Some people ask that though Riba is prohibited but how is it justified or what are the rationals to prohibit it? They go further, as from the notion of Time Value of Money all know that $1 of today does not worth the value of $1 next year or say after so many years, and if interest rate is not paid on the deposited principle then one after so many years principle will count zero money balance. More, some may include a skeptical incident that, if there is yearly 5% on average inflation in an economy, and if someone deposits $10000 in a bank, then after 1 year true value of her deposited money will be, $[10000- (0.05*10000)]= $9500, and on other side, by utilizing it if Bank takes 8% interest rate from borrowers then why cannot she take 4% of it, even after taking it her loss accounts (5-4)%= 1% and after 1st period she gets true money of $[10000- (0.01*10000)]= $9900 which is less than her deposited amount, and will it be Haram or prohibited then?
To answer it concisely, it needs to refer the literal meaning of Riba, Arabic word Riba means unjust, excess, exploitative gains made in trade or business. It is termed as usury and interest. Not only in Islam it is prohibited but also in Judaism and Christianity it is prohibited, one verse from Old Testament can be asserted here,
"And in case your brother grows poor so he is financially weak alongside you, you must also sustain him. As an alien resident and a settler, he must keep alive with you. Do not take interest and usury from him, but you must be in fear of your God; and your brother must keep alive with you. You must not give your money on interest, and you must not give your food out on usury." (Leviticus 25:35-37)
Islam, Judaism, and Christianity, all these monotheist religions define usury, interest rate or riba not only a matter of Money Trade but also excess profit from any kind of trade which actually exploits people, sucks the potential expansion of economy as a consequence, collapse the overall economy one day, sooner or later. Lusts, whatever form it takes, ultimately cuts the head off, cause it also inspires people to earn more money by manipulating financial matters and gain by exploiting others. Riba is the starting point of it. Bribery too. But, as a whole, for all, these things fetch huge financial crises like USA, Argentina, Greece and EU did have and are having still. It may also flow to other countries. More the interest and usury, more the risk to get in the crises.
Perhaps, there are different kinds of Riba according to Islam and it's scholars, i.e., Riba-al-fadl, Riba-al-nasia, Riba al-qarud, Riba al-buyu and Riba al-jahiliyya. Riba can arise in trade too, an incident can be noted down here,
"Once Bilal brought Barni (i.e. a kind of dates) to the Prophet (ﷺ) and the Prophet (ﷺ) asked him, "From where have you brought these?" Bilal replied, "I had some inferior type of dates and exchanged two Sas of it for one Sa of Barni dates in order to give it to the Prophet; to eat." Thereupon the Prophet (ﷺ) said, "Beware! Beware! This is definitely Riba (usury)! This is definitely Riba (Usury)! Don't do so, but if you want to buy (a superior kind of dates) sell the inferior dates for money and then buy the superior kind of dates with that money." (Book 40, Hadith 12, Sahih al-Bukhari)
Now, I would like to ask that person, why was the Money created? One should know, it's main function is not to hold for long long and so long time as a lazy object but to do transaction, so why to restrict it's volatility by keeping it idle for years after years. Notion of Islamic banking is to make money more volatile to invest in real businesses, to earn profits and incur losses, though Islamic Banking has become only brand name at present days, no Islamic bank of Bangladesh is fully following the Islamic rules, but still they are better, because, they invest in a project after their own feasibility study. Depositors over there are more safe. The more return you get today, the more you are in danger that the business will collapse soon.
Even with 0 (zero) interest bank can run, even with 10% (not necessary or allowed to make 200% profits by exploiting people) profit a business can run. To run in 0% interest, bank can act as some percentage of share holder of the project that it has invested, and if it invests in 100 projects, if even 15 projects fail, then remaining 85 projects will help it to accumulate wealth, and then it can repay some inflation (or, deflation) adjusted money to the depositor, but no extra profit. Cause, without doing nothing, keeping money idle, there is no rational for depositor to attain profit but his money is safe in a secured place, and with ups and downs of the business cycle, his money will not get suddenly vanished, that is enough to provide with and providing no profit should be imposed as penalty, but opposite case of existing now and at present days, banking system is making people rent-seeker, but human being is not born to be this, but to be working and praising the one almighty.
Even, if no inflation adjusted money is given to the depositor, it is quite good, EU countries are now thinking of cutting money as a percentage of deposited amount in the name of service charge from the depositors. However, Bangladeshis owned banks are exploiting less, do you know one thing, Interest Spread of foreigners owned Standard Chattered Bank is ~10.3%. Can you even think of at what extent unjust is going on and how much wealth they are outlaying from this country?
Hope, I have answered the question and many more things. And Allah knows the best. Thanks for reading.
The article has got published in,
1. Interest (Riba) : A blessing or nuisance to humanity ?
To answer it concisely, it needs to refer the literal meaning of Riba, Arabic word Riba means unjust, excess, exploitative gains made in trade or business. It is termed as usury and interest. Not only in Islam it is prohibited but also in Judaism and Christianity it is prohibited, one verse from Old Testament can be asserted here,
"And in case your brother grows poor so he is financially weak alongside you, you must also sustain him. As an alien resident and a settler, he must keep alive with you. Do not take interest and usury from him, but you must be in fear of your God; and your brother must keep alive with you. You must not give your money on interest, and you must not give your food out on usury." (Leviticus 25:35-37)
Islam, Judaism, and Christianity, all these monotheist religions define usury, interest rate or riba not only a matter of Money Trade but also excess profit from any kind of trade which actually exploits people, sucks the potential expansion of economy as a consequence, collapse the overall economy one day, sooner or later. Lusts, whatever form it takes, ultimately cuts the head off, cause it also inspires people to earn more money by manipulating financial matters and gain by exploiting others. Riba is the starting point of it. Bribery too. But, as a whole, for all, these things fetch huge financial crises like USA, Argentina, Greece and EU did have and are having still. It may also flow to other countries. More the interest and usury, more the risk to get in the crises.
Perhaps, there are different kinds of Riba according to Islam and it's scholars, i.e., Riba-al-fadl, Riba-al-nasia, Riba al-qarud, Riba al-buyu and Riba al-jahiliyya. Riba can arise in trade too, an incident can be noted down here,
"Once Bilal brought Barni (i.e. a kind of dates) to the Prophet (ﷺ) and the Prophet (ﷺ) asked him, "From where have you brought these?" Bilal replied, "I had some inferior type of dates and exchanged two Sas of it for one Sa of Barni dates in order to give it to the Prophet; to eat." Thereupon the Prophet (ﷺ) said, "Beware! Beware! This is definitely Riba (usury)! This is definitely Riba (Usury)! Don't do so, but if you want to buy (a superior kind of dates) sell the inferior dates for money and then buy the superior kind of dates with that money." (Book 40, Hadith 12, Sahih al-Bukhari)
Now, I would like to ask that person, why was the Money created? One should know, it's main function is not to hold for long long and so long time as a lazy object but to do transaction, so why to restrict it's volatility by keeping it idle for years after years. Notion of Islamic banking is to make money more volatile to invest in real businesses, to earn profits and incur losses, though Islamic Banking has become only brand name at present days, no Islamic bank of Bangladesh is fully following the Islamic rules, but still they are better, because, they invest in a project after their own feasibility study. Depositors over there are more safe. The more return you get today, the more you are in danger that the business will collapse soon.
Even with 0 (zero) interest bank can run, even with 10% (not necessary or allowed to make 200% profits by exploiting people) profit a business can run. To run in 0% interest, bank can act as some percentage of share holder of the project that it has invested, and if it invests in 100 projects, if even 15 projects fail, then remaining 85 projects will help it to accumulate wealth, and then it can repay some inflation (or, deflation) adjusted money to the depositor, but no extra profit. Cause, without doing nothing, keeping money idle, there is no rational for depositor to attain profit but his money is safe in a secured place, and with ups and downs of the business cycle, his money will not get suddenly vanished, that is enough to provide with and providing no profit should be imposed as penalty, but opposite case of existing now and at present days, banking system is making people rent-seeker, but human being is not born to be this, but to be working and praising the one almighty.
Even, if no inflation adjusted money is given to the depositor, it is quite good, EU countries are now thinking of cutting money as a percentage of deposited amount in the name of service charge from the depositors. However, Bangladeshis owned banks are exploiting less, do you know one thing, Interest Spread of foreigners owned Standard Chattered Bank is ~10.3%. Can you even think of at what extent unjust is going on and how much wealth they are outlaying from this country?
Hope, I have answered the question and many more things. And Allah knows the best. Thanks for reading.
The article has got published in,
1. Interest (Riba) : A blessing or nuisance to humanity ?
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