Is paying of interest not allowed in Islam ?

Society Religion & Philosophy
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I have read all the interest related verses in Quran. Quran prohibits loaning money on interest. Taking interest is prohibited in very strong words in Quran. But Quran does not say anything against paying the interest. Why ?
Now do not quote me Hadees which say’s that paying interest is prohibited. That is only one hadees. As compared to that there are hundreds of hadees against loaning the money on interest to others those hadees also do not say anything against those who pay interest.
That makes me think that since the person who is Paying the interest is not the perpetrator he is the victim therefore Islam has nothing against those who pay interest if the person with the money will not loan his money on interest the borrower will not have to pay interest. Nobody would be happy to pay interest but if the situation dictates he might have to borrow money on interest. In western countries the Muslim who buy home they have no choice other than borrowing money on interest.
Yes there are organization who loan money for buying home, interest free ,and call it Islamic financing but if you look closely their rate of loaning the money is higher than the mortgage loan of non Islamic financiers. Also their criteria for choosing the borrower is stricter than the traditional loan institutions.

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Re: Is paying of interest not allowed in Islam ?

Peace Mirch

I should recommend more research on the topic of rib'a. There are already three hadith that I have found that condemn the giving of rib'a and the verse in Surah Al-Baqarah 276 ... It states that Allah (SWT) will destroy rib'a ... this means the act of rib'a will be punishable. The giving or taking is not specified in that ayat.

Also you need to understand what rib'a is ... Did you know that the lowest form of rib'a is ... well read below:

Al-Tirmidhi Hadith 2826 Narrated byAbuHurayrah Allah's Messenger (peace be upon him) said, "Usury has seventy parts, the least important being that a man should marry his mother." Ibn Majah and Bayhaqi, transmitted it in Shu'ab al-Iman.

So in this context who is the one who is punishable the mother or her son or both?

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There is a common misconception among Muslims regarding interest being prohibited.

First of all, Islam prohibits usury, not interest. Secondly, one needs to differetiate between usury and interest.

  • S: (n) interest (a fixed charge for borrowing money; usually a percentage of the amount borrowed) “how much interest do you pay on your mortgage?”
  • S: (n) usury (the act of lending money at an exorbitant rate of interest)

Interest is normally charged on lending of capital (or other goods) which have become overdue and directly cause expenses to be incurred by the lender. The interest usually also takes inflation in to account. An example of this is a movie-store charging you late penalties (interest) at a fixed-rate for overdue movies: if you do not return the movie(s) on time, the store is at a loss because that inventory-asset(s) could’ve been rented to others to generate revenue. The interest covers up the loss incurred by the lender for your failure to repay on time (or failing to fulfill your contractual obligations). Usury, however, occurs when an entity intentionally sets up an environment where it can profit from lending to others. An example of this are the credit card companies (at least in N.America): they will lend you money to acquire goods & services, after you’ve agreed to their terms that if you do not pay your due amounts on time, you are willing to pay an (exorbitant; very high) interest accrued to your principal (borrowed) sum. The current interest rate on credit cards is 18.5%. The usury covers not only the loss incurred by the lender, but also produces a profit. This is the vital difference between usury and interest. Interest is an essential constituent of economics, and must be used to retain proportionate homology when taking measures such as inflation in to consideration. For example: your friend lends you $1, in 2005 (an amount which could purchase 1 can of coke at that time), with mutual consent between both parties that you will return the sum in one year. However, you fail to return the due amount on time (in 2006), and decide to do so 25 years later, in 2030. Due to inflation, a can of coke now costs $5, meaning that the value of $1 of 2005 is now (in 2030) equivalent to $5. Will you pay your friend back $1 or $5? Interest is used to maintain the value of currency, taking in to consideration economic measures such as inflation; the amount may increase, however, the real value remains the same. Usury alters the value.

The reason why usury is forbidden in Islam is because the unscrupulousness of this practice causes the lender to become powerful and the lendee, a slave. A colossal example of this is the Federal Reserve system in the United States of America: a private bank based in United Kingdom owns the US dollar, and loans it to the American government at an exorbitant interest rate (usury); as a result, the US government is always in a perpetual system of ever-increasing indebtedness, and the power of the government is influenced (and in many cases actually) aggregated in to the hands of a few private individuals.

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Re: Is paying of interest not allowed in Islam ?

salam alaykum

The posts in this thread remind me of how the Prophet Muhammad(SAW) had forewarned us in a hadith that one of the signs of the Day of Judgement is that people would try to make halal,what is haram and make haram,what is halal.

Riba is Haram,as stated explicitly in the Quran.So dealing with it is not permitted.Simple.Please do not try to find ways around this to make it "permitted".

Or else, just prepare for a declaration of war by Allah and His Messenger (SAW) .

Can u win against them?

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Re: Is paying of interest not allowed in Islam ?

Quran has declared taking of riba haram. I have no argument against it.
Quran has given Muslim a relaxation , as to if they have no choice they can pay interest to non-Muslims who lend money on interest . This relaxation is along the lines where in case of eminent death you are allowed to eat from haram to save your life.
Allah is not short of words nowhere in Quran there is war declared against those who are forced to pay riba . The war is against those Muslims who take riba . Quran is full of wisdom. It is we who lack wisdom to understand the Quranic Wisdom and try to complement Quran with the help of fake ahadees thinking that this is loophole and it should be closed with the help of ahadees.
If you read Quran you will find that nobody (even the prophet of Allah) is not allowed to make haram which Allah made halal and make something halal which Allah made haram.
So paying of raba is not haram , nobody can make it haram.

Sing a Song according 2 Ur Mood !!!!!
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Re: Is paying of interest not allowed in Islam ?

salamalaykum,

So your point is, if muslims are being threatened with death or being forced to pay riba at gunpoint to save their life,hence in this case riba should be permitted?if yes..i agree with you.

HOWEVER, if they need bigger and more cars,houses, and property and can only acquire them by payment of interest,,,this is where riba is prohibitted to be paid,as survival of a human being does not depend on the acquisition and hoarding of such material objects.

and Allah knows best.

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Re: Is paying of interest not allowed in Islam ?

You can call it this or that fee but there is no way you can wriggle out of paying some compensation to the person who is loaning you money otherwise why would anyone take the risk..

People go litral and miss the larger meaning in any old religious tenets..
I am guessing in those days all the soodkhors might have goine crazy charging people 300-400% of ungodly sum and thereby enriching themselves at the expense of society seeing this it was out of control total ban was sanctioned.

These days we have very appropriate interest system where one gets the intereste on the basis of over all growth .. and everyone is the winner..

Even today unauthorised money lenders who charge ungodly intereste rate are indluging in illegal activities and rightly so..

Last but not the least you can beguile yourself by calling intereste some kind of this or that fee but it essentially remains interest in its basic form

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Re: Is paying of interest not allowed in Islam ?

DAWN.COM | Editorial | Bank interest is not ?riba?

Bank interest is not ‘riba’
By Asghar Ali Engineer
Friday, 26 Jun, 2009 | 02:52 AM PST
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THE controversy about the permissibility or prohibition of bank interest started in the colonial times, in the 19-century onwards, when banking institutions came to the Islamic world.

The controversy first raged in Egypt. It is said that the Grand Mufti of Egypt, Muhammad Abduh, had permitted interest on postal savings though the fatwa issued by him is not available now. Today, many still ask if bank interest is prohibited in Islam. Most of the jurists maintain that it is not permissible, and Muslims should not accept interest on their bank deposits.

In the latter part of the 20-century many Muslim intellectuals came out with the concept of Islamic banking based on mudaraba and profit-sharing. A number of Islamic banks were started in Muslim and non-Muslim countries with a large Muslim population. Still the question continues to be asked if banking interest is permissible, and there is no unanimity of opinion on this question.

Yet, there are many Islamic scholars who feel that banking interest is not prohibited by Islam. Many modern commentators of the Quran also translate riba as usury and not as simple banking interest. From Pakistan Prof Fazlur Rehman, who had migrated to the US and taught at Chicago University for a number of years, wrote a very well-argued paper on the permissibility or otherwise of banking interest. He came to the conclusion that banking interest is not prohibited. Even those who do not agree with this view must read his article. It is very scholarly and based on original sources.

What is riba then? The Quran strongly condemns the institution of riba. It says, “Those who swallow usury (riba) cannot arise except as one whom the devil prostrates by (his) touch. That is because, they say, trading is only like usury. And Allah has allowed trading and forbidden usury. To whomsoever then the admonition has come from his Lord, and he desists, he shall have what has already passed. And his affair is in the hands of Allah. And whoever returns (to it) — those are the companions of Fire: there they will abide.” (2:275)

The Quran also goes on to say, “But if you do (it) not, (i.e. continue to take riba), then be apprised of war from Allah and His Messenger; and if you repent, then you shall have your capital. Wrong not and you shall not be wronged.” (2:279)

Thus we see that if one continues to take riba, the Quran not only warns against it but even permits war against the usurer. Is bank interest so severe in consequences as to be warned of a war by God? Banking interest is taken and given by hundreds of thousands of Muslims all over the world, including in Islamic countries. Should Islamic states declare war against banks? No country ever does it. Let alone war, they are not given any punishment.

Then what is riba? Its root meaning in Arabic is ‘growth’ and here obviously it is unjust growth. One should not fatten oneself at the cost of others, which leads to gross injustice in society. Our justice system overlooks the stock exchange operations, which is based on pure speculation. One either becomes a millionaire overnight or is ruined completely if share prices crash. Islam permits only just growth which one earns in a permissible way through one’s hard work, physically, intellectually, or both.

Speculation is strictly prohibited. For example, it is not permissible to buy a standing crop in the field as one does not know how much it would be maturing and how much will be destroyed. To buy cheap a standing crop amounts to speculation and exploitation of the peasant. Yet, many middlemen thrive on such speculations. Our justice system hardly ever condemns such practices. Many people become rich overnight by speculation using such practices. On the contrary, our jurists allow the share trade without any restrictions.

There were no banks during the time Islam appeared on the scene. People used to borrow money from private moneylenders and return double or more than the actual amount. Thus we see riba was the doubling of double (3:129), which ruined the poor borrowers who often borrowed either for personal needs or small trade. This is certainly condemnable and all governments should take action against such practices.

Banking interest is far from ruinous and its rate is fixed by market operations to increase or decrease liquidity in case of inflation or deflation. A bank cannot be conceived as an exploiting institution. On the other hand, it is a regulatory institution facilitating financial operations between borrowers and lenders.

Some jurists argue that interest is not permissible as there is no element of risk in it and its rate is fixed. There is no such argument in the Quran itself. If this argument is valid then even investing in a building and giving premises on rent will also not be permissible as rent is fixed and there is no risk involved. The Quran denounces riba as an exploitative practice leading to unjust growth, not because there is no element of risk in it.

In view of the above arguments it can be argued that banking interest cannot be treated as riba and should be held permissible.

The writer is an Islamic scholar who heads the Centre for Study of Society and Secularism, Mumbai.](“http://www.addthis.com/bookmark.php”)

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this pretty much gives an idea of where such "reformist" ideas emanate from :)

as Allama Iqbal once noted "Khud Badalte Nahin..Quran ko Badal Dete Hain"

May Allah guide us! ameen

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Re: Is paying of interest not allowed in Islam ?

where can i find some nice muslims/muslim financial institutions who would give me interest-free loans without any associated penalties (usury)?

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Re: Is paying of interest not allowed in Islam ?

^ No such thing. They are muslims ....... they are not crazy.

But just wondering, Islam allows renting of assets right? So I can rent a house or a bicycle or jewelery (gold) to people and expect them to return the original plus a fixed or previously agreed sum upon its return? Paper money in today's world is an asset by all means (trades on international desks, changes value every day, used as collateral, etc). So why would Islam prohibit collecting the rent for this asset, when this asset is given to someone for use?

Mai to halaal hai jo piye dhab se bada nosh
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So if there was just one hadith prohibiting or, lets say, commanding an issue...would you just discard it?

Let it be known for the umpteenth time, Hadith are a revelation from Allah. The Prophet did not pass judgements and commands based on his desires. He was being commanded, guided and inspired by Allah.

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bro check out Meezan Bank meezan bank is an institution that complies with Shariah based rules on finance. Its based in Pakistan however. But it may be providing its services for customers outside of the country.

Islamic banking is a fast developing sector of International banking at the moment.Banks around the world are now introducing interest free loans as a new alternative.So insha’Allah you may also check that out.

The Prophet Muhammad (peace be upon him)* also warned of the gravity of riba when he said: “A dirham which a man knowingly receives in usury is more serious than thirty-six acts of fornication.” (Al-Tirmidhi 2825)

Abdullah ibn Mas’ud narrated: “The Apostle of Allah (peace be upon him) cursed the one who accepted usury, the one who paid it, the witness to it, and the one who recorded it.” (Sunan of Abu-Dawood 3327)

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Exactly.The Hadith are the second source of Islamic law,collected,recorded and preserved by the mighty scholars of Islam after passing through the stringest and highest standards of authenticity.

How many of us even know the arabic language or its intricacies?or studied for years the sciences of Islam?or remember even 5 ahadith in the arabic language?what makes us think we can even qualify to even pass judgements dismissing ahadith that do not suit our desires and nafs?

Indeed,intellectual arrogance is a dangerous disease of the mind.

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Re: Is paying of interest not allowed in Islam ?

interest------------>>>> H-A-R-A-M

The Jail game
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No, Meezan bak doesn’t provide you an interest free loan i.e the bank should give me money for x years and expect the same amount in return after x years. No they don’t do that.

For example, the modarba product is basically same as business loan + fixed interest. The bank just named the fixed interest as “profit” and instead of providing the loan so that you buy the product with it, the bank buys the product directly and sell it to you for a fixed profit (fixed interest really). Again, ask how they reached this “fair” profit? The real answer is that it depends on interest rates for the loan duration.

For all these so called Islamic mortgages, what banks do is they label “interest” as “rent” which goes back to my original question as to why can’t people rent money (since it is an asset like other assets). The reason why this rent is just interest in sheep’s clothing is:

  1. The amount of rent doesn’t depend on local rental values of similar properties but instead varies as bond/interest rates change.
  2. If the value of the house goes down during the partnership, the bank doesn’t share the loss
  3. If the value of house goes up during the partnership, you don’t share the profit with the bank
  4. Like normal rentals, does the bank provides 80% of maintenance bills? no.
  5. Don’t know about Meezan but the Islamic mortgage brokers in US use the applicants FICO credit score to determine the eligibility of a person to go in partnership with and also to determine the amount of “rent” (interest rate).

Doesn’t all this sound eerily similar to a normal mortgage or a normal business loan? The only difference is that a normal loan is cheaper (because of competition) but these Islamic loans are often expensive as compared to market loans. There is a lot of money to be made in Islamic banking because Muslims are willing to pay extra money so that they can feel good that they didn’t violate their religion. These banks pay good money for scholars to issue fatwas to approve their products.

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american_pie bro,u kno what?i think you're right!!! most of the islamic banks really are just operating on the same interest based principles like the normal banks..and they do give different names to "interest"..like profit etc.

and that is the reason why i solely gave a link to meezan bank because i had been assured by a reliable source that this was probably the only bank in Pakistan complying with the Shariah laws on finance.I guess i was wrong..

so to the people who want to open up their accounts with meezan bank,please conduct your own study into it...in the end i dont want to be responsible for incurring the huge sin of guiding people towards an institution that was apparently "islamic" but no so in reality!

just something i want to add...my own opinion...I think that there is no concept of Banks in Islam whatsoever..the borrower can ask for a money from a muslim and the lender can loan him the money and demand the same after a period of time fixed between them...the borrower HAS to return the money..if he doesnt that then the burden will be on him on the Day of Judgement..the lender on the other hand can forgive the loan...and the lender DOES have security in Islamic law of contracts...just an eg..a shaheed will be forgiven all of his sins EXcept for any debts that he owed..

inshallah this is something i want to study on further..

wasallam!

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Yes it does and u are right on spot.

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Those who say that interest is forbidden (and equating usury to it), please answer the following question with your Islamic reasoning:

Hello From _______
Hello From _______
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Re: Is paying of interest not allowed in Islam ?

Thats what I thought.