One of the most common arguments in favour of modern day bank interest is that it is not the same riba as defined in the Quran, because the Quranic riba specifically refers to usurious loans.
This issue has been discussed at length in the 1991 judgment of the Shariah Appellate Bench of the Supreme Court of Pakistan that gave its landmark decision banning interest in all its forms and by whatever name it may be called.
The bench consisted of 1) Mr. Justice Khalil-ur-Rahman, 2) Mr. Justice Munir A Shaikh, 3) Mr. Justice Wajeehuddin Ahmad, and 4) Maulana Justice Muhammad Taqi Usmani.
Against this decision of the Shariah Appellate Bench the Federal Government of Pakistan and certain banks and financial institutions filed 67 appeals. One of the issues raised by these appellants is the same.
Below is the text copied from the judgment of the Shariah Appellate Bench of the Supreme Court of Pakistan, wherein this misconception has been clarified from Quranic references.
The full judgment can also be obtained from this link.
The appellants have argued that :
“The word ‘riba‘ refers only to the usurious loans on which an excessive rate of interest used to be charged by the creditors which would entail exploitation. As far the modern banking interest, it cannot be termed as ‘riba‘ if the rate of interest is not excessive or exploitative.”
This argument has been quashed by the Sharia bench as below:
“The argument advanced on behalf of some appellants was that the prohibition of riba is applicable only to those interest transactions where the rate of interest is exorbitant or excessive.
This argument is sought to be supported by the verse of Surah Al-i-‘Imran:
“O ye who believe! devour not Usury, doubled and multiplied; but fear Allah; that ye may (really) prosper.” [Al-i-‘Imran 3:130]
It is argued that this verse of the Holy Qur’an is the first verse that came with a clear prohibition of riba, but it has qualified the prohibition by the words “doubled and multiplied” to denote that the practice of riba is forbidden only when the rate is so excessive that it makes the payable amount twice that of the principal. The logical result of this expression would be that if the rate of interest is not so high, the prohibition is not applicable.
The interest charged in the present banking system, it is argued, is not normally so high as to make the payable amount double the principal, and, therefore, the banking interest is not covered by the prohibition.
This argument overlooks the fact that the different verses of the Holy Qur’an relating to the same subject must be studied in juxtaposition with each other. No verse can be interpreted in isolation from the other relevant material available in other parts of the Holy Qur’an. As explained at the very beginning, the Holy Qur’an has dealt with the subject of riba in four different chapters. Obviously, no verse can contradict another verse on the same subject. The most detailed treatment of the subject of riba is found in Surah Al-Baqarah, the relevant verses of which have already been quoted and translated in paragraph 15 of this judgment. These verses include the following command:
“O those who believe fear Allah and give up whatever remains of riba, if you are believers.” [AlBaqarah 2:278]
The words “whatever remains of riba” in this verse indicate that every amount over and above the principal has to be given up. This point is further clarified in express terms by the following sentence:
“And if you repent (from the practice of riba) then you are entitled to get back your principal.”
These words do not leave any ambiguity in the fact that repentance from the practice of riba is not possible unless any amount exceeding the principal is given up and that a lender is entitled only to the principal he has actually advanced. A combined study of the verses of Surah Al-i-‘Imran and Surah Al-Baqarah leaves no doubt that the words “doubled and multiplied” occurring in Surah Al-i-‘Imran are not of restrictive nature, and that “doubled and multiplied” is not a necessary condition for the prohibition of riba. These words have rather been used to refer to the worst kind of practice of riba rampant at that time.”
The above explanation by world renowned Islamic scholars and experts on Islamic finance which are based on Quranic verses, leave no room for ambiguity to understand that the meaning of riba as defined in Quran, includes the interest as charged by modern day banks.
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. And if you repent, yours is your principal. Neither you wrong, nor be wronged. [Al-Baqarah 2:278-279]
May Allah protect and guide us to follow the right path.
