IS BANK INTEREST REALLY HARAM IN ISLAM?
As Muslims we all have heard that Riba (interest) is haram in lslam. But if that is the case why is the use of interest so widespread among Muslim——-even in Muslim countries ?
I guess the primary reasons for the same is lack of proper understanding of the severity of the issue among Muslims.
From my personal experience I recall that as kids we knew that alcohol, gambling and fornication were haram, but we did not know about the strict prohibition of Riba in Islam.
May be the subject matter of Riba was a mature one which could not be well understood by the young minds, but so are alcohol, gambling and even fornication. But whatever be the reasons, we ended up being ignorant about the abhorrence of Riba in Islam.
It was quite late in life as a young adolescent that I came to know about the severity of prohibition of Riba, it being severe than anything else in Islam may perhaps be second only to shirk (associating partners with Allah).
In addition, due to lack of complete understanding many a times we have our own reasons and justifications to not believe and understand the severity of the issue.
So let us first try and understand what is Riba and what the Quran says about it.
Simply put Riba is the Arabic equivalent for modern day interest on bank loans and deposits. It may also include some other transactions, wherein the return on principal is fixed as an amount or percentage.
The prohibition of Riba in the Quran has been discussed in atleast four different sets of verses which were revealed on different occasions.
[Ar-Rum 30:39], [An-Nisaa 4:161], [Al-i-‘Imran 3:130], [Al-Baqarah 2:275-281]
One of the strongest words used condemning Riba are in verse
يَا أَيُّهَا الَّذِينَ آمَنُوا اتَّقُوا اللَّهَ وَذَرُوا مَا بَقِيَ مِنَ الرِّبَا إِن كُنتُم مُّؤْمِنِينَ –
“O those who believe, fear Allah and give up what still remains of the riba if you are believers. But if you do not, then listen to the declaration of war from Allah and His Messenger.” (Al-Baqarah 2:278-279)
In an authentic Hadeeth of Ibn Majah, as narrated by Abu Hurayrah:
The Prophet, said: “Riba has seventy segments, the least serious being equivalent to a man committing adultery with his own mother.” (Ibn Majah)
Not only Islam but even Judaism and Christianity prohibit usury.
The severity of Riba can be well understood by the above words of Quran and Hadith.
There are also some misconceptions Muslims generally have about Riba. Let’s discuss some of those misconceptions:
Riba in Quran means Usury?
Some people argue that the word ‘Riba‘ in Quran refers only to the usurious loans which would entail exploitation as excessive rate of interest is charged, and this is not the case with modern banking as interest on consumer and commercial loans are not exploitative or excessive.
This argument is not valid as the Quran does not make any distinction on the basis of amount of interest charged.
In Surah Baqarah, Allah says,
“O those who believe fear Allah and give up whatever remains of Ribā, if you are believers.”
Prophet Muhammad (Salallāhu ‘alayhi wasallam) in his Last Sermon, said,
“Listen, every amount of interest that was due in Jahiliyya is now declared void for you in its entirety. You are entitled only to your principal whereby neither you wrong nor be wronged. And the first liability of interest declared to be void is the interest of Abbas ibn Abd-ul-Muttalib which is hereby declared void in its entirety.”
As can be observed from the above surah and hadith, interest has been declared void in its entirety, with no distinction of it being excessive or reasonable.
Riba haram only for consumption loans?
It is also argued sometimes that the prohibition of Ribā is only limited to consumption loans where the borrowers are poor who procure loans to fulfill the daily expenses and hence it exploits their need.
In Islam, the validity of a financial or commercial transaction is not dependent on the financial status of the transacting parties. Alcohol, gambling, bribery are haram for both rich and poor. The purpose of loan is also immaterial whether it is consumption or productive, it will be haram.
Modern day interest different from Riba
Another common misconception is that the modern day commercial banking system is different from the ‘Riba’ in the pre-Islamic era.
The argument against this misconception is that the prohibition is on the principle of Riba in whichever form it may be. Like alcohol and gambling are also forbidden, but many of its current day forms were not present in the pre-Islamic days. But still these are considered haram in today’s time based on the principles of their prohibition.
The above arguments make it amply clear that the modern day interest is the same Riba that has been prohibited in Islam.
However, we also know that Riba is so common place in today’s economic environment that if not impossible but it is very difficult to avoid interest 100%.
It is narrated by Ibn Isa, and recorded in Abu-Dawood Hadith #3325
“There will come a time when you will not be able to find a single person in the world who will not be consuming riba. And if anyone claims that he is not consuming riba then surely the dust of riba will reach him.”
But this does not mean that we cannot avoid Riba but rather, we need to make extra efforts to protect ourselves from one of the biggest sins.
As practicing Muslims we should strive to avoid Riba based transactions in our daily dealings to the maximum extent possible.
Some suggested actions to avoid dealing in Riba.
- If available in your country , use only Islamic Banks for your banking needs.
- If there are no Islamic Banks in your country of residence and you have to deal with conventional banks out of necessity (buying a car or house is not a necessity), seek Allah’s forgiveness for the same and make sure that the interest banks pay on the savings accounts is balanced by giving it away or rather more as charity.
- Do not put your money in conventional bank term deposits and other fixed return instruments like bonds, Commercial paper etc.
- Investment your savings in halal investment options like gold, halal stocks, real estate, crowd funding halal business, etc.
- Raise your concerns with your government / banks/ employers and all stake holders and pressurize them to provide halal alternatives for banking and investment, especially in Muslim countries.
- Most important ! ! seek Allah’s forgiveness and pray that HE may provide us with halal income and investment opportunities.
Remember Allah knows our intentions and if we are sincere, in sha Allah we will not only be able to find ways but also be able to receive HIS blessings and rewards.