What are your views on the subject?
Personally our family doesn’t take any, although the Moulana’s here in South Africa say you should and use it to pay taxes and other such things…
What are your views?
Re: Interest…
I had a very nice conversation regarding interest with one of the guppies here once. When you say Interest do you mean Usury or Riba on material things? Interest is a blanket word which covers many things in todays world of commerce.
Re: Interest...
I mean when banking... Interest that is accrued from savings...
What's the difference between usury and riba?
Re: Interest...
I heard that cause inetrest earned on Savings is Haraam, thus it should only be used at the situation/places where eating haraam is OK.
So in this case, find a extremely poor muslim family, and give the money to them
Paying taxes from that money does not make much sense to me.
Re: Interest...
They said because a Muslim's "tax" is Zakaat, and everything else is just the "white-man-tax"
Re: Interest...
As a muslim, when we live in any state, we have to abide the laws (including taxes). if we dont like it, leave that country
Point is, there is no legal challenge in paying taxes through you Tax income. But if your intention is to get rid of that sinned income then I dont see how paying taxes through that does that. As I said, paying taxes to govt is obligation of muslim, even living in non-muslim country
Re: Interest...
I mean when banking... Interest that is accrued from savings...
What's the difference between usury and riba?
Usury and Riba are the same thing. Interest given by banks or any institution to counter the effects of inflation on your money in my opinion is not the same as usury or riba.
In simple terms if what your $1000 buys today will be bought with $1001 next year because of inflation then that extra $1 is not Usury or Riba though in todays world of commerce it would still be termed as interest of some kind, I think it is inflationary interest. If you are returned $1002 then that extra $1 over $1001 is Riba or Usury.
Re: Interest...
What are your views on the subject?
Personally our family doesn't take any, although the Moulana's here in South Africa say you should and use it to pay taxes and other such things...
What are your views?
Islam is against stagnancy of money and encourages circulation of money. Every transaction which happens generates economic activity. It is this economic activity which generates prosperity and thus Islam's circulation concept is benefecial for any economy.
If you consider money as a commodity like any other commodity and allow buying and selling of money, how it can be haram. The market forces determine the value of money and price of money. For all practical reason money is a commodity. The value of each currency depends on the economic fundamentals of the country and the price of this currency depends on various factors such as future prospects, demand for the currency etc.
What do the banks do. They buy money at the prevailing market price, charge their service charges and sell money at prevailing market prices. Any transaction done naturally by market forces is not haram in Islam. It is just like buying and selling any other commodity where in market forces determine the value of that specific commodity.
Now the end result of banking system is that it brings otherwise stagnant money in to productive channels. Thus this frozen money also becomes productive and transactions done through this money generate employment, prosperity, and business.
Actually the problem with our Islamic societies is what I have been advocating all along. Mullahism...
These people without understanding ABC of a particular subject start giving fatwas. Keep in mind three principles of sunnah and life will become much easier for all of us.
1) Actions for betterment of Islam.
2) Actions for moral uplifting of humankind.
3) ACTIONS SHOULD BE LOGICAL.
In the light of these principles you can reform according to the requirements of the day.
Re: Interest...
Let me tell you the greatest joke of this interest-free banking! Recently the SBP increased its disount rate up to 10.5%. And the so-called Islamic Bank of Pakistan - Meezan Bank who has got the endorsement and patronage of Justice Taqi Usmani - also increaed the montly amount of their so called "rent" for home financing.
Re: Interest...
Let me tell you the greatest joke of this interest-free banking! Recently the SBP increased its disount rate up to 10.5%. And the so-called Islamic Bank of Pakistan - Meezan Bank who has got the endorsement and patronage of Justice Taqi Usmani - also increaed the montly amount of their so called "rent" for home financing.
You have to consider the cost of Islamic banking is higher due to extra advertising compaign attached to it.
Also do not forget you have to feed muulahs who have to give specific fatwas, in the name of Islamic research. They cost a lot extra as well on the payroll.....
As far as Islamic, jewish, hindu, secular or any other banking is concerned nobody can get a deposit (a commodity), at a price lesser than the market price !!!!
Re: Interest…
Nice post bro. One question though todays money is not a commodity in the sense that it has an intrinsic or physical value. Riba or usury is existant on goods of intrinsic value. Todays money may be a commodity from a trading perspective though. So to understand Riba on it, my opinion is that it should be converted into a solid commodity first or if taken in its fluid form then its inflation or deflation must be accounted for.
Re: Interest…
I get your point!!!
However please consider it is much more complicated than this. For example currency valuation and cost of its retention for a specific period does not only depend on inflation or deflation.
For example swiss currency has economic stability, therefore is valued accordingly. American currency has stretegic stability, while Afghan currency does not have these qualities. There are a lot of speculative forces working also. Trade balance, economic growth, future potential, natural mishaps also play their roles..
In order to understand a law we must consider the intention of lawmaker and the spirit of the law. In this case we have to see why specific laws in this regard were formulated. The main reason for this was to avoid exploitation of any party involved, and not to make money stagnant by avoiding transaction altogether.
Money in todays world is for all practical reasons a commodity (physical and kind). It has all the dynamics of a commodity. The value of this commodity flactuates on daily basis. Any attempt to fix its value or fix the charge on it’s use will in my opinion lead to exploitation. It is the same if we fix the price of wheat it may lead to the exploitation of grower or consumer. The best way to avoid this exploitaion is to let the market forces take their course and determine the real values. However it is essential that idle resources are mobilized in to productive channels without exploitation of anybody. No economy in todays world can prosper without this.
Re: Interest...
I get your point!!!
However please consider it is much more complicated than this. For example currency valuation and cost of its retention for a specific period does not only depend on inflation or deflation.
For example swiss currency has economic stability, therefore is valued accordingly. American currency has stretegic stability, while Afghan currency does not have these qualities. There are a lot of speculative forces working also. Trade balance, economic growth, future potential, natural mishaps also play their roles..
In order to understand a law we must consider the intention of lawmaker and the spirit of the law. In this case we have to see why specific laws in this regard were formulated. The main reason for this was to avoid exploitation of any party involved, and not to make money stagnant by avoiding transaction altogether.
Money in todays world is for all practical reasons a commodity (physical and kind). It has all the dynamics of a commodity. The value of this commodity flactuates on daily basis. Any attempt to fix its value or fix the charge on it's use will in my opinion lead to exploitation. It is the same if we fix the price of wheat it may lead to the exploitation of grower or consumer. The best way to avoid this exploitaion is to let the market forces take their course and determine the real values. However it is essential that idle resources are mobilized in to productive channels without exploitation of anybody. No economy in todays world can prosper without this.
I understand your point as well, which is the same as when I said it is a commodity for all trading purposes. Lets do brief and simple example. Riba does not apply to trading but to loaning in my opinion. So if I traded 4 oranges for 10 apples with someone that is a trade transaction and depends on the trading parties needs. However if I loaned someone 15 apples then the person should return the loan in the form of 15 apples or an agreed upon equivalent. Fluctuation in money during trading is a different phenomenon though somehwhat related however the concept of Riba is related exploitation on loans. So if you loaned me $1000 today with an agreement to pay it back in 10 years. After 10 years should I return you $1000 or the equivalent of $1000 in the year that I return it to you? My opinion is that I will return you the equivalent of it, it maybe less or it maybe more. Anything I ask for more than its equivalent over a passage of time is Riba.
Re: Interest...
I understand your point as well, which is the same as when I said it is a commodity for all trading purposes. Lets do brief and simple example. Riba does not apply to trading but to loaning in my opinion. So if I traded 4 oranges for 10 apples with someone that is a trade transaction and depends on the trading parties needs. However if I loaned someone 15 apples then the person should return the loan in the form of 15 apples or an agreed upon equivalent. Fluctuation in money during trading is a different phenomenon though somehwhat related however the concept of Riba is related exploitation on loans. So if you loaned me $1000 today with an agreement to pay it back in 10 years. After 10 years should I return you $1000 or the equivalent of $1000 in the year that I return it to you? My opinion is that I will return you the equivalent of it, it maybe less or it maybe more. Anything I ask for more than its equivalent over a passage of time is Riba.
Dear respected bhai,
Let's assume I rent you a shop for 2 years. Are you supposed to return me only the shop in it's original worth after two years. If a shop can be rented why not money which is really a live commodity today changing it's value everyday like anyother commodity. IF YOU CAN PAY RENT ON A SHOP WHICH BECOMES A COST OF DOING YOUR BUSINESS WHY YOU CAN NOT PAY RENT ON ANYOTHER RESOURCE YOU TAKE TO DO YOUR BUSINESS OR EVEN TO CARRY OUT YOUR LIFE. Believe it or not money is actually traded today like any other commodity and it's value flactuates everyday. The only difference is as it is the instrument of EXCHANGE today, you may call it a promissory note which entitles you to buy goods and services of your choice for equivalent value therefore it's rent is also paid with same instrument. That is the only difference.
Look let's not talk about unnatural situations where idle resources will come in to productive channels only through Karzehasna, while the party who is putting these resources is only entitled to inflation.
Also when we have institutions involved who have the task of mobilizing these idle resources (banks, stock exchanges, commodity exchanges) they have a certain cost of providing these services. Without these institutions we can not create a market mechanism which will result in exploitation. Somebody has to pay for these services also. Here I agree with you that party putting in the resources should be allowed:
1) A fair rent of money determined by market forces.
2) Service charges of transaction.
3) A fair risk factor component.
Anything above that will be exploitation...
The problem is again I will request you to look at the real intention of the law maker and spirit of the law. Clergy over the years have taken very tough stance on this matter which now no matter how much you logically argue with them it is impossible for them to roll back. They tend to forget they have the duty to encourage transaction/circulation to avoid stagnancy which is against Islamic economic concepts...
In today's world when business of money exchange and buying and selling of money is driven by market forces the circumstances are totally different from what they were prevailing even 50 years ago. We have to accept realities of today and reform keeping in view the real intention of the law maker i.e. nobody gets exploited....
TRANSACTION HAS TO BE ENCOURAGED, EXPLOITATION HAS TO BE DICOURAGED....
Re: Interest…
You also have good knowledge bro on this.
I think there is difference though between loaning something and renting it out. The premise of each one is different in Islamic principles though. Loans are not given for profit whereas renting is basically a profitable transaction. Loans are meant to help someone else whereas renting is meant for your own individual or self. Loans are not a source of earning though renting is.
Though what you have stated is interesting if we look at it from the perspective that money can be rented for our use. There is one factor which you did not touch upon, when something is rented you do not have to return the value of the rental principal itself but rather just pay the rent as long as you want to use it. To me this might look like an interest only loan in which nothing goes towards the principal balance (which is what you have rented for your use). So then if I took an interest onyl loan for a period of 20 years, then after paying the rent or interest on it for 20 years without anything towards the principal amount I took I should not be liable to pay anything of the principal back after the expiration of 20 years. What you are saying is that I go an buy a principal balance for a certain inflated amount and agree to pay it back over a period of time. This is not renting.
Re: Interest...
Re: Interest…
Dear Brother,
I do not want to misguide you on any things. My personal views on the matter are very liberal and do not conform with traditional views of our religious scholars…
I think if we do not understand the dynamics of modern day economics, and how actually things work, ummah will be left behind economically. I believe it is absolutely necessary to inject all our idle resources in an Islamic society in to productive channels if we want to progress. I sincerly belive it will not be possible without declaring money a commodity like any other commodity which can be rented out. However I’ll quote Mr. Khalid Zaheer who has alternate views from mine and distinguishes rent from intrest like this:
Interest and Rent
Many modern writers tend to confuse interest with rent because of the apparent similarity in the two arrangements of carrying a fixed charge. The distinction between the two, though, is quite clear. Whereas interest, in the context of the Islamic teachings. is the fixed return demanded from another party on borrowing something which by nature is such that It is exhausted when it is put to use, rent is associated with those assets which remain, by and large, intact while they are in the process of being used. Interest has been prohibited because, once exhausted, the remaking of the borrowed article itself is not guaranteed. The only fair way to lend such articles, therefore, is to do so on a sharing agreement for business purposes and an interest-free basis on loans for personal needs)’ In the case of rental agreements, since nothing normally happens to the asset borrowed, the borrower is not likely to be in serious trouble like his counterpart hi the interest-based arrangements and should, therefore, have no difficulty in paying the fixed charge. In a cue where something happens to the asset that destroy it completely or partially, it is the sole responsibility of the owner, unless it is proved flit the user damaged the asset deliberately or was guilty of willful neglect in protecting It. Indeed, the lender of Interest-based loans also undertakes the default risk, yet that risk is only in the event that the borrower disappears or somehow proves that he is unable to pay back the loan even from his personal wealth. Under normal circumstances the lender is able to recover his fixed charge from the borrower. Moreover, what is more important is the fact that the lender does not intend to forego his interest even in the case where the borrower loses the principal amount as well. The fact that the latter sometimes gets Say without paying interest or even the principal amount is not because of a kind-heisted disposition on the part of the lender, but rather in spite Of his firm resolve. In short, the only reason why Qur’an has prohibited interest is that the chargers of interest disregard the plight of the borrowers and not necessarily because they do not undertake any risk at all It is therefore, not quite correct to state that in Islam the “general principle which is beyond dispute as being the criterion for determining the permissibility or otherwise of any method of financing a that the financier cannot avert the taking of some risk if he wishes to derive an income” (Chapra 1985, 166).
Keynes made a distinction between interest charged on capital and the rent on land by suggesting that while there could be intrinsic reasons for scarcity of land, there west none in the case of capital, at teat in the long run. (Keynes 1973, 376) Indeed, there are reasons for criticism on charging interest from a purely economic point of view as well; however, the basic reason. Why it has been condemned by Islam is moral, i.e. interest exploits the need of individuals and stems from greedy and selfish motives of the owners of capital in complete disregard of benevolence, justice, and fairy play. Rent, under normal circumstances, if it is not unfairly exorbitant, cannot be subjected to the same criticism.
In my opinion such a simplistic exlplaination of affairs will lead to a great loss for the ummah. If we bring the concept of renting only to the commodities which can be remade on returning, then the whole sector of large scale manufacturing in an Islamic economy will be stiopped, as this sector requires multiple inputs to carry out it’s business. Therefore of such enterprise the only commodity useful for renting is an instrument which enables them to buy these multiple inputs, which in my opinion is the modern day currency…
My friend we haqve to take decision whatever is best for Islamic ummah, so that they are not leconomically left behind in the world. They are also able to use thier resources to the fullest like the other people in the world are doing to remain competitive…
Therefore in my opinion renting money at prevailing market rate without without exploitation of any party is not against the teachings of Islam and principles of sunnah…
Re: Interest…
:salam:
First bro, you will not be misguiding me Inshallah!. My intent here is to have a good and thorough discussion. I am a very open minded person and differ a lot with views of traditional scholars. However I do not choose to go against traditional views until I have done enough research and recieved enough feedback to satisfy my opinion. So this discussion between you and me is not about winning but atleast for me its about learning and analysis. Since I am not in a commerce profession sometimes these financial religious rulings really confuse me or atleast do not sit well with my opinions, which is why I am doing all this poking around. Hope you are fine with it.
I understand the need to circulate money and invest it and that is hardly possible unless it is treated as a commodity for trading or business purposes. I also understand that each countrys currency is not the same and each country has a need to strenghtening its currency and hence economy. The promissory value of its currency is driven by its economy and world standing as well. Simply put like if we were part of a group of countries who export rice, we would want to make our product better and that would bring us the advantage when selling our product to rice importing countries. We would do all possible to improve the quality of the rice we export and make it as economically feasible as possible. The same goes with todays money. Analogously currency can be a similar product. What separates it from other commodities in the world is its fluidity and ability to trade with any other commodity in the world.
The reason I do not agree with traditional views on financial issues are because they are reminiscent of a financial system which no longer exists and our scholars have been trying to carry over those same concepts regarding money into the new system and that does not jive in. However money was a commodity 1400 years ago so the rulings should still apply in some way, shape or form. The difference though is that the value of currency in the olds days did not depend on a countries economic prosperity and gold coin or silver coin of the same weight would be of the same trading value irrespective of which country it goes to. Today this is not the case since we use paper currency, which really has no value of its own but its an imaginary value assigned to it. The value of currency today is not backed by its physical characteristics but by the economy it represents.
So still uptil now in my view, to be able to declare interest on something today from the Islamic perspective, it has to be backed with a physical commodity not just its promissory value. Paper currency eliminates the dictates of barter trade and it is a universal commodity. So in your view or understanding now how we do we define interest from an Islamic perspective on this universal commodity?