, it is not congenial to live up to an ideal. But
that does not mean that the ideal is wrong in itself. It merely means that
gradually the circumstances have to be changed and the failings overcome. If we
can’t eradicate corruption in our society, it does not mean that we should
re-define corruption. Justification of failings in this manner closes the door
to repentance and reform.
iv) Quite often, the solution to a problem lies in looking
beyond given premises. A seemingly anomalous idea can sometimes offer the
required breakthrough and, as such, such an idea as is presented by an
established scholar deserves serious deliberation, if nothing else.
Now, in consideration of these general principles, one can
say that whatever solution is adopted to solve the problems pointed in the
a) the solution may be implemented gradually so as to
avoid imbalances in society
b) any solution that does not violate Islamic principles
and guidelines may be adopted,
c) even if the solution is not practicable immediately,
un-Islamic strategies should not be justified through the subterfuges of new
definitions; rather, gradual change in circumstances that hinder the
implementation of the correct solution should be made the aim,
d) help should be sought from economists to work out the
solution. Scholars of Islam should give them clear guidelines regarding what
Islam prohibits. But, it must be remembered that:
i) any real solution would entail some material sacrifice
on the part of the affluent in society; for example if we wish to eliminate
corruption, those who roam about in their BMW’s and lament about the state of
affairs in the country may have to settle down for a Toyota or even a Suzuki;
the companions of the Prophet (sws) had to do much more to receive the blessings
of Allah; God does not shower the blessings of His religion on those who do not
have the moral courage to live up to nobler ideals.
ii) to make a breakthrough, new approaches are required;
they in turn require moral courage, political will and sagacity.
Now, coming to the question specifically, let us take each
a) Financing trade and industry
After the failure of three peoples
to find an alternative to Ribā as a basis for institutional credit creation
(which is what banking is actually about), especially in working capital loans,
it is high time we realised that, in a business enterprise, Ribā is an
indispensable basis for the extension of credit at an institutional level. The
obvious corollary is that one must look not for an alternative to Ribā as a
basis for institutional credit creation but for an alternative to institutional
credit creation itself as a basis for the economy. The notion may seen radical
at first, but, as already pointed out, quite often the solution lies in
exploring new frontiers, especially those that have been presented on the basis
of serious academic work.
In the analysis of any such solution, the point to
remember is that apart from institutional credit creation, all other forms of
financing would still be available, for example floating stocks, inducting new
partners, better financial management, etc., and that when all are in the same
boat no single person would have the competitive edge, which is more often the
reason for seeking a loan than any other requirement.
Furthermore, the constraint on the private sector to set
up large scale industry does not mean that the economy would be centrally
controlled. In fact, this change may form the basis for a congenial mixed
economy that not only promotes entrepreneurship and industry but does that
without negating the interest of the majority for the sake of a selected few.
b) Financing the budget deficit
It is unfortunate that our dependence on loans has reached
a stage where we usually think of only one way to deal with the deficit in the
It is true that borrowing can help in mobilising resources
and stimulating economic activity, but unless the borrowed funds are used with
sagacity, effectiveness and long-term vision, the result can be a negative
leverage that spells disaster in more than just one way.
Instead of resorting to risky palliatives as deficit
financing that have caused enough ill already, the government should try to move
towards real solutions as expanding the revenue base and decreasing expenditure.
This may not be as difficult as is usually imagined. For instance, Zakāh is used
on a very narrow basis to raise funds. Actually, it is a broad based tax (as
well as an ‘ibādah) which encompasses almost every kind of wealth produced in
the economy, and funds raised thereby can be used for all state functions.
This huge base for revenue has remained unexplored.
Similarly, on the expenditure side, we seem to be
unwilling to even explore the possibility of changing our expense structure. Not
only is there the need the curb wasteful expenditure, but there is also the need
to find ways to deal with counter-productive expenditure as debt-servicing we
are stuck up with and with indispensable expenditure as defence.
Until we learn to reduce the gap between our revenue and
expenditure by expanding the revenue base, increasing production, expanding the
production base and reducing and restructuring our expenditure, our reliance on
loans can only add to our reliance on loans and to our woes.
c) Foreign loans
As already explained, when acquiring loans becomes
unavoidable, paying Ribā does not amount to co-operation with evil as such. Our
country, however, should gradually come out of the situation where it has to
borrow on Ribā.