Daily Archives: Sabtu, 13 September 2008

Interest and Usury (Bunga dan Riba)

Interest and Usury are ones of the most debatable topics amongst the Muslims, especially amongst Muslims who live in a country that does not adopt sharia law like here in Indonesia. Interest is the additional money over the principal borrowing paid by the borrower to the lender. Usury is the practice itself of adopting interest in borrowing.  We live in a modern world which is almost impossible to avoid conventional banking system adopted from the West who introduced interest in the system. Interest is applied as the ‘cost of borrowing’ because the lender’s money is not  at his disposal when it is not in the lender’s bank account on hand while the value of money itself (i.e. the purchasing power of money) depreciates over a period of time. It is the inflation who eats away at the value of money.

However usury (riba) is condemned in Islam, because usury does not encourage mutual corporation and does not foster brotherly love amongst Muslims. For a clearer picture, the following is the ingredients of usurious transactions:

– Two homogeneous things of exchange and it has the same character but differing in size, quality or measurement, for instance if silver is exchanged for silver of the same weight and quality in hand-to-hand transaction, it is not interest. But if it is unequal, then the excess is surely an interest !!

– If there is a stipulation or demand for the excess over the principal sum to be paid in the future, the excess is also called interest.

In Quran, the practice of  usury (which involves interest) is condemned several times in many verses:

يَا أَيُّهَا الَّذِينَ آمَنُواْ لاَ تَأْكُلُواْ الرِّبَا أَضْعَافاً مُّضَاعَفَةً وَاتَّقُواْ اللّهَ لَعَلَّكُمْ تُفْلِحُونَ ا

O you who have believed, do not consume usury, doubled and multiplied, but fear Allah that you may be successful.  (QS 3:130)

الَّذِينَ يَأْكُلُونَ الرِّبَا لاَ يَقُومُونَ إِلاَّ كَمَا يَقُومُ الَّذِي يَتَخَبَّطُهُ الشَّيْطَانُ مِنَ الْمَسِّ ذَلِكَ بِأَنَّهُمْ قَالُواْ إِنَّمَا الْبَيْعُ مِثْلُ الرِّبَا وَأَحَلَّ اللّهُ

الْبَيْعَ وَحَرَّمَ الرِّبَا فَمَن جَاءهُ مَوْعِظَةٌ مِّن رَّبِّهِ فَانتَهَىَ فَلَهُ مَا سَلَفَ وَأَمْرُهُ إِلَى اللّهِ وَمَنْ عَادَ فَأُوْلَـئِكَ أَصْحَابُ النَّارِ هُمْ فِيهَا خَالِدُونَ

Those who consume interest cannot stand [on the Day of Resurrection] except as one stands who is being beaten by Satan into insanity. That is because they say, “Trade is [just] like interest.” But Allah has permitted trade and has forbidden interest. So whoever has received an admonition from his Lord and desists may have what is past, and his affair rests with Allah. But whoever returns to [dealing in interest or usury] – those are the companions of the Fire; they will abide eternally therein.  (QS 2:275)

Trading requires the use of labour and skill and promotes the morals; usury elevates the habits of indolence, cunning and oppression. To help the down-trodden poor men in straitened circumstances is the object of the social structure of Islam and to reduce him to further straits is the end of usury. Hence usury is termed war against Allah.

The prophet of Allah (peace be upon him) has declared all sorts of usurious transactions unlawful because the charging of interest undermines the spirit of fellow-feeling and sacrifice and inculcates selfishness and miserliness in a man.

Besides those described above, the following is the additional reasons of the illegality of interest and usury:

  1. Usury is unlawful because it amounts to exploration and reduces the debtor to poverty which is a colossal inequity. The prophet (peace be upon him) has said that a man’s wealth is as unlawful to another as his blood. For this reason the extortion of wealth without lawful consideration has been illegalised.
  2. The second reason for the illegalisation of interest is that debts cut the root of one’s honour in declared unlawful people would naturally abstain from borrowing and squandering money. In case it is made lawful, people will not hestiate in borrowing at any rate. This will bring **sigh** mutual sympathy and human goodliness to and end !!
  3. The third reason for the unlawfulness of usury is the fact that money acquired by way of interest prevents the creditor from indulging in any occupation because the creditor shall find it so easy to acquire his living from interest on cash on loans. He will not engage himself in some business which entails labour. This would give a horrifying setback and hinder the progress of an economy and civilisation because no society can march on without trade, industry and moreover technology!
  4. The fourth reason for illegalisation of interest is that, in all probability, the creditor might become richer and the debtor may become poorer. It will divide the society into two or even more classes which is disfavoured by Islam thus undeniably it goes against the spirit of Islam.

Now from the text above we all know that basically Interest is very unlawful in Islam. In sharia law we are encouraged to practice profit-sharing base in trading and abandoning the practice of usury. But of course, in a country like ours turning down western trading system is much easier said than done! I myself have never been sure whether I sin or not by following western trading system. But I believe even though I am in a wrong direction I am not the one who has to sin due to following the system. It is the ones who are authorised to adopt the system who sin most. And if I do sin, I am sure there are millions of others who are as strayed as I am! :mrgreen: