Interest...

[USResident]

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?

@yazdi

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:

http://www.khalidzaheer.com/essays/kzaheer/economic%20issues/what_is_riba.html

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…