CHAPTER TWO
DEFINITION
OF RIBA
Perhaps no modem scholar of
Islam has understood the nature and substance of riba more
accurately than an Austrian Jew named Leopold Weiss who became a Muslim in 1926
and took the Muslim name, Muhammad Asad. His autobiographical journey to Islam
and in Islam, is beautifully narrated in his book, ‘Road to Mecca’. He probed
with a creative mind and with original thought to uncover the very essence of
things lie wrote a translation and commentary of the Qur’an (tafseer) in the
English language in which he made comments concerning the Qur’anic verses on riba.
Those comments are so important that they capture the very essence of the
definition of riba in a manner unsurpassed by any other work of tafseer,
classical or modern. His success in penetrating the very essence of the subject
was undoubtedly related to his own Jewish background and his knowledge of riba
in Judaism.
We quote him at length: In
its general linguistic sense, the term riba denotes an 'addition’ to or
an ‘increase’ of a thing over and above its original size or amount; in the
terminology of the Qur’an, it signifies any unlawful addition, by way of
interest to a sum of money or goods lent by one person or body of persons to
another.
Considering the problem in
terms of the economic conditions prevailing at or before their time, most of
the early Muslim jurists identified this 'unlawful addition' with profits
obtained through any kind of interest-bearing loans irrespective of the rate of
interest and the economic motivation involved.
With all this as is
evidenced by the voluminous juridical literature on this subject. Islamic scholars
have not yet been able to reach an absolute agreement on the definition of riba:
a definition that is, which would cover all conceivable legal situations and
positively respond to all the exigencies of a variable economic environment. In
the words of Ibn Kathir (in his commentary on 2:275). 'the subject of riba
is one of the most difficult subjects for many of the scholars (ahl al-'ilm)'.
It should be borne in mind that the passage condemning and prohibiting riba
in legal terms (2:275-281) was the last revelation received by the Prophet, who
died a few days later (cf note 268 on 2:281); hence, the Companions had no
opportunity to ask him about the shar’i implications of the relevant injunction,
so much so that even, Umar ibn al-Khattab is reliably reported to have said:
'The last (of the Qur’an) that was revealed war the passage (lit.. the verse)
on riba: and behold, the Apostle of God passed away without (lit.
before) having explained its meaning to us (Ibn Hanbal. on the authority of Sa’id
ibn al-Musayyab)
Nevertheless. the severity
with which the Qur’an condemns riba and those who practice if furnishes
- especially when viewed against the background of mankind's economic
experiences during the intervening centuries - a sufficiently clear indication
of its nature and its social and moral implications. Roughly speaking, the
opprobrium of riba (in the sense in which this term is used in the Qur’an
and in many sayings of the Prophet) attaches to profits obtained through
interest-bearing loans involving an exploitation of the economically wealthy
the strong and resourceful: an exploitation characterized by the fact that the
lender, while retaining full ownership of the capital loaned and having no
legal concern with the purpose for which it is to be used or with the manner
of its user remains contractually assured of gain irrespective of any losses
which the borrower may suffer in consequence of this transaction.
With this definition in mind,
we realize that the question as to what kinds of financial transactions fall
within the category of riba is, in the last resort, a moral one,
closely connected with the socioeconomic motivation underlying the mutual
relationship of borrower and lender; and stated in purely economic terms, it is
a question as to how profits and risks may be equitably shared by both partners
to a loan transaction. It is of course impossible to answer this double
question in a rigid once-for-all manner; our answers must necessarily vary in
accordance with the changes to which man's social and technological
development - and thus his economic environment - is subject. Hence, while the Qur’anic
condemnation of the concept and practice of riba is unequivocal and
final, every successive Muslim generation is faced with the challenge of giving
new dimensions and afresh economic meaning to this term which, for want of a
better word may be rendered as 'usury'.
When we examine the manner
in which modem riba-based banking operates we find that it merely
takes time before wealth begins to be accumulated in the hands of the few to
the misery of the masses. The misery is compounded by the fact that wealth then
circulates only amongst the wealthy. And so the-poor now remain permanently
poor. It does not take much more than common sense for that state of economic
affairs to be recognized as economic oppression.
Let us now turn to the basic
Qur’anic definition of riba. It is instructive that the
definition should come in the very first Qur’anic revelation on the subject
proper:
And that which you put out
(i.e. invest) in riba seeking increase (i.e. profit) through the wealth
of others (i.e. at the expense of the wealth of others) will not increase in
the sight of Allah (thus Allah disapproves of it): - whereas all that you give
as charity, seeking Allah’s Face (i.e. Allah's Pleasure): such will be blessed
with multiple increase.
(Qur’an 30:39)
At the time when this verse
of the Qur’an was revealed riba was recognized as a loan which
realized through ‘interest’ an increase in capital. The verse declared that
increase to have been realized at the expense of the wealth of others. In other
words if ‘my' capital increased through a riba transaction (in
the form of a usurious loan) which I made with someone then ‘my gain’ would be ‘that
person's loss’. Such a transaction did not qualify as ‘business’ rather it was
a rip off. Islam in fact, ordained an ideal in business of mutual consent
(hence satisfaction) amongst all parties. (Qur’an 4:29)
This definition of riba
and interpretation of the verse (30:39) was confirmed in the second Qur’anic
revelation on the subject in which Allah the Most High, condemned the jews for
their oppression, tyranny, evil or wicked conduct (zulm). Among their acts of
oppression was their taking riba, although it had been prohibited
for them and as a consequence of their taking riba, Allah the Most
High, went on to declare that they were:
. . . consuming the wealth
of mankind through means which were false and wrong (batil) .. .
(Qur’an4:161)
With this revelation it was
now quite clear that the Qur’anic definition of riba was increase
in capital, at the expense of the wealth of others, through means which are
false and wrong. Thus riba was a form of economic exploitation!
In the third and fourth
revelation on the subject of riba, Allah the Supreme, identified
one form of riba i.e. lending on the condition that the principal
sum lent be returned with a predetermined additional amount (today called
interest). (Qur’an;- 3:130. 2:279). Riba thus results in an
unjust transfer of wealth.
It is sometimes difficult to
recognize riba because it is concealed as a system of legalized
theft (Qur’an - 4:161). Professor Richard Falk of Princeton University used the
term ‘legalized theft’ to describe the unjust transfer of wealth in ‘predatory
capitalism’.3 Our view is that ‘all capitalism’ is predatory.
How does this legalized
theft take place? The Qur’an directed particular attention to one form of riba
mentioned above, that of borrowing and lending on ‘interest’ i.e. transactions
in which the principal sum which is ‘lent’ increases through its repayment with
a contractually predetermined extra amount known today as ‘interest’,
regardless of the amount of interest involved. This was clear from the very
last revelation in the Qur’an (2;278-281) revealed to the Prophet (s)
which ordered the believers to give up whatever remained of (their demand for) riba.
It went on to explain that when a believer complied with this divine order he
was then entitled to the return of ‘only’ the principal sum lent (i.e. the
principal sum without any interest whatsoever), (Qur’an:~ 2:278).
In fact the Qur’an rejected
the view that such transactions as ‘lending on interest’ were business
transactions. They are not! Allah the Most High, made business permissible
(halal) and made riba prohibited (haram). Riba was
not business. Why was this so? From the perspective of Islam, all business
ought to take place in the free and fair market, where there is risk and where
there can be profit or loss. In riba, however the market is
bypassed, circumvented or corrupted. The purpose of this circumvention of the
market is to eliminate risk and as a consequence, eliminate all possibilities
of loss! But that is not fair! That circumvented market would no longer be a
free and fair market.
If A is insulated against
loss, while B is forced to assume the risk of losses of both himself and A, it
should be clear that there would be a one-way long-term transfer of wealth from
B to A. B will, in fact be absorbing all losses his as well as those of A. And
that is economic exploitation.
The competition in interest
rates between banks and other lending agencies does not provide evidence of a
free and fair market. Rather it is analogous to the competition in rates
between hired killers. Banks are constantly trying to relocate from those areas
where poor people live and banks don’t like to lend to the poor. Such lending
forces the banks to assume risks! And banks do not want to assume risks since
they want to eliminate all possibilities of loss.
Let us now turn to Prophet
Muhammad (s) as we search for a definition of riba. When
we do so we find that there are many different forms of riba, of
which lending and borrowing on interest is only one. Indeed the Prophet (s)
said that there were seventy different kinds of riba and clearly
most have emerged in today’s economy!
