Question about Interests/Riba/profit/loans etc

[Raja.Pakistani]

I have seen that many pensioners(mostly older peoples) in Pakistan put all their money/saving in national saving centre and get monthly interest of Rs 1200 for one lack and use this money to cover their living expenses as they don't have any other source of income and cannot utilise their money in business or other activities. Their money still stay the same while they get their monthly interest which is enough for their expenses. My question is: Are they committing any sin by taking these monthly interest to arrange their bread and butter as this is the only source of income for them? Are present day interests/loans comparable to those of usury in past which was based on coercion? I mean now banks are working under certain rules and regulation for example if someone take loans from bank and cannot afford to repay the debt then he can apply for bankruptcy while in past he was exploited by those who gave him loans. What are your thoughts on this matter? How Islamic banking system work in pakistan/middle east. Is halal insurance/interest any different than other forms of interests?

 

[Skallagrim]

You raised a good question. But I doubt if anyone is going to give a satisfactory answer. I saw similar question in Islamic forums but yet to see a good reply. It seems like the 'experts' are knowledgeable either in Islam or in Economics, not in both.

 

[King Solomon]

Interest is not forbidden in Islam. Usury (Riba) is. Usury and interest are quite different things.

 

[BelligerentPacifist]

^The 'Inter' in Interest does not give the lender to charge on the loan just because they're allowing the borrower time. That is AFAIK muttafaqah 3alaih forbidden. It falls under ribaa.

Lending and recuperating the capital and the capital solely, is seen OTOH a very good deed.

 

[Pukhtoon]

It is still sood or riba.. interest any thing u call it...

Don't know about other Islamic banks but in Meezan bank you can put yr money and they will use yr money for bizniss and will give you Munafa or they will deduct if the bizniss do losses...

 

[ZaYYaF]

In different Ahadith, it is stated that Riba will be the deadliest weapon of Dajjal- The Anti-Christ. This is that time where he is currently using that weapon of his and has been successful in making us all bend over to his desires. In another Hadith, it is stated that every person will be drowned in the evil of Riba and those who claim they are not, verily the dust of riba will be upon them. Means even if someone tries his best, there still will be some traces upon him of Riba. In another Hadith, it is stated that 4 people will be in hell because of Riba. One who Takes Interest. One who gives Interest. One who records the transaction .And the two witnesses.

So. Back to the question: Is it Riba or not?! Surely it is Riba and surely it is forbidden. Even if the whole world is doing it and even if the whole world allows and makes it permissible, Riba cannot be turned into Halal when ALLAH, clearly, has made it Haram and openly declared war against those who are involved in it. So now the question about if they have no other way? It doesn't matter. They can still strive to earn halal rizq and still find other ways to earn halal. But if you/they settle for haram and say that they cannot do anything else and because the people will not let them, then surely they are the ones on the wrong path. Because as long as you don't continue your struggle in the way of ALLAH, then you are a wrongdoer. As long as you constantly struggle to make your earning halal, then even if you're infected by Riba, ALLAH will insha ALLAH forgive you. Because ALLAH grants great rewards for the Intentions. But struggle is a must. And about the Banks? They are all haram. Please listen to Maulana Imran N. Hosein's lectures about Riba and you will be able to know about this evil of Riba. He has, masha ALLAH, great knowledge about Riba.

Imran Hosein The Prohibition of Riba interest - YouTube --Imran Hosein The Prohibition of Riba

Sheikh Imran Hosein @The Legend - Riba Conference in Kuala Lumpur.mp4 - YouTube --Sheikh Imran Hosein @The Legend - Riba Conference in Kuala Lumpur

Hope that helps!

 

[Awesome]

To say that lending and recovering original principal amount is good fails to explain that if I lend you 1000 bucks for 1 year, that prevents me from using those 1000 bucks for one year where I may have invested it and made it into 1100 bucks. On top of that you may say die in that 1 year and never repay me my amount.

To compensate this risk as well as unearned profit, I have to charge you say 100 bucks to recover my unearned profit (a loss).

I think if the interest is reasonable then its okay. Which is a concept practiced by Islamic banking where they call it profit instead of interest.

Islamic banks will not give you personal loan (to be spent on anything even burgers). You will have to tell them I am opening say a gannay ka rus ki dukaan. An agent of the bank will work with you and estimate okay in one year you will make 10% profit on the money we lend to you.

You pay us back half of that profit every year for 10 years on top of the original loan borrowed.

Another difference is, that if you didn't make 10% profit and made like 5% profit then the bank only gets half of that. If you made 20% profit the bank gets half of that too. If you make a loss, the bank will pay half of the loss too (usually Islamic banks have stricter checks to ensure they don't go into business with people who won't earn the projected amount).

Now for saving certificates. You are giving the government a loan on which they are giving you good returns. They are able to do this since the government never goes into a loss. They take your money and invest into xyz project and that project gives them huge returns. (usually its no project they will take your money and give it to corp or country is desperate need of funds and charge even more interest from them), they pay you your agreed amount.

Since the interest rate with you is fixed - this is non Islamic. They will pay you no matter what, even if they go in a loss.

That is the only difference otherwise the spirit of the deal is quite fair and a good thing to invest in.

 

[King Solomon]

^The 'Inter' in Interest does not give the lender to charge on the loan just because they're allowing the borrower time. That is AFAIK muttafaqah 3alaih forbidden. It falls under ribaa.

Lending and recuperating the capital and the capital solely, is seen OTOH a very good deed.

As I said, interest and usury are quite different things. Dictionary defines usury as "extortionate interest", or "the practice of taking exorbitant or excessive interest.".

Arabic language also makes distinction between interest (Fa'eda) and usury (Reba). Koran forbids Reba, or usury. Earning interest and paying interest is perfectly acceptable, as the Koran has not prohibited interest.

The circumstances which may fall among Reba (usury) are for example unlicensed or illegal moneylenders (mafia as a well known example) who charges usury, excessive interest compared to market rate. Or simply black market lenders.

In practical terms as long as someone are dealing with any state-licensed institution like a bank, Mortgage Company, Credit Card Company, etc., he/she is not violating any Islamic commandment as these institutions usually follow the law of the land and do not charge excessive interest (usury).

 

[livingdead]

To say that lending and recovering original principal amount is good fails to explain that if I lend you 1000 bucks for 1 year, that prevents me from using those 1000 bucks for one year where I may have invested it and made it into 1100 bucks. On top of that you may say die in that 1 year and never repay me my amount.

To compensate this risk as well as unearned profit, I have to charge you say 100 bucks to recover my unearned profit (a loss).

I think if the interest is reasonable then its okay. Which is a concept practiced by Islamic banking where they call it profit instead of interest.

Islamic banks will not give you personal loan (to be spent on anything even burgers). You will have to tell them I am opening say a gannay ka rus ki dukaan. An agent of the bank will work with you and estimate okay in one year you will make 10% profit on the money we lend to you.

You pay us back half of that profit every year for 10 years on top of the original loan borrowed.

Another difference is, that if you didn't make 10% profit and made like 5% profit then the bank only gets half of that. If you made 20% profit the bank gets half of that too. If you make a loss, the bank will pay half of the loss too (usually Islamic banks have stricter checks to ensure they don't go into business with people who won't earn the projected amount).

Now for saving certificates. You are giving the government a loan on which they are giving you good returns. They are able to do this since the government never goes into a loss. They take your money and invest into xyz project and that project gives them huge returns. (usually its no project they will take your money and give it to corp or country is desperate need of funds and charge even more interest from them), they pay you your agreed amount.

Since the interest rate with you is fixed - this is non Islamic. They will pay you no matter what, even if they go in a loss.

That is the only difference otherwise the spirit of the deal is quite fair and a good thing to invest in.

What about individual who need money for non business purpose. For example, fixing your house, medical emergency. I have no chance of getting money from anywhere then(apart from friends and families)

Also, this will mean islamic bank has to be expert in all the fields of business, and need to see profit potential because they are buying your shares. That makes the deposits risky. Should I make deposits in banks which indulges in such risky behaviour.
In UK, they are ringfencing retain banking so depositors money will remain safe.

 

[rohailmalhi]

As I said, interest and usury are quite different things. Dictionary defines usury as "extortionate interest", or "the practice of taking exorbitant or excessive interest.".

Arabic language also makes distinction between interest (Fa'eda) and usury (Reba). Koran forbids Reba, or usury. Earning interest and paying interest is perfectly acceptable, as the Koran has not prohibited interest.

The circumstances which may fall among Reba (usury) are for example unlicensed or illegal moneylenders (mafia as a well known example) who charges usury, excessive interest compared to market rate. Or simply black market lenders.

In practical terms as long as someone are dealing with any state-licensed institution like a bank, Mortgage Company, Credit Card Company, etc., he/she is not violating any Islamic commandment as these institutions usually follow the law of the land and do not charge excessive interest (usury).

Its not the case at all. They all charge intrest even in Pakistan which was suppose to be Islamic republic we are using this banking model from the west which involves intrest. and their is no justifcation what so ever of that .

There exsist a model in this world which is intrest free. The intrest rate is literary 0% on whatever money you take.So i would call that model the praticallly implemented to be follwed by Islamic states.

And This so called islamic banking its just using the name islamic but the things remain the same. U get profit or loss in your bussiness you have to pay the bank that is their profit no matter what...........

 

[XTREME]

Brother, better to ask this question on Islamic forum.

 

[Raja.Pakistani]

You raised a good question. But I doubt if anyone is going to give a satisfactory answer. I saw similar question in Islamic forums but yet to see a good reply. It seems like the 'experts' are knowledgeable either in Islam or in Economics, not in both.

You are right. I have not received any satisfactory answers from any religious scholar. All i get is quotation from Islamic scriptures which i as a Muslim respect alot but i wanted to know the reasons and logic behind forbidding this fixed interest especially in circumstances mentioned above where it seem it don't give any harm to both parties but instead boht government and old aged person are getting material benefit out of it. Old guy have money and don't have time and strength to invest it in business or dont want to take risk to lose all money he saved so far so he give that amount to government which utilise his money and give him interest which he can use to fulfil his basic needs.

Many peoples in UK cannot buy houses with cash as they are very expensive so they buy houses on mortgages . I mean sure they pay more than actual price of the property because bank provide them all money but at the end they don't lose anything.what they pay for rent..they pay for their mortgages and we all know the price of property will not be the same after 20 or 30 years. They paid some interest on mortgages but the worth of their property will be double after 15 or 20 years and let say they cannot pay mortgages after 5 or 6 years then they have option to sell their property according to current market price so in this scenario both bank and the person took mortgages get benefit out of it .

I just wanted to compare the material harms of riba/fixed interest whatever you may call it in past and present scenario..sure i believe it must be forbidden for certain reasons and if those reason are no there ..should it still be forbidden?

 

[Raja.Pakistani]

To say that lending and recovering original principal amount is good fails to explain that if I lend you 1000 bucks for 1 year, that prevents me from using those 1000 bucks for one year where I may have invested it and made it into 1100 bucks. On top of that you may say die in that 1 year and never repay me my amount.

To compensate this risk as well as unearned profit, I have to charge you say 100 bucks to recover my unearned profit (a loss).

I think if the interest is reasonable then its okay. Which is a concept practiced by Islamic banking where they call it profit instead of interest.

Islamic banks will not give you personal loan (to be spent on anything even burgers). You will have to tell them I am opening say a gannay ka rus ki dukaan. An agent of the bank will work with you and estimate okay in one year you will make 10% profit on the money we lend to you.

You pay us back half of that profit every year for 10 years on top of the original loan borrowed.

Another difference is, that if you didn't make 10% profit and made like 5% profit then the bank only gets half of that. If you made 20% profit the bank gets half of that too. If you make a loss, the bank will pay half of the loss too (usually Islamic banks have stricter checks to ensure they don't go into business with people who won't earn the projected amount).

Now for saving certificates. You are giving the government a loan on which they are giving you good returns. They are able to do this since the government never goes into a loss. They take your money and invest into xyz project and that project gives them huge returns. (usually its no project they will take your money and give it to corp or country is desperate need of funds and charge even more interest from them), they pay you your agreed amount.

Since the interest rate with you is fixed - this is non Islamic. They will pay you no matter what, even if they go in a loss.

That is the only difference otherwise the spirit of the deal is quite fair and a good thing to invest in.

But imagine a old guy who has saving of 10 lakh which he saved after working hard all his life and he try to go for islamic way of banking which mean islamic bank will invest his money in some business and will give him share in profit and loss..but in that case if business loss then they will cover that loss by taking money from his balance which dont benefit it as much as non islamic banking where there is no loss..so my question is how islamic banking is more useful option for him in this scenario ?

Is it also riba when Government take loans from IMF to run the country?

 

[Raja.Pakistani]

As I said, interest and usury are quite different things. Dictionary defines usury as "extortionate interest", or "the practice of taking exorbitant or excessive interest.".

Arabic language also makes distinction between interest (Fa'eda) and usury (Reba). Koran forbids Reba, or usury. Earning interest and paying interest is perfectly acceptable, as the Koran has not prohibited interest.

The circumstances which may fall among Reba (usury) are for example unlicensed or illegal moneylenders (mafia as a well known example) who charges usury, excessive interest compared to market rate. Or simply black market lenders.

In practical terms as long as someone are dealing with any state-licensed institution like a bank, Mortgage Company, Credit Card Company, etc., he/she is not violating any Islamic commandment as these institutions usually follow the law of the land and do not charge excessive interest (usury).

If peoples cannot pay interest or cannot pay for their loans..they have legal ways of dealing it as they can go for bankruptcy unlike in past where they were abused badly if they were not able to return the money to lender..

 

[livingdead]

^^^ There is no real answer to your question, because I asked the same earlier in anothe thread( when somebody asserted islamic banking would not have led to current financial crisis)

There is a standard fake answer many of them give though: Islam is a full system which encompasses all facets of life, including importantly, politics and governance. Without changing that, you cannot have an islamic financial system'