The Islamic Financial System
Islamic Shar'iah principles prohibit the charging or receiving of interest (Arabic: Rib'a). Therefore, contrary to the modern economic life and financial system where the cost of borrowing (usury) occupies a focal position, Islamic banking and finance cannot be founded on interest-bearing capital nor dealing with interest-sharing funds.
Allah has condemned and prohibited the charging or receiving of interest (usury) in the strongest terms possible:
O believers! Do not consume usury; doubling and multiplying your wealth, but fear Allah, that you may truly prosper. Guard yourselves against the Fire, that is prepared for those who reject Faith. And obey Allah and the Messenger, so that you may obtain mercy.
[The Holy Qur'an, Surah 3:130-132]
Even after the such clear instructions and prohibition some do not comprehend the meanings of true prosperity yet others try to find excuses to re-define the term usury, differently, for their own benefit. But God knows the human the best. Therefore God explains in the Book and guides us further on the subject:
Those who take usury will rise up before Allah (on the Day of Resurrection) like one whom Satan (the Evil One) by his touch has driven to madness. That is because they claim: "Trade is the same as usury." But Allah has permitted trade and forbidden usury. Those who after receiving admonition from their Lord, desist, will be forgiven for the past; their Judge is Allah. But those who go back to usury are companions of the Fire; they will abide therein for ever.
[The Holy Qur'an, Surah 2:275]
Some people might think that their savings, in the highest interest rate accounts are earning highest interest therefore giving the highest growth over a set period of time. So it may appear. But to the true believers the case is quite opposite; because they know the real meaning of growth.
Allah will deprive usury of all growth, but will bless deeds of charity with increase. For Allah does not like the ungrateful sinners.
[The Holy Qur'an, Surah 2:276]
Here God has taught us to avoid usury by showing the contrast between unlawful grasping of money and deeds of charity. And then here follows a very reasonable advice for true believers:
O believers! Fear Allah and waive any remaining dues of (your demand for) usury, if you are true believers.
[The Holy Qur'an, Surah 2:278]
And then a very strong warning to the greedy capitalists and materialists who ignore the Message of God but keep collecting their wealth unjustly:
If you do not, then be warned of war against you from Allah and His Messenger. But if you repent, you may retain your capital. Do not be unjust then you will not be treated unjustly.
[The Holy Qur'an, Surah 2:279]
The following verses suggest dealing with the debtor mercifully - an act of charity and righteousness:
If your debtor is in a difficulty, grant him time till it is easy for him to repay. But if you remit the debt as charity, that is best for you, if you only knew. Be conscious of the Day when you shall be brought back to God; when every soul shall be paid back in full what it earned, none shall be treated unjustly.
[The Holy Qur'an, Surah 2:280-281]
The charging and receiving of interst causes all types of unjustices in human race. A financial system based on usury creates such social circumstances where the riches of society become richer, the poor become poorer. It creates so called upper and lower class symbols of social status. Allah created human equal, His justice system does not allow such inequalities. Therefore, the prohibition of usury is not a new idea nor a new command from God.
Prohibited in the Bible
According to (even the latest versions) the Bible, ceremonial law of Jews forbade charging or receiving of the usury:
If you lend money to any of my needy people among you, you must not become like a usurer. You must not lay interest upon him.
[The Bible, Exodus 22:25]
But unfortunately, the sons of Israel ignored God's command.
Therefore the commandment was again repeated when according to the Bible, God spoke further to Moses in Mount Sinai. We read in Leviticus, chapter 25:
And in case a countryman among you becomes poor and if he is financially weak, you must also help him, as you would help an alien resident or a setler, so he can keep alive along with you. Do not take interest and usury from him, but you must fear your God; so that your conuntryman may keep alive along with you. You must not lend him your money on interest and you should not sell your food to him at increased profit.
[The Bible, Leviticus 25:35-37]
The prohibition of taking interest was further emphesised in Deuteronomy:
You must not make your brother pay interest, whether interest on money, interest on food, interest on anything else that may earn usury.
[The Bible, Deuteronomy 23:19]
These were the transparent and strict instructions. Yet the nobles and the riches of the society were not ready to follow the God's words of wisdom. We are given further detailed narration of social injustices in the Bible through the book of Nehemiah:
Now, there came to be a great outcry of the men and their wives against their brethren, the Jews. Some of them were saying: "we are giving our sons and daughters (as security) so that we may get grain to eat and keep alive." There were others who were saying: "We are mortgaging our fields and our vineyards and our houses (as security) so that we may buy grain during the period of food shortage." And there were some who said: "We needed to borrow money to pay the king's taxes on our fields and our vineyards. Our flesh and blood is the same as the flesh and blood of our brethren; our children are as good as their children, but still our children are subject to slavery, there are some of our daughters already been enslaved; and there is no power in our hands because our fields and our vineyards now belong to others."
As I heard their outcry and these words, I became very angry. My mind took consideration within me and I began finding fault with the nobles and the rulers, and said to them:
"Usury is what you are exacting - each one from his own countryman."
So I proceeded to arrange a large assembly to deal with these matters. Further I said to them: "As far as it was in our power, we ourselves have bought back our own Jewish brethren from the Gentiles and at the same time will you yourselves sell your own brethren, only for them to be sold back to us?" At this they became speechless because they could not find a reason to answer. Also I continued: "What you are doing is not good. Should you not walk in the fear of our God to avoid the reproach of the nations, our enemies?" I, my brethren and my officials are also lending money and grain on loan among them. But let us leave off this lending on interest. Give back, I request you on this day, their fields and vineyards, their olive groves and their houses and the hundredth part of the money and the grain, the new wine and the oil that you are exacting as usury from them."
To this they replied: "We shall make restoration and we shall demand nothing more from them . We shall do precisely as you say." So I summoned the priests and made the nobels and officials take an oath to do according to this promise. Also, the folds of my robe I shook out and then said: "Similarly may the true God shake out from his house and from his possessions every man that does not keep this promise; and so may such person become shaken out and emptied." At this all the congregation said: "Amen!" And began to praise God. Then the people proceeded to do according to this promise.
[The Bible, Nehemiah 5:1-13]
Sadly, the people did not keep their promise. The people again and again kept leaving the Straight Path, and ignoring the commands given to them through Moses (peace be upon him) and other prophets.
Messenger David (peace be upon him) reminded people Allah's commands. David wanted people to come back to the Straight Path. We read a melody of David in the Psalm 15:
O Lord, who may abide in your sanctuary? Who will reside on your holy mountain?
The one who walks faultlessly and practice righteousness and speaks the truth from his heart. And who has not slandered with his tongue. The one who has done nothing bad to his neighbour, and who has taken up no reproach against his fellow-men.
In whose eyes anyone contemptible is rejected, but those fearing God, he honors. One who keeps his oath even it hurts and yet he does not alter it. Who lends his money without usury, and never accepts a bribe against the innocent one.
He that has done these things will never be shaken.
[The Bible, Psalms 15:1-5]
Yet the sons of Israel did not follow God's commands and God ended up saying, through Ezekiel, telling about a catalogue of sins in Jerusalem, as we read in the Bible:
Bribes you accept for the purpose of shedding blood. Excessive interest and usury you take, and you violently keep making unjust gains from your companions with defrauding, and Me you have forgotten, says the Sovereign Lord. Behold, I will strike my hands together at the unjust gains you have made and the blood you have shed in the midst of you.
[The Bible, Ezekiel 22:12-13]
Holy Prophet Jesus (peace be upon him) was sent to the people to confirm God's commandments and remind them the Message of God. According to Matthew's Gospel, Jesus said:
"Do not think I have come to destroy the Law or the Prophets. I have come, not to destroy, but to fulfil.
[The Bible, Matthew 5:17]
Interest and usury cause injustice and major financial inequality in the society. Allah does not want to see such circumstances between humankind, created by human greed. It is very clear from the Jewish, Christian and Muslim religious scriptures that social values built on the structure of usury certainly cause Allah's anger.
The Jews were forbade the eating of certain animals, including the flesh of camel:
Only this is what you must not eat among the chewers of the cud and the splitters of the hoof: the camel, because it is a chewer of the cud but is no splitter of the hoof. It is unclean for you ....
[The Bible, Leviticus 11:4-8]
The Qur'an Confirms the Previous Scriptures
The Holy Qur'an confirms this in surah Al-Nisa (Women):
For the iniquities done by the Jews, We made certain good foods unlawful for them which had been lawful formerly, because of their averting many people from Allah's Way; Also because of taking usury, though they were forbidden from it, and because of devouring others wealth wrongfully. We have prepared a grievous torment for those who reject Faith. But those among them who are firm in knowledge and sincerely believe in what has been revealed to you and what was revealed before you. And particularly, those who establish regular prayer and practise regular charity, and believe in Allah and in the Last Day; these shall be richly rewarded.
[The Holy Qur'an, Surah 4:160-162]
The above verses from the Holy Bible and the Holy Qur'an show very clearly that there has always been consistancy in Allah's commands about the human financial matters. The prohibition of interest and usury was not something new revealed in the Qur'an through Muhammad (peace be upon him).
Say: "I have not brought something new among the messengers, nor do I know what will be done with me or with you. I follow only what is revealed to me by inspiration. I am but an open and clear warner.
[The Holy Qur'an, Surah 46:9]
And beofre this (The Qur'an) the Book of Moses was revealed as a guide and mercy. This Book, revealed in the Arabic language, confirms it; to forewarn the unjust and as glad tidings to the righteous.
[The Holy Qur'an, Surah 46:12]
A Muslim's life is based on Allah's love, respect and fear. These factors make a Muslim - one who submits to the Will of God - follow Allah's commandments in daily life, including financial matters.