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ShariahHijri Calendar ‘AH’ Current year is 1429 AH is 11 days shorter with 354 days
• *Al‐i‐'Imran3:130] “O those who believe do not eat up riba doubled and redoubled."
a.Riba Qardh: where the increase (interest) on the principal sum of the loan is agreed
upon at the point of contract.
b.Riba Jahilliyah: this refers to the increase levied on the borrower for late repayment
or failure to repay the loan.
ShariahRiba al-Qardh
Riba al-Qardh, the usury of loans, involves a charge on a loan arising due to the passage of
time, in other words a loan at interest. It arises where a borrower of another's wealth, in any
form, enters into a contract to repay to that other person a pre-agreed amount in addition to
the principal that was borrowed, in whatever manner this increase arises.
Riba al-Buyu
Riba al-Buyu (‘Usury of Surplus’.) may comprise either Riba al-Fadhlor Riba al-Nasiah.
• Riba al-Fadhl involves an exchange of unequal qualities or quantities of the same
commodity simultaneously, and could therefore be described as the usury of surplus.
• Riba al-Nasiah involves the non simultaneous exchange of equal qualities and
quantities of the same commodity and does not therefore involve a surplus but only a
difference in the timing of exchange.
'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, equal for equal, payment being made on the spot. If the
species differ, sell as you wish provided that payment is made on the spot'. Hadith : Muslim
RibaTransaction of Loan or Deferred Sale?
It is clear from these quotations that the transaction in which the creditor used to charge an
additional amount on the date of maturity was not a transaction of loan. Initially; it used to be
a transaction of sale of a commodity on deferred payment basis in which the seller used to fix
a higher price because of deferred payment, but when the buyer would not pay at the date of
maturity, the seller used to keep on increasing the amount in exchange of additional time
given to the buyer. "The non‐believers say that sale is very similar to Riba." *Al‐
Baqarah2:275]
IbnAbiHatimon the authority of Said ibnJubair: "They used to say that it is all equal
whether we increase the price in the beginning of the sale, or we increase it at the time of
maturity. Both are equal. It is this objection which has been referred to in the verse by saying
'They say that the sale is very similar to Riba.‘”
The Holy Prophet, Sall-Allahualayhiwasallam, has said: "If the creditor received a goat as
mortgage from the debtor, the creditor may use its milk to the extent he has spent in
providing fodder to the goat. However, if the milk is more than the price of the fodder, the
excess is riba.”
The History & Evolution
of
Islamic Banking
History of Commercial Banks
• Rich & Reputable Merchant
–Used to issue IOUs
–People who had nothing to do with the merchant used to deal in sale / purchase of these
IOUs.
–SootarMandiin Faisalabad?
–Modern day Merchant Banking = Investment Banking
• The Money Lender
–Started with his own capital
–Then as the reputation built people started depositing their money for further investment
–An embryonic bank
• Goldsmith
–People entrusted their gold for safekeeping
–Goldsmith acted as trustee
–Receipts for deposit of Gold or other valuables were traded as money
–People can write an order to transfer the gold to another account
All 3 created ‘Money’