sweep_shot
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Salute to your parents for not giving in. It can be quite tempting.
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Contact the PP Team
Is interest (in the modern context) haram?
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Salute to your parents for not giving in. It can be quite tempting.
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Yes, cash sitting there will devalue. However, shunning away all investments due to 'haram' without looking deeper is also a poor mentality.
A lot of people in Pakistan have the idea that all stock market is haram and therefore shy away from it without bothering to study further.
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That's the test, I guess.
Itachi
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It would have been had you had controlled over the whole process.
A $1 has a monetary value associated with it yet you can never be sure through which means it came.
If you are investing in whatever asset, how are you sure that, the share that you will get, those money came from halal way? You will just have to trust the face value of the words.
When your whole principle ground is totally dependent on words of others, it's on very shaky ground.
FastBowlingAllrounder
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You never fully control any process in any aspect of life.
But if you did everything in your means to find out if a certain asset was halal or not, and you accurately concluded it was halal then that is fine.
A lot of principles in life are dependent on the words of others. With the way the world works, we can never get the full story. You never have full control over any process in life.
CricketCartoons
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Money's value is not the number on currency, but the amount of stuff it can buy. How is it like for like when I can buy less stuff with the amount now than 5 years ago?
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But the market accepts the current value at this point in time. Value is reevaluated at different stages of time.
Itachi
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Do depreciation gets count while returning the loan?
Because otherwise, the borrower is getting benefitted more than the lender in contrast to what should have been a 1:1 trade out of good faith.
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Some people here have said that some Islamic loans take interest into account to make up for money lost through inflation. I am not sure about the judgement on that. But the idea with interest is that, once you are done repaying the loan after the set period of time, the bank (or lender) walks away with a profit even when inflation is taken into account.
Muhammad Qasim Zaman, a first-rate historian at Princeton, has written an interesting piece on the debates in Pakistan between the ulama and modernists on whether prohibition of usury encompasses modern-day financial interest (https://journals.openedition.org/remmm/5343). It is a long piece, written in an academic register and will therefore not appeal to everyone. But in focussing on the lines of argumentation on financial interest it reveals some of the conflicting assumptions that have underpinned the thinking of the ulama and the modernists on the role of Islam in Pakistan.
Starting with the ulama, they have generally construed modern forms of interest to be riba and therefore prohibited. Zaman in particular focusses on the arguments put forth by the Deoband alim, Taqi Usmani (1943 - ). The ulama, steeped in the tradition of medieval exegesis and legal debates have seen themselves as custodians of this religious tradition. And it is this particular expertise, upon which the ulama base their religious authority, that Usmani brings to bear in undermining modernist arguments. The ulama also tend to caricature the modernists as insincere and inauthentic in their invocations of Islam; as seeking to bend Islam to their particular convenience. The final point of interest is that the ulama have often ‘teamed up ‘ with the Islamists represented by the Jamaat-e-Islaami. There has always, in fact, been tension between these two groups but when it comes to putting pressure on the state and its modernist representatives, the ulama and Islamists have often come together as in the case of modern day financial interest.
The modernists maintain that the Qur’anic prohibition only applies in the context of the “exorbitant forms of usury practiced in pre-Islamic Arabia.” Despite the characterisations made by the religious establishment, they are no less committed to Islam. Indeed, Zaman draws attention to an appeal in 2002 from a Pakistani bank, supported by the Government of Pakistan to the Shari`at Appellate Bench, challenging its decision in 1999 that Pakistani banks should put an end to interest-based transactions. The federal government counsel stated that in fact it was the ulama that were the “main hurdle in the Islamisation process in the country.” (https://www.dawn.com/news/43737/ulema-a-hurdle-in-islamization-process-says-counsel). This points to the very different understanding of Islam. Modernists tend to stress the general principles of Islam, emphasising the ethical aspects of it and seeking to recover the moral spirit of the Qur’an. They argue that the ulama in blindly imitating medieval traditions and lines of thought have subverted the true spirit of Islam. It is in this context that the belief that the ulama are in fact the obstacles for Islamisation is to be understood. It is worth quoting Zaman in full here as he makes the point powerfully:
“The claim [by the modernists] here is that an economic and social system that seeks the betterment of the people’s condition is “true” Islamization, for this is what the “spirit” of the Qur’an demands. The `ulama’s Islam, on the other hand, is tied to outmoded forms and concepts and, since these only exacerbate the people’s economic woes, they can hardly further the common good or, what amounts to the same thing, serve the true interests of Islam.”
One modernist went much further and more directly challenged the ulama on their own turf, as it were. Zaman points to the pre-eminent modernist intellectual of Pakistan, Fazlur Rahman (1919-1988) and his careful examination of the hadith reports on riba.
Starting with the ulama, they have generally construed modern forms of interest to be riba and therefore prohibited. Zaman in particular focusses on the arguments put forth by the Deoband alim, Taqi Usmani (1943 - ). The ulama, steeped in the tradition of medieval exegesis and legal debates have seen themselves as custodians of this religious tradition. And it is this particular expertise, upon which the ulama base their religious authority, that Usmani brings to bear in undermining modernist arguments. The ulama also tend to caricature the modernists as insincere and inauthentic in their invocations of Islam; as seeking to bend Islam to their particular convenience. The final point of interest is that the ulama have often ‘teamed up ‘ with the Islamists represented by the Jamaat-e-Islaami. There has always, in fact, been tension between these two groups but when it comes to putting pressure on the state and its modernist representatives, the ulama and Islamists have often come together as in the case of modern day financial interest.
The modernists maintain that the Qur’anic prohibition only applies in the context of the “exorbitant forms of usury practiced in pre-Islamic Arabia.” Despite the characterisations made by the religious establishment, they are no less committed to Islam. Indeed, Zaman draws attention to an appeal in 2002 from a Pakistani bank, supported by the Government of Pakistan to the Shari`at Appellate Bench, challenging its decision in 1999 that Pakistani banks should put an end to interest-based transactions. The federal government counsel stated that in fact it was the ulama that were the “main hurdle in the Islamisation process in the country.” (https://www.dawn.com/news/43737/ulema-a-hurdle-in-islamization-process-says-counsel). This points to the very different understanding of Islam. Modernists tend to stress the general principles of Islam, emphasising the ethical aspects of it and seeking to recover the moral spirit of the Qur’an. They argue that the ulama in blindly imitating medieval traditions and lines of thought have subverted the true spirit of Islam. It is in this context that the belief that the ulama are in fact the obstacles for Islamisation is to be understood. It is worth quoting Zaman in full here as he makes the point powerfully:
“The claim [by the modernists] here is that an economic and social system that seeks the betterment of the people’s condition is “true” Islamization, for this is what the “spirit” of the Qur’an demands. The `ulama’s Islam, on the other hand, is tied to outmoded forms and concepts and, since these only exacerbate the people’s economic woes, they can hardly further the common good or, what amounts to the same thing, serve the true interests of Islam.”
One modernist went much further and more directly challenged the ulama on their own turf, as it were. Zaman points to the pre-eminent modernist intellectual of Pakistan, Fazlur Rahman (1919-1988) and his careful examination of the hadith reports on riba.
PetroDollars
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theres no types of inflation
demand pull and supply push
its demand pull when theres to much money in circulation in the economy which increases transactions and demand of goods.
supply push is when the cost of inputs to make things increases in price, mostly its oil
the inflation rises and hyperinflation we see today and in the last 100 years is supply push, where in poor countries like zimbabwe or developing nations farms get devasted by gov polices (zimbabwes case) or thrw droughts and climate change, so prices rise and there forced to import, which means you need dollars to trade which isnt easy to get for these countries.
same is the case in pakistan, inflation is caused by oil hikes.
money printing hasnt caused inflation - us and europe mostly do this and have printed more in the last 10 years then in the last 100 but it caused deflation instead, mostly because it doesnt end up with consumers easily and they keep increasing production which means supply moves higher as consumer demand increases and then globalisation means, cheaper goods from china.
uberkoen
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Why should the bank not earn money when it is providing a service? I don't understand why it's okay for everyone to earn money while providing a service but when banks start earning it suddenly becomes haram.
Major
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Economics has been one of my favourite subjects and the interest being halal and haram is a subject that i have always tried looking for.
Really some good and interesting post in this thread.
My question is if you declare interest haram, than the interest that we use for controling inflation, growth how would you do that? If inflation is happening, how would you control it without interest.
Often people give refeences of islamic scholars, but i would prefer the reference of a scholar who has knowledge of economics or how the banking system or the economic system of a country work
Really some good and interesting post in this thread.
My question is if you declare interest haram, than the interest that we use for controling inflation, growth how would you do that? If inflation is happening, how would you control it without interest.
Often people give refeences of islamic scholars, but i would prefer the reference of a scholar who has knowledge of economics or how the banking system or the economic system of a country work
ishtiaq_ctg
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This. Scholar who'll give a verdict about interest should have a firm grasp of economy. But they seem to give away fatwas about everything starting from biology to physics to economics to world politics without properly trying to understand what's really going on in the real world. Islamic banking system that I've studied as a subject (I'm a finance & banking major), it never struck me as a very distinct system. Rather it borrows most of its elements from the conventional system. It tries to differentiate between interest & profit which becomes very murky on most cases. I feel fluctuations in the time value of money due to inflation is one thing that is the stumbling block when it comes to the alternative system.
PetroDollars
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I have looked at all of them, or mostly the big ones, they dont understand economics and finance which is clear and give conclusions on thre faulty understanding of these subjects.
However the nature of these topics (economics/finance) is that there very complex to understand, even people who have stuided dont understand it properly, but you cant make conclusions when you dont understand a topic, its hypocrisy.
Major
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i dont think economics is very complex, i believe people just dont know how to teach this subject.
I was privileged to learn this subject from an academy teacher in Pindi. Man he was one of the best teachers i ever had in life. He taught this subject in very easy terms and developed a very good understanding for me about this subject.
Now the interesting thing was that my teacher was very religious, had a beard and said that he also thought interest was haram. He was an economics teacher. I wish i could ever meet him again and ask him why he thinks its haram, as that was on of th e few guys i ever knew who had great understanding of economics and had an opinion that interest is haram.
At that time i was young, still learning didnt get the chacne to ask him that question.
PetroDollars
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It depends on what part of it you learn, im assuming he taught you the basics, otherwise getting into it makes it very complex especially when you also bring finance in to it.
In terms of going to the interest question, you should read the chapter 'capitalist creed' from yuval noah harris sapiens, in which he brilliantly explains the concept of interest being a sin in old times and why it doesnt apply today,
In terms of what scholars do, in such matters they should get together with economists and banking experts and then come to a conclusion together rather than trying to be a jack of all trades.
Major
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Thanks man will give it a read
sweep_shot
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If you are a Muslim, it is better to be safe than sorry. If you end up in jahannam because of dealing with interest, you will be the one who will suffer. Why take the risk?
I know it can be difficult to completely avoid interest but try your best. Vast majority of scholars say interest is not allowed. You are taking a big gamble if you deal with interest.
I know it can be difficult to completely avoid interest but try your best. Vast majority of scholars say interest is not allowed. You are taking a big gamble if you deal with interest.
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PetroDollars
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who is it who defines the boundries and parameters of what safe is?
On what will you end up in jahannam for? was there a murder commited?
If you want to be safe than sorry, then its alot easier to do things which dont cause harm to others and you will be safe.
The same vast majority of scholars you keep bringing up are cluless on finance/economics, you cant take such knowledge from a faulty position, will you build a house on sand and risk your family living in there. Thats what you doing by following such people who are doctors one day and economists the next.
There is no gamble with anything, if you have good intentions, dont harm anyone, comit a fraud, then you are fine, but if you think that taking a loan to create employment and generate economic activity is a sin, then your logic is clearly lacking,.
cricketjoshila
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What about interest? Charging and paying interest?
Varun
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That is also forbidden, hence Islamic Banks exist. However, everybody has to make a profit so they find a way to charge the customer extra up front instead.
Strictly forbidden. In fact, in the Holy Quran, Allah says charging and obtaining interests is akin to declaring war against Allah and his prophet. However, many Pakistanis look the other way because money always takes precedence over religion. I know some people in Pakistan who keep money in the bank simply to earn interest.
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You actually dont understand this whole concept do you?
Can you please explain which financial system you work with which gives you this option?
Banks.
cricketjoshila
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So you have to work with the existing system. I am sure many muslims work in banks.
Yes. Working in a bank is a haram way to earn a living.
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The Dollar that the Islamic bank uses is from which Islamic system? What do you think is the basis of the Dollar?
Just because they change the word Interest with Profit does not automatically make it Islamic.
I use normal banks that give you zero interest on your money.
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Ok so you give money to a bank who then invests your money and earns interest from it and you think you are fine because you arent getting interest?
Newsflash:
You are helping an entity earn income from interest with YOUR money.
Keeping money in a bank for safekeeping without taking interest is permissible.
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Think for second.
You are helping an institution that charges interest continue in its evil ways.
Take the balance sheet of institution you bank with - (check their site for their financials), look at the line which says Interest income, then understand where your money is going.
Bigboii
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The farthest anyone can go with interest laws is if you are buying a house or a thing like furniture or something
That's where debate is still happening in sharia but the other parts of interests are categorically forbidden
Bigboii
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Islamic banks have endorsement of multiple leading islamic figures...
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Local.Dada
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Interesting. What do Islamic banks do exactly as interest and profit from investing is not allowed?
Do they just have lockers where you can save money, jewels etc.?
Also surprising that while even mosques and schools with kids have been attacked, no radical outfit has ever attacked an Islamic bank to try and raid their lockers
Bigboii
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https://en.wikipedia.org/wiki/Islam...the modes of,which literally means "increase".
To be consistent with the principles of Islamic law (Shariah) -- or at least an orthodox interpretation of the law—and guided by Islamic economics, the contemporary movement of Islamic banking and finance prohibits a variety of activities, some not illegal in secular states:
Paying or charging interest. "All forms of interest are riba and hence prohibited".[19] Islamic rules on transactions (known as Fiqh al-Muamalat) have been created to prevent use of interest.
Investing in businesses involved in activities that are forbidden (haraam). These include things such as selling alcohol or pork, or producing media such as gossip columns or pornography.[86][87]
Charging extra for late payment. This applies to murâbaḥah or other fixed payment financing transactions, although some authors believe late fees may be charged if they are donated to charity,[88][89][90] or if the buyer has "deliberately refused" to make a payment.[91]
Maisir. This is usually translated as "gambling" but used to mean "speculation" in Islamic finance.[83] Involvement in contracts where the ownership of a good depends on the occurrence of a predetermined, uncertain event in the future is maisir and forbidden in Islamic finance.
Gharar. Gharar is usually translated as "uncertainty" or "ambiguity". Bans on both maisir and gharar tend to rule out derivatives, options and futures.[83] Islamic finance supporters (such as Mervyn K. Lewis and Latifa M. Algaoud) believe these involve excessive risk and may foster uncertainty and fraudulent behaviour such as are found in derivative instruments used by conventional banking.[92]
Engaging in transactions lacking "`material finality`. All transactions must be "directly linked to a real underlying economic transaction", which excludes "options and most other derivatives".[87][93]
Money on the most common type of Islamic financing — debt-based contracts — "must be made from a tangible asset that one owns and thus has the right to sell — and in financial transactions it demands that risk be shared." Money cannot be made from money.[94] Another statement of the Islamic banking theory of finance is: "Money has no intrinsic utility; it is only a medium of exchange."[95][96] Other restrictions include
Islamic banks are to collect zakat (obligatory religious alms giving) from customers' accounts — at least according to some sources.[97][98]
A board of Shariah experts is to supervise and advise each Islamic bank on the propriety of transactions to "ensure that all activities are in line with Islamic principles".[97][98] (Interpretations of Shariah may vary by country. According to Humayon Dar,[99] interpretation of the Shariah is more strict in Turkey or Arab countries than in Malaysia, whose interpretation is in turn more strict than the Islamic Republic of Iran. Mohammed Ariff also found less exacting Shariah compliance in Iran where the Islamic government had decreed "that government borrowing on the basis of a fixed rate of return from the nationalized banking system would not amount to interest" and consequently would be permissible."[60] Mahmud el-Gamal found interpretations most strict in Sudan and least in Malaysia.)[100]
Risk sharing. symmetrical risk and return on distribution to participants so that no one benefits disproportionately from the transaction.[87][93]
In general, Islamic banking and finance has been described as having the "same purpose" as conventional banking but operating in accordance with the rules of shariah law (Institute of Islamic Banking and Insurance),[101] or having the same "basic objective" as other private entities, i.e. "maximization of shareholder wealth" (Mohamed Warsame).[102] In a similar vein, Mahmoud El-Gamal states that Islamic finance "is not constructively built from classical jurisprudence". It follows conventional banking and deviates from it "only insofar as some conventional practices are deemed forbidden under Sharia."[Note 5]
A broader description of its principles is given by the Islamic Research and Training Institute of the Islamic Development bank,
"The most important feature of Islamic banking is that it promotes risk sharing between the provider of funds (investor) on the one hand and both the financial intermediary (the bank) and the user of funds (the entrepreneur) on the other hand ... In conventional banking, all this risk is borne in principle by the entrepreneur."[104][105][Note 6]
Some proponents (Nizam Yaquby) believe Islamic banking has more far reaching purposes than conventional banking, and declare that the "guiding principles" for Islamic finance include: "fairness, justice, equality, transparency, and the pursuit of social harmony",[107] although others describe these virtues as the natural benefits of following sharia. (Taqi Usmani describes the virtues as guiding principles in one section of his book on Islamic Banking, and benefits in another.)[108]
Nizam Yaquby, for example declares that the "guiding principles" for Islamic finance include: "fairness, justice, equality, transparency, and the pursuit of social harmony".[107] Some distinguish between sharia-compliant finance and a more holistic, pure and exacting sharia-based finance.[109][110][111] "Ethical finance" has been called necessary, or at least desirable,[112] for Islamic finance, as has a "gold-based currency".[113] Taqi Usmani declares that Islamic banking would mean less lending because it paid no interest on loans. This should not be thought of as presenting a problem for borrowers finding funds, because — according to Usmani — it is in part to discourage excessive finance that Islam forbids interest.[114] Zubair Hasan argues that the objectives of Islamic finance as envisaged by its pioneers were "promotion of growth with equity ... the alleviation of poverty ... [and] a long run vision to improve the condition of the Muslim communities across the world."[115] Some (such as convert Umar Ibrahim Vadillo) believe the Islamic banking movement has so far failed to follow the principles of shariah law, or at least failed to follow them sufficiently strictly.[Note 7]
On the other hand, Usmani preached that an Islamic economy free of the "imbalances" in society — such as concentration of "wealth in the hands of the few", or monopolies which paralyze or hinder market forces — would follow from obeying "divine injunctions" by banning interest (along with other Islamic efforts).[118] (Later in his book Introduction to Islamic Finance, he argues that Islamic principles should include "the fulfillment of the needs of the society" giving "preference to the products which may help the common people to raise their standard of living", but that few Islamic banks have followed this path.)[119] Another source (Saleh Abdullah Kamel),[Note 8] described the changes anticipated for the Muslim community by following Islamic approach to economics, banking, finance, etc., as a "move towards economic development, creation of the value added factor, increased exports, less imports, job creation, rehabilitation of the incapacitated and training of capable elements".[120]
Bigboii
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The Qur'an prohibits riba, which literally means "increase". Technically riba is the increase when liquid or fungible assets (cash, debt, grains, etc.) are exchanged other than at par value. The most prevalent example in today's economy is lending money at interest, for example an exchange of $100 cash now for $110 payable in a year's time, an increase of $10 (some Muslims dispute whether there is a consensus that interest is equivalent to riba).[2][3] Investment in businesses that provide goods or services considered contrary to Islamic principles (e.g. pork or alcohol) is also haraam ("restricted, or excluded").
thats why some scholars think we shouldn't be using Islamic laws of interests on "physical things" like car, furniture, home
but the other parts are clearly forbidden with no debate
GenericBrand
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We live in a society where it is virtually impossible to avoid interest.
Even if you do go down the route of avoiding accruing interest for your own benefit such as leaving your cash in a chequing account then you're just hurting yourself because your money, which your livelihood depends on, just loses value due to inflation. I would think God would be more forgiving on this since our livelihood depends on it at times. Kind of like how its permissible to eat Pork if it is unavoidable and if your livelihood depends on it.
Just my opinion though.
Even if you do go down the route of avoiding accruing interest for your own benefit such as leaving your cash in a chequing account then you're just hurting yourself because your money, which your livelihood depends on, just loses value due to inflation. I would think God would be more forgiving on this since our livelihood depends on it at times. Kind of like how its permissible to eat Pork if it is unavoidable and if your livelihood depends on it.
Just my opinion though.
Kianig89
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So Pakistan a country based on kalma has Total 31 banks with 5 complete Islamic Bank having around 19% of the Total market share
sweep_shot
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Concept of interest is quite evil. Interest in the long run causes problems like inflation, income inequality etc.
Paying or receiving interest is haram as per majority of the Islamic scholars/preachers.
Paying or receiving interest is haram as per majority of the Islamic scholars/preachers.
Varun
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Which bank accounts do you hold?
sweep_shot
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I have a checking and a savings.
Savings had interest by default but I asked them to make interest 0% and they obliged.
Kianig89
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So when are Hafiz sb , ordering to shun conventional banking and go full Islamic , but guess what it won't go well with IMF.
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