Alhuda CIBE - Riba by Zubair Usmani

1. AlHuda Seminar onAlHuda Seminar on
Islamic Banking and FinanceIslamic Banking and Finance
Guest SpeakerGuest Speaker
Dr. Muhammad Zubair UsmaniDr. Muhammad Zubair Usmani
Jamia Darul Uloom, Karachi PakisJamia Darul Uloom, Karachi Pakis11tantan
Sharia Advisor, MCB Islamic BankingSharia Advisor, MCB Islamic Banking

2. “ Those who devour interest become like the one whom Satan has
bewitched and maddened by his touch. They have been condemned
to this condition because they say trade is just like interest, whereas
Allah has made trade lawful and interest unlawful. Henceforth, if
one abstains from taking interest after receiving this admonition
from his Lord, no legal action will be taken against him regarding
the interest he had devoured before; his case shall ultimately go to
Allah. But if one repeats the same crime even after this, he shall go
to Hell, where he shall abide forever”.

3. “ O believers fear Allah and give up that interest
which is still due to you if you are true believers;
but if you do not do so then you are warned of the
declaration of war against you by Allah and His
Messenger. If, however, you repent even now (and
forgo interest), you are entitled to your principal; do
not wrong, and no wrong will be done to you”.

4. 4. Hazrat Jabir Ibn-e-Abdullah (‘) has reported
the Prophet () to have cursed those who
charge interest, those who pay it, those who
write documents pertaining thereto, those who
keep the accounts of such matters and those
who sign as witness. He () said that they are
all equal in this crime.

5. 8. Hazrat Abu Hurairah () has reported the Prophet () to have said, “four
categories of people are such that Allah has made it binding upon Himself to
refuse them admission to the paradise or to let them enjoy is goodies. The
first is the one who is a habitual drinker of alcoholic drinks. The second is
the one who devours interest, the third is the one who devours the wealth
belonging to an orphan, without any justification therefore, and the fourth is
the one who is disobedient to his parents. This has been reported by Hakim
on the authority of Ibrahim bin Khathim bin Irak and he (Ibrahim) reported
it on the authority of his father (Khathim) and he (Khathim) reported it on
the authority of Hazrat Abu Hurairah () Hakim has classified it as an
authentic saying.”

6. 13.It has been reported by Hazrat Hanzala bin
Abdullah () (who was given a bath by the angels)
that the Prophet () said, “Devouring a dirham of
interest is worse than committing adultery 36 times,
provided one is aware that he is utilizing money
earned by way of interest”. This saying has been
reported by Imam Ahmed and Tibrani.

7. 19.Hazrat Ibn-e-Masood () reporting a saying of the
Prophet () in which the Prophet () said, “When
adultery and interest become common place in a
people, then they have definitely asked for Allah’s
punishment for themselves”.

8. 25. According to Hazrat Abdullah bin Masood (), the Prophet () said,
“whoever earns money/wealth through interest would find it reduced in the
end”. This has been reported by Ibn-e-Majah and Hakim and they said that
the reporting chain is authentic. Another version is that the Prophet () said,
“Howsoever much the interest may appear to be in quantum, the end result is
that it reduces (the wealth).
Note: Abdul Razzaq, who is considered an authority on Hadith, has reported from
Moammar that Moammar said to have heard that not 40 years lapse on business
involving interest and it suffers a loss or an accident which causes a loss.

9. ISLAMIC BANKINGISLAMIC BANKING
 CLASSIFICATION OF RIBACLASSIFICATION OF RIBA
 Riba-un-Nasiyah or Riba-al-JahiliyaRiba-un-Nasiyah or Riba-al-Jahiliya
 ““that kind of loan where specified repaymentthat kind of loan where specified repayment
period and an amount in excess of capital isperiod and an amount in excess of capital is
predetermined”predetermined”
( Imam Abu Bakr Hassas Razi)( Imam Abu Bakr Hassas Razi)

10. ISLAMIC BANKINGISLAMIC BANKING
 CLASSIFICATION OF RIBACLASSIFICATION OF RIBA
 Riba-un-Nasiyah or Riba-al-JahiliyaRiba-un-Nasiyah or Riba-al-Jahiliya
 ““all loans that draw interest is riba”all loans that draw interest is riba”(Hadith quoted(Hadith quoted
by Ali ibn Talib)by Ali ibn Talib)
 ““the loan that draws profit is one of the forms ofthe loan that draws profit is one of the forms of
riba”riba”(definition from Sahabi Fazala Bin Obaid)(definition from Sahabi Fazala Bin Obaid)

11.  CLASSIFICATION OF RIBACLASSIFICATION OF RIBA
 Riba-un-Nasiyah or Riba-al-JahiliyaRiba-un-Nasiyah or Riba-al-Jahiliya
 real and primary form of ribareal and primary form of riba
 premium paid to the lender in return for his waitingpremium paid to the lender in return for his waiting
 giving or taking of every excess amount ingiving or taking of every excess amount in
exchange of a loan at an agreed rate irrespectiveexchange of a loan at an agreed rate irrespective
of whether it is low or highof whether it is low or high
ISLAMIC BANKINGISLAMIC BANKING

12. ISLAMIC BANKINGISLAMIC BANKING
 TYPES OF RIBATYPES OF RIBA
 Tijarti Sood(Commercial interest)Tijarti Sood(Commercial interest)
 interest paid on loan taken for productive andinterest paid on loan taken for productive and
profitable purposeprofitable purpose
 Sarfi Sood (Usury)Sarfi Sood (Usury)
 interest paid on loan taken for personal needinterest paid on loan taken for personal need
and expensesand expenses

13. Arguments given to Justify
Commercial Interest
Q. Commercial Interest is charged from wealthy persons
whereas usury is charged from the poor. It does not exploit
the poor while consumption interest or usury exploit the
poor.
Validity of a transaction is not based on the financial status of a
party, like sale, leasing etc. Law does not differentiate between
poor and wealthy in crimes like bribery, theft etc. Further,
Commercial Interest also exploit the poor.

14. Q. It was not in the prevalent modern shape
in those days.
When some thing is prohibited, it is not directed to
a particular form of it but it covers every form which
comes in its general sense, e.g. gambling and pork,
liquor and adultery are as Haram now as they were
in Jahiliyyah

15. Q. The Commercial interest was not in vogue in
Arab
History shows that it was in vogue.
Q. Doctrine of necessity and wisdom requires to
allow it
It does not, it is not at all a necessity in Shariah.
Even from economic point of view, the modern
interest has brought more harm to the humanity than
the premature forms of usury.
The Principles of Shariah are binding, even though
their wisdom is not visible in a particular transaction.
They are based on Illat.

16. Islamic RulesIslamic Rules
Basic Rules of Islamic FinancingBasic Rules of Islamic Financing
 Money is converted in to goodsMoney is converted in to goods
 Possession of the goodsPossession of the goods
 Ownership of the goodsOwnership of the goods
 Presence of the goodsPresence of the goods
 Identification of the goodsIdentification of the goods
 Determination of priceDetermination of price
 In case of credit sale, the period of repayment isIn case of credit sale, the period of repayment is
known and fixedknown and fixed

17. Islamic Alternatives ofIslamic Alternatives of
Conventional BankingConventional Banking
 MurabahaMurabaha
 IjaraIjara
 MusharakaMusharaka
 MudarabaMudaraba
 SalamSalam
 IstisnaIstisna