BANK LOANS AND RIBA AL-FADL
Buying and selling money
today takes the form of borrowing from a bank on interest. It is a form of riba
known as riba al-fadl and is strictly prohibited! The
Prophet (s) is reported to have made mention of two precious metals
(gold and silver) and four commodities (wheat, barley, dates and salt) and prohibited
any transaction of like for like which is not also equal for equal and hand to
hand (i.e. no credit) in so far as these metals and commodities were being
traded. Any violation of that law would entail riba:
Ubada
bin al-Samit retried Allah's Messenger as saying: Gold is to be paid for by
gold, silver by silver, wheat by wheat, barley by barley, dates by dates and
salt by salt, like for like and equal for equal, payment being made on the
spot. If these classes differ (i.e. if it is not like for like) sell as you
wish if payment is made on the spot.
(Muslim)
(See below for an
explanation of the above ahadith and the ones which follow)
Abu
Said al-Khudri reported Allah's Messenger as saying: Gold is to be paid for by
gold, silver by silver, wheat by wheat, barley by barley, dates by dates and
salt by salt, like for payment being made on the spot. If anyone gives more or
asks more he has dealt in riba. The receiver and the giver are equally guilty.
(Muslim)
Abu
Said and Ahu Huraira told that Allah's Messenger appointed someone a governor
over Khaibar. When the man came to Madina he brought him dates of a very fine
quality called janib. The Prophet asked him: Are all the dates of Khaibar of
this kind? The man replied: No! Oh messenger of Allah we exchange two s’as of
bad dates for one s'a of this kind of dates (i.e. Janib), or exchange three s’as
for two. On that, the Prophet said: Do not do so, as it is a kind of riba. But
sell the dates of inferior quality for money, and then buy janib with the
money. The Prophet said the same thing about dates sold by weight.
(Bukhari)
Abu
Said al-Khudri said; Once Bilal brought barni (i.e. a kind of dates) to the
Prophet and the Prophet asked him: From where have you brought these? Bilal
replied I had some inferior type of dates and exchanged two s'as of it for one
s’a of barni dates in order to give it to the Prophet to eat. There upon the
Prophet said: Beware! Beware! This is definitely riba! This is definitely riba!
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.
(Bukhari)
Abu Saeed
said that Bilal brought the Prophet some barni dates, and when he asked him
where he had gotten them he replied: I had some inferior dates so I sold two
sa’s of them for one sa (of this). He said: Ah! The very essence of riba, the
very essence of riba. Do not do so, but when you wish to buy, sell the dates in
a separate transaction, then buy with what you get.
(Bukhari, Muslim)
Yahya
bin Sa’id reported that Allah's Messenger ordered the two Sa’ads to sell off
all gold and silver plates obtained in booty (enemy property seized in
warfare). They sold three plates for four (or four for three). The Prophet
said: You have taken riba. Annul the sales.
(Muwatta, Imam Malik)
Malik
reported that it reached him from Qasim bin Muhammad that Umar bin al-Khattab
said: A dinar far a dinar and a dirham for a dirham and a sa for a sa. Do not
sell cash for credit.
(Muwatta, Imam Malik)
Malik
bin Aus bin Hadthan al-Nasri reported: I had need for changing one hundred
dinars into dirhams. He said Talha bin Ubaidullah sent for me. We agreed on it
(barter of gold and silver for gold and silver). He took gold from me and
turned it over in his hands and said: Wait until my cashier arrives from Ghabah.
Umar bin al-Khattab heard of this and declared: By Lord, do not leave him until
you take money from him. He then said, the Prophet had said that the exchange
of gold for silver is riba except when it is a cash transaction, the selling of
wheat for wheat is riba except when it is a cash transaction, and the selling
of dates for dales is riba except if it is a cash transaction, the selling of
barley for barley is riba except when it is a cash transaction, and the selling
of salt for salt is riba except when it is a cash transaction.
(Muwatta, Imam Malik)
Ibn
Shihab reported that Malik bin Aus said: I was in need of change for one
hundred dinars. Talha bin Ubaidullah called me and we discussed the matter, and
he agreed to change my dinars. He took the gold pieces in his hands and
fidgeted with them, and then said: Wait until my store-keeper comes from the
forest. Umar ibn al-Khattab was listening to that and said: By Allah you should
not separate from Talha until you get the money from him, for the Prophet said:
The selling of gold for gold is riba, except if the exchange is from
hand-to-hand and equal in amount, and similarly, the selling of wheat for wheat
is riba unless it is from hand to hand and equal in amount, and dates for dates
is riba unless it is from hand to hand and equal in amount, and barley for
barley is riba unless it is from hand to hand and equal in amount.
(Bukhari)
Abu
Salih al-Zaiyat said: I heard Abu Said al-Khudri saying: The selling of a dinar
far a dinar and a dirham for a dirham (is permissible). I said to him: Ibn
Abbas does not say the same. Abu Said replied: I asked Ibn Abbas whether he had
heard it from the prophet or had seen it in the holy book. Ibn Abbas replied: I
do not claim that, and you know Allah's Messenger better than I do. But Usama
informed me that the Prophet had said: There is no riba (in money exchange)
except when it is not done hand to hand (i.e. when there is delay in payment).
(Bukhari)
The above ahadith have
cleared some problems in understanding even for those who are teaching Islam in
New York. In fact the implications are quite simple. If one person gives a loan
of one gold dinar to another, then the contractual obligation for repayment of
the loan should not exceed one gold dinar. Secondly, just as we need to buy
French francs when we visit France, so too, in a market which uses real money,
people need to buy money. Just as we may seek to buy the French francs with US
dollars, so too, in a market which uses real money, we may seek to buy gold
dinars with silver dirhams. Or we may wish to purchase a dozen larger size gold
coins with a weight of one dozen ounces, with smaller size gold coins (and this
is like changing five US$20. currency notes for a US$100. currency note. - with
the exception that paper money is itself riba). Such money
transactions, i.e. in which money is exchanged for money, are required to meet
the condition of equal for equal and hand to hand in order to avoid riba.
It is of crucial importance
for us to carefully note that while like for like required an equal for equal
transaction which was also a transaction, when gold, silver, dates etc., were
being bought and sold, this was not so for camels:
Hassan
bin Muhammad bin Ali bin Abi Talib reported that Ali bin Abi Talib sold his camel,
named 'Usaifir, in return for Twenty camels (on credit).
(Muwatta, Imam Malik)
Nafi'
reported that Abdullah bin Umar boughs a she-camel in exchange for four camels
and arranged that those four camels should be delivered to the owner at Rabdhah.
(Muwatta, Imam Malik)
The reason for this was that
camels were not used as money, while dates were sometimes used as money. And so
four young-camels could be exchanged for one adult camel, but two baskets of
inferior quality dates could not be exchanged for one basket of superior
quality dates.
What would be the
implication of the above ahadith if one were to take a bank loan in US dollars
and were required to repay the loan in US dollars? This would be a like for
like transaction involving something which, like gold, silver, wheat etc., is
being used as a medium of exchange. Since it would be a like for like
transaction, the Prophet (s) ordered that it be equal for equal. The
hadith would thus prohibit bank interest charged on paper, plastic and
electronic money.
It is my understanding that
gold, silver, wheat, barley, dates and salt were mentioned by the Prophet (s)
in connection with riba transactions because each of the these
precious metals and commodities had served, or could serve, as a medium of
exchange.
As a consequence it would
follow that anything else, not mentioned in the hadith, which was adopted by
mankind as a medium of exchange (i.e. or moneys would have the same
restrictions applied to it.
This opinion appears to be
supported by the following quote which appears in the muwatta of Imam Malik:
Abu
Zinad reported that he heard Sa’id bin al-Musayyib saying: There is no riba but
in gold and silver or in articles of consumption sold by weight or measure.
Thus a bank loan of US$1,000
in paper currency must require repayment of nothing more than the US$1.000
which was borrowed. Any repayment greater than US$1,000 which is stipulated as
part of the loan agreement, would be riba. If the bank were to
require of you that you must repay the $1,000 plus some additional amount (as
interest, say 6 %) then that would be like for like but not equal for equal. It
would thus most certainly be riba. This is so because US dollars
are used as money in the form of a medium of exchange. It is, of course,
another matter as to whether or not it is halal for us to use US dollars, or
any other artificial money, as a medium of exchange. The answer is that paper
money and all other forms of artificial money are themselves pure riba
and therefore, haram for a Muslim. We have attempted to explain the reason for
this in several places in this book. (See below: The Prophet, artificial money
and inflation).
What can we do about it?
Obviously we must strive to return to such money as is real money, and turn
away from artificial money. The problem we face, however, is that gold appears
to be indispensable to any effort of return to real money. And the enemy has
seen to it that the bulk of the world’s supply of gold (both raw arid minted)
is under their control.
to be continued . . . .
