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Chapter IV

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Muhammad (Sallallaho alahi wasallam) evolved a new monetory system which controls inflation & vanishes the gloom

Another form of cruelty prevalent before the advent of the Prophet (sallallaho alaihi wasallam) was usury (Riba). The Arabic word 'Riba' means excess or give with intention to take more, 'Riba' means both interest and usury. Islam taught charity, mercy clemency, to help the needy, and to sacrify for the others. Usury or interest are just opposed to Islamic teachings. A usurer gets hard hearted, impolite and even resorts to nasty means in realizing his money with interest. The debts are not taken except in dire need, thus the debtor deserves help from the rich people. Instead of help, his brain is shattered, his peace vanishes, when he gets entangled into a credit, as the interest always increases over the principal. Money lenders of the old have been replaced by the bankers. The people take loan or over draft for personal reasons or for trade purposes. However, the bankers are more powerful than the money-lenders of the olden times. The wretched condition of the some who happen to take a loan is not worth mentioning, as every month they loose a substantial part of their income in paying interest and the principal amount hangs over them like the sword of Damocles.

Banks advance loan for trade purposes which are also called 'Economic Credit'. An industrialist who is producer quite few times approaches bank for taking loan, similarly the merchant who acts as importer or as exporter also approaches bank for taking loan. Thus on one class of goods from their production to their final sale to the common buyer, the bank is approached quite few times for loan. It is no secret that whenever the industrialist or the merchant acting in his capacity as importer or exporter takes an economic credit from the bank that adds to the cost price of the goods. Now any economist who considers various stages of producers and merchants loan taking, can easily work out that the cost of goods is enhanced up to 40% or more on account of bank's interest only. It is an irony of fate that all this interest on loan is paid by the common buyer. That is to say that the Bank’s interest is continually bringing inflation in the world and the more the inflation, the poor gets more poorer. It was, therefore, that this greatest curse was banned by God long before the advent of Islam and this fact we find mentioned in the Holy Quran:

" That they took usury, though they were forbidden.'- (4/161)

The very mentioning of this fact in Holy Quran that it was forbidden for the people of the Book (in Torah) proves that it stood forbidden for us from the very inception of Islam.

Baidhawi writes in his commentary of the Holy Quran:

" The interest was forbidden for them, as it is forbidden for us and this text indicates a clear guidance on the prohibition of interest."

PROHIBITION FURTHER DISCUSSED

God said:

"That which ye give in usury in order that it may increase on (other) people's property hath no increase with Allah; but that which ye give in charity, seeking Allah's countenance, hath increase manifold. (30/ 39)

As cited above that prohibition of usury continued from the time of Torah. In the above text God stopped the people of the Prophet (sallallaho alaihi wasallam) to tempt towards usury, thinking that the wealth increases from it but as a matter of fact it destroys. The wealth earned through usury, bribery and other illegal means causes sorrows, sufferings, miseries, unseen troubles and diseases not only on the wrong doer but also on his family and children and lastly he shall have a painful doom leading him to a final destruction.

It is also contended that God also condemned those who give something in gift to some one with expectation to get a better return gift from him.

Dhohak (a famous commentator) said, "the Prophet (sallallaho alaihi wasallam) banned giving of gift with such in tention." As God said:

"Nor expect, in giving, any increase for thyself." (74/ 6)

It is also noteworthy that among Arabs of Hedjaz, the custom is to send gift to neighbours and acquintances and they take their disgrace in not making a return gift. To gift is a virtue, but to give gift with intention to get a better return gift looses that virtue. Islam taught faithful not to expect any increase or profit from any one, other than God or fear loss but from Him, therefore, for purifying the conscience of, the faithful the aforesaid text taught not to give any gift with expectations to get an increase over it.

Further mentioning the ban on usury or interest, the Holy Quran said:

"0 ye who believe! Devour not usury, doubling and quadrupling (the sum lent). Observe your duty to Allah, that ye may be successful. And ward off (from yourselves) the Fire prepared for disbelievers. (3/130-131)

Saeed bin Jubair explaining the above text said:

"The man loaned money to another man. After the due date the lender demanded his sum lent. The borrower (not being in a position to pay) requested for the extension of the due date saying that he will double or quadruple the principal amount lent to him. This doubling or quadrupling of the money lent is also usury. God stopped them from devouring usury, so that they may prosper here and in Hereafter. He frightened the faithful from the Fire which he prepared for the disbelievers." (Dur-al Manthur).

In previous revelations God banned devouring of interest. In this text God stopped those who loaned money but in case the barrower requested the extension of the due date, they demanded the doubling or quadrupling of the principal amount so lent. Thus we find that all kinds of usury prevalent among the people were forbidden by God and His prophet (sallallaho alaihi wasallam).

HISTORICAL EVENT

It has been reported authoritatively (Dur-al Manthur and lbn Kathir) that after the conquest of Mecca (8th Hijra) Arab tribes embraced Islam. Among them were Bani Umar and Bani Umair an offshoot of Bani Thaquif and Bani -Al- Mugheera who were offshoot of Bani Ma-khzoom at Taif. Bani Thaquif were the money lenders and Bani Ma-khzoom were debtors. Both the tribes had a very great business from before the Conquest. And a very big sum of money as interest was involved in this trade. After coming into the fold of Islam Bani Thaquif demanded their interest over the money lent to Bani Makhzoom before Islam. Bani Makhzoom refused to pay back the interest money and contended that they would not pay the interest after embracing Islam as God and His Prophet had banned it for the faithful. Both the tribe complained to Etab bin Usayyed (Governor of Mecca) appointed by the Prophet (sallallaho alaihi wasallam) after the Conquest. Etab wrote the entire case to the Prophet as it involved a very big amount as interest only. When the letter reached Medina, God revealed the following text:

" 0 ye who believe! Observe your duty to Allah, and give up what remaineth (due to you) from usury, if ye are (in truth) believers.

And if ye do not, then be warned of war (against you from God and His Apostle. And if ye repent, then ye have your principal (without interest). Wrong not, and ye shall not be wronged.

And if the debtor is in straitened circumstances, then (let there be) postponement to (the time of) ease; and that ye remit the debt as alms giving would be better for you if ye did but know." (2/ 278-280)

We can draw the following conclusions from the above historical event.

1) The prohibition of interest was known to the Muslims.

2) It was well known to every body, even to the new Muslim tribes i.e in 8th year after Hijra, as the cause of action arose immediately after the conquest of Mecca.

3) That Bani Thaquif were under misconception that they could realize the interest due before Islam.

4) These were not personal debts on few persons but both the tribes were involved in this business.

5) It was a very big money due as interest, it proved that the money lendings were for trade purposes, as nobody could dare to own such a big amount of interest on his personal account unless he was sure to gain it through trade.

6) That above revelation dates back to 8th year after Hijra which showed the displeasure of God to the extent that the usurers should get ready to fight against God and His Prophet (sallallaho alaihi wasallam).

7) God advised to take pity on the debtor, and liked his remission from the debt by way of charity, as the impact of the interest falls finally on the consumer.

It is also contended that the above revelation included Abbas bin Abdul Muttalib and Khalid bin Waleed and they were both partners who lent money on interest to Bani Umar and Bani Umair of Bani Thaquif and a very big amount of money was due on Bani Thaquif as interest which was done away by the Prophet on the day of Conquest of Mecca. As he said:" All the interest of the days of ignorance are trodden under my feet, and the first usury that I cancel is of Abbas (Ibn Kathir).

There is a perfect coordination in between the above two narratives. They proved that Bani Thaquif had their borrowings from Abbas and Khalid and they further lent the money to Bani Mukhzoom. The above two transactions doubled the interest, similarly the borrowings of the industrialist and that of the merchant on one class of goods increases the bank interest to manifold which is finally taken from the pocket of consumer.

The interest money accrued over the transactions between Abbas and Bani Thaquif and Bani Makhzoom was very big. That proved a business was going on and Bani Thaquif and Bani Makhzoom would have been sure to pay it back from the resources at their disposal which could not be other than trade in that barren and sandy desert of Arabian peninsula. We therefore can term those borrowings of Bani Thaquif and Bani Makhzoom as economic credit which is thought to be the creature of modern banking. When God banned all that money trade, then how can we exclude the economic credit the creature of modern banking which adding to inflation makes the poor more poorer and is paid finally by the common buyer.

In the days of the Prophet (sallallaho alaihi wasallam) Banking was there; in whatever shape but it was there. As banking is an institution where two or more persons invest their capital funds, inorder to gain a return on their capital by way of interest, after loaning those funds to its customers. Similarly Abbas and Khalid joined in a partnership were loaning funds to the tribes of Bani Thaquif and they did the same onward. So people individually and collectively did lend the money on interest. There were borrowings individual as well as collective. As already mentioned the economic credits were there, the people did borrow for personal reasons and for trade purposes. But the consequene, yes the consequence of all money lendings on interest is one, the man who is hit is the common buyer or consumer, the interest money is finally paid by the public and not by the borrower. Situation in the days of the Prophet (sallallaho alaihi wasallam) was the same as it is now. We are not to be misled by the modern banking terms, but we ought to see the consequence, as Bani Makhzoom were the target of money lenders similarly the commoners are the target of the modern bankers. The people of Bani Makhzoom were oppressed as they were under the full impact of a double interest, it was only Islam who came to their rescue, I call them oppressed because immediately after coming into the fold of Islam, the first thing which they intended was to do away the interest money. The announcement of the Prophet (sallallaho alaihi wasallam) did vanish the gloom from many and liberated the debtors from the clutches of cruel blood suckers called usurers. It vanished the gloom from the generations who were yet to come under the Muslim rule.

Bani Thaquif thought they could claim the balance of interest money which was fallen due before Islam. When Etab referred to the Prophet (sallallaho alaihi wasallam) at Medina, God revealed the text which finally wiped out the gloomy shadows of interest bearing financial system, making trade free from all encumbrances. The result was marvelous, the history recorded such golden years of Muslim rule that there was none to accept charity. God said:

"Those who swallow usury cannot rise up save as he ariseth whom the devil hath prostrated by (his) touch. That is because they say: Trade is just like usury; Whereas God permiteth trading and forbiddeth usury. He unto him an admonition from His Lord cometh, and (he) refraineth (in obedience thereto), he shall keep (the profits of) that which is past, and his affair (henceforth) is with God. As for him. who returneth to usury- such are the .rightful owners of the Fire. They will abide therein (for ever). (2/ 275)

UMAR'S SUSPICION

Some of the hypocrites of the modern age in an attempt to legalize banks' interest attempted to take excuse of Umar's saying: He said, "For three matters, I wished that the PROPHET (sallallaho alaihi wasallam) would have made us to know (in such detail) that we had known them finally, the devolution of grand father's property, the devolution of property in Kalala and lastly usury."

Ibn Kathir referrring to the above suspicion of Umar writes in the foot note of his commentary page 464 Vol II, "Umar's suspicion was only when the following text was revealed:

" 0 ye believe! Devour not usury, doubling and quadrupling the sum lent" (3/130)

and the text, "Those who swallow usury"was not revealed. His suspicion was that the basis of the interest is one in both the texts or it is defined in the second text i.e.those who swallow usury . . . The majority of the scholars thought that the basis was defined in the second text. Umar's doubt in devolution of grand father's property and Kalala are famous."

WHY SUSPICION AND WHAT WAS IT

Looking to the above two matters, we find the position may differ with different heirs in each case. Thus in each case the devolution of the property shall have to be considered before a final award. When Umar informed of his doubts to the Prophet (sallallaho alaihi was-allam), God revealed:

"They ask thee for a pronouncement say:

to ... lest ye err. (4/ 176).

"The above verse revealed the fundamental basis of devolution but Umar could not understand". (Ibn Kathir).. i.e. he wanted to understand all the possibilities of heir-ship in Kalala. However the Muslim jurists did understand it fully. Ibn Kathir in a citation referred to Abdullah Bin Masud a companion of the Prophet particularly in this respect.

The Prophet defined interest and mentioned its various kinds. He forbade from all those transactions of trade which involved interest in money and in kind. He said, "There are seventy three doors (leading) to interest." (Ibn Maja, narrated Masud), and the lowest sin (in entering any of the doors of interest i.e.taking of interest is, as if a man commits adultery with his own mother." (Hakim in his book Mustadrak).

In another tradition the Apostle of God said, " There are seventy kinds of interest and the lowest sin in indulging in any kind of interest is to commit adultery with mother."

The suspicion of Umar was not because he did not understand usury, but as he was extremely righteous, he wanted to learn all kinds of interest. Umar knew interest or usury very well, as it is evident by his own statement, quoted by Ibn Kathir referring Saeed bin Musayyab," That the text of interest was revealed last. The Prophet, (sallallaho alaihi wasallam) passed away before explaining (all the kinds of) interest. You leave the interest and leave all those transactions in which you suspect interest." (Ahmad).

We can conclude the following from the above statement of Umar:-

a) The text of interest ' those who swallow usury .... . . 'etc' was revealed last but there were other texts mentioning the prohibition of usury which were revealed before this text. We have already seen that the prohibition of the interest continued from the time of Tora'h and the ban continued after the advent of Islam as well.

b) We have already noticed that even this text i.e. 'who swallow usury. . . . ' , was revealed just after the Conquest of Mecca when cause of action between Bani Thaquif and Bani Makhzoom arose. Where as the Prophet had already pronounced the ban on interest on the day of Conquest of Mecca and cancelled the usury of Abbas bin Abdul Muttalib. The subsequent revelation of the aforesaid text was simply the confirmation of the Prophets announcement by God which proved that the prohibition did exist before this text.

c) Had not the ban already in existence before the conquest Bani Makhzoom would have never raised a quarrel against the paying of interest.

d) The last text became more famous because:

1) God announced his anger on usurers.

2) They were challenged to fight with God and His Apostle. As a matter of fact it was a warning to Bani Thaquif and to all those who didn't intend to leave the interest. The Apostle of God would wage a war against them.

3) The usurers were allowed to get their capital funds back, on the principle, Wrong not and ye shall not be wronged.'

4) The creditors were advised to postpone the debt to the time of ease; and told,' to remit the debts as alms giving would be better.'

e) The above text in itself explained the interest as it stated capital sums and interest separately, leading no shadow of doubt for any one. It was, therefore, that Umar told people to leave interest in the first instance, and since few transactions of trade had some doubt as to the involving of interest, he told the Muslims to leave all those transactions totally.

f) Umar had a desire that would that the Prophet (who explained some of the transactions), had explained all such possible transactions which might have tinge of interest.

g) Umar's advice was in confirmity to the Prophet's saying: Leave what puts in suspicion and act upon what is above suspicion." (Sunnan)

h) Mentioning Umar's desire to know more from the Prophet (sallall-aho alaihi wasallam) in three matters the last being interest, Ibn Kathir said," Umar wanted to learn few cases which might have suspicion to the involving of interest." (Vol I page 581)

The above facts make it amply clear that Umar did know what was interest, his only doubts were on certain transactions of trade and these doubts do not cast any reflection whatsoever on the prohibition of interest, I venture to say 0 You! hypocrites of modem age that you cannot make use of any of the Umar's saying in legalizing the Bank interest.

GOD DESTROYS USURY

The Holy Quran said:

"Allah hath blighted usury and made almsgiving fruitful. Allah loveth not the impious and guilty. (2/ 276)

The Arabic word 'Yamhaq' which has been translated as blighted means eradicate, destory, and annihilate. The translation of the Arabic text will be, 'God eradicates or destroys or annihilates the usury.' If we look into the past history of the world, we find that the usurers from the major part of the world have been annihilated. The interest bearing monetary system gave birth to communism. The Bankers and the bank interest were fanning the inflation, with the result the poor getting poorer, the rich growing richer, the result was communism.

Thus God's contention became true, that He annihilates the usury.

Though Islam is against 'communism*1, as communism is against all the civil liberties enjoyed by the free world and allowed by Islam, but when the people indulged in the disobedience of the law given in Torah forbidding usury. God's curse fell in the shape of communism.

It is already discussed that the industrialist, importer, and exporter approach the Bank for loan quite a few times on one class of goods. Thus every time the interest paid on each loan increases the cost price of the goods which is finally taken by the pocket of the consumer. Over and above the world is faced by an ever growing inflation. The result is fall in the value of currency Pound sterling and Dollar could not save devaluation. Purchasing power of Pounds and Dollars is continuously falling. The interest bearing monetary system is gradually destroying the hottest currencies of the world viz a viz pound and dollars. These bare facts only upheld God's saying, "God destroys usury."

It is the firm belief of every Muslim that all the developments right from the primitive origin till Doomsday are in the knowledge of God. Viewing all those developments, Allah gave us commandments to obey and prohibitions to abstain. So when God banned usury He did have the knowledge of the present banking system and its importance for trade. That is to say that the worlds' trade could be run with a non-interest bearing monetary system. Only one has to give a serious thought to it. The Prophet (sallallaho alaihi wasallam) did evolve a non- interest bearing monetary system. I have already discussed that the caricature of the modern banking was in existence during the days of the Prophet. He forbade all the transactions bearing interest. He banned hoarding and stopped speculation. By doing so he removed all sorts of encumbrances from the trade. The merchants during his days-flourished very much.

Baitulmal, the very first public property, was instituted and scholarships were given ' to the poor and needy, and even to the children. The collection of Zakat (charity tax 2-1/2% over the savings round the year) was the duty of the state. It was used on the welfare of the poor etc. The financial system evolved by the Prophet (sallallaho alaihi wasallam) did work for many hundred years. The Muslims and even other nation under their rule did prosper under it. Until Muslim nations mostly under subjugation left that financial system, and the interest bearing monetary system was enforced by Western domination over the East. They wanted to drag out all the gold from Eastern possession. So they evolved the system of paper money backed by a very nominal gold reserve. They brought it into circulation by the force of law. They tempted people to deposit their balances in banks by offering more interest on fix deposits etc. By providing credit facilities to the customers they further dragged the Eastern wealth. All the trade net work was tied through the banks, thus by way of interest the western banks continued to accumulate the Eastern wealth into their Western Stores. The banks paid less to their customers as interest but earned excessive profits. The government banks were regulating all the interest bearing monetary system. Thus we noticed a time for which the Prophet (sallallaho alaihi wasallam) had prophesied long before:

Abu Huraira narrated, that the Apostle of God said," Time would come over the people when they ate (out of) usury." It was enquired from him," if all the people would eat out of usury." He said, "who did not eat should receive its dust" ( Musnad Ahmad).

So the money which passes our hands does have a touch of interest, the money circulation being regulated through government and private banks all over the world.

There is no denial to the importance of present banking system for the regulation of the foreign trade. But we cannot declare that interest bearing monetary system is inevitable. Since all the services of the banks rendered to their customers in money matters come within the definition of the interest, as mentioned by shariat, we would therefore have to declare all the services of the banks, in money matters to its customers free of charges, this will not hinder the functioning of the bank because all the industrialist, importers and exporters etc shall have to keep their contact with the banks for the continuity of their business. They can be further tempted to deposit their balances in the banks by offering them non-interest credit facilities to the tune of their deposits in a certain ratio. The private banks can offer secured loans by mortgaging property, goods, and factories etc. And since all the money deposited by the bank's customers is never withdrawn at any one time, the bank may utilize its balances in earning profits through institution of industry or import and export business and they can distribute the dividend annually to their investors etc. In this way we can cutdown the ever growing inflation and poverty .The prosperity obtained through the non-interest banking system shall be much more than what the banks earn through interest. There will be great blessings of God and a general liberation not only of the debtors but of the consumers who always pay the bank interest from their pocket and the poverty will get a death blow. The old times of the Muslim rule when there was none to accept charity will be revived.

The Prophet (sallallaho alaihi wasallam) again announced the ban on usury on the occasion of his Last Haj, and there again he annihilated all the interest accrued to Abbas even of the days of ignorance, so that the greatest assembly of Muslims on that occasion may note finally the ban on usury. The few traditions which show that the Prophet remained alive for few days or 2 months after the revelation of the last text of interest don't hold good as even from his last Haj he remained alive for 3 months and 3 days. i.e. 9th Zilhaj to 12th Rabi-al-awwal.

He blessed the world by giving her non-interest bearing financial system. He made' the flow of trade free of all encumbrances. He redressed the oppressed who were under the yoke of usurers.

PAKISTAN & SAUDI-ARABIA

The proposal for introducing Non-Interest Bearing Banking System' as per teachings of Islam was made by me in part II of my book "The Chief of the Prophets" which was published separately in 1978 from Korea. It is very pleasing to note that Pakistan has implemented non-interest bearing banking system. Saudi Arabia has won the greatest applause throughout the world by giving interest free loans to the different countries. Saudi Arabian loans have been considered a very constructive step to reduce world inflation. General Muhammad Zia ul Haq of Pakistan, and His Majesty King Khaled bin Abdul Aziz have set the glowing examples to be followed by other countries of the world to solve the world problem viz 'a viz inflation.

If we collect the income of the different countries of the world on loans and of all the banks operating all the world over, we shall find their annual earnings by way of interest run into billions of dollars. Thus interest free loans and a non-interest bearing financial system if introduced throughout the world shall cut down the world inflation forever. That is why the Prophet advocated a non-interest bearing financial system which extends its blessings to mankind.

  1. Contrast between Islam and communism see appendix. I