Professional Documents
Culture Documents
Training Session On
Points to be Discussed
A. Riba
B. Riba and the Holy Quran
C. Riba and the Hadith
D. Controversial Issues about Riba
E. Arguments on behalf of Riba
F. Impact of Riba
Definitions and
Lexical
Analysis of
Riba
Lexical
Meaning of
Riba
What Increase is
Known as Riba?
Extracted Principle
1. Imam Qurtubi (671AH/1070AC) clearly
indicates thatMuslims are agreed on the authority of
their Prophet that the condition for an
increase over the amount lent is Riba
2. Ibn Manzur (711AH/1311AC) clearly states
thatwhat is prohibited the extra amount,
benefit or advantage received on any loan
Early
Definitions of
Riba
Abubakr Al-Jassas
Ahkamul Quran
P.469 V.1
Definitions
(Cont)
Abubakr Al-Jassas
Ahkamul Quran
P.465 V.1
Definitions
(Cont..)
The Riba Al-Nasiah, it was a transaction wellknown and recognized in the days of Jahiliya i.e.
they used to give money with a condition that
they will charge a particular amount monthly and
the principal will remain due as it is. Then on the
maturity date they demanded the debtor to pay
the principal. If he could not pay, they would
increase the term and the payable amount. So it
was the Riba practiced by the people of Jahiliya
Al-Tafseer Al-Kabeer
Imam Al-Raazi
P.91, v.7
Modern
Definitions of
Riba
Modern Definition of
Riba/Interest
1. Riba is a predetermined, fixed and timerelated excess over and above the principal of
a loan
2. Riba is a discrepancy which results from the
contractual obligations of a party in the
context
of a direct exchange of items of the same
general
kind between two parties.
Islamic Financial
System:
Including Strategy for Elimination of Riba
Definitions
(Cont.)
Classification
s of Riba
Classification of Riba
1. Riba Al-Nasiah
2. Riba Al-Fadl
a) Riba Al-Buyu
b) Riba Al Duyun
i. Riba Al-Jaly
ii. Riba Al-Khafi
I. Riba Al-Quran
II. Riba Al-Hadith
Riba Al-Nasiah
Riba Al-Fadl
Riba in the
Holy Qur,an
Nature of Prohibition
of Riba by the Holy
Quran
3. Absolute
Riba in the
Hadith
- 40
Characteristics of
Riba Al-Fadl in
Islamic Shariah
Cont
2. Imam Al-Shafie (150-204H) is of the
view that=
Cont
3. Imam Malik (93-179H) is of the
opinion that=
Classification of
Goods and
Services in this
World
2.
3.
4.
Judaism
-Prohibited
Christianity -Prohibited
Hinduism
-Prohibited
Islam
-Prohibited
Verdict of the
Four Schools
of Thoughts
about Riba
Unanimous
Verdict of the
Muslim
Ummah
Cont.
3. The International Conference of the OIC and
Rabitah Fiqh Committee meetings held in 1985
and 1986 in Cairo and Makkah respectively
The Condemned
Parties of the
Riba
Relationship
Pattern with the
Debtor
Reasons for
Prohibition of
Riba
Reason for
Prohibition of
RIBA AL-NASIAH
Philosophical Target of
prohibition of Riba
1. Elimination of Injustice that is intrinsic in
the institution of interest on loans
(Riba is inherent in all forms of Injustice)
2. Elimination of dishonest exchange in
business transactions
(Riba is inherent in all forms of dishonest)
3. Elimination of Unjust exchanges in business
transactions
(Riba is inherent in all forms of Unjust)
Reason for
Prohibition of
RIBA AL-FADL
Key
Arguments
about Interest
Factors of Interest
There are three factors of interesta) Time Factor
b) Opportunity Cost
c) Element of Risk
Logic
Descriptions of
Bai
Descriptions of Bai
1. Production of Goods & Services
2. Consumption of goods and services
3. Demand of goods and services
Description of
Profit
Description of Profit
1. Ownership
2. Possession
3. Risk
SocioEconomic
Impact of Riba
Impact of Riba on
Allocation of Resources
Cont
1. According to Lester Thurow-
Cont..
3. Dr. Umar ChapraWhile deposits come from a broader crosssection of the population, their benefit goes
mainly to the rich
Cont..
1. The end use of the funds does not
constitute the main criterion for financing
2. It encourages people to live beyond their
means
3. The people do not borrow for productive
projects only, but also for conspicuous
consumption
Dr. Taqi Usmani
The Historic Judgmen on Interest
P.103
Cont..
4. Similarly, Government borrow money not
only for genuine development programs,
but also for their lavish expenditure and for
projects motivated by their political
ambitions rather than being based on sound
economic assessment
5. Non-project related borrowings, which were
possible only in an interest-based system
have thus helped in nothing but increasing
the size of our debts to a horrible extent
Dr. Taqi Usmani
The Historic Judgmen on Interest
P.103
Impact of Riba on
Distribution
Cont.
1. When business is financed on the basis of
interest, it may bring injustice either to the
borrower if he suffers a loss, or to the
financier if the debtor earns huge profits
2. The both situations are equally possible in
an interest-based system, where the
payment of interest has brought total ruin
to the small traders
3. The injustice brought to the financier is
more pronounced and much more disturbing
to the equitable distribution of wealth
Cont.
3. The big entrepreneurs deployed their funds
from their own pocket are much less than the
funds borrowed by them from the common
people through banks and financial
institutions (90%:10%)
4. When these huge projects bring enormous
profits, only a small proportion will go to the
depositors whose input in the projects was
90%, while all the rest will be secured by the
big entrepreneurs whose real contribution to
the projects was not more than 10%
Dr. Taqi Usmani
The Historic Judgmen on Interest
P.103
James Robertson
1. The pervasive role of interest in the
economic system results in the systematic
transfer of money from those who have less
to those who have more
2. It is partly because those who have more
money to lend, get more in interest than
those who have less; it is partly because
those who have less, often have to borrow
more
James Robertson
Future Wealth: A New Economics for the 21 st Century
London 1990
P.130,131
Cont..
3. The transfer of revenue from poor people
to rich people, from poor places to rich
places, and from poor countries to rich
countries by the money and finance system
is systematic
James Robertson
Transformation of Economic Life: A Millenial Challenge
London 1998
P.51-54
Cont.
3. The money-creation system turned into the
fashionable standard practice of the modern
banks under the fractional reserve system
Dr. Tqi Usmani-P.109
Tendency of
Interest
Based Loans
Interest and
Humanitarian
Goals
Cont..
1. General need fulfillment
2. Full employment
3. Equitable distribution of income and
wealth
4. Economic stability
Dr. M. Umar Chapra
Prohibition of Interest: Does it make sense?
P.13
Actions of
Islamic Shariah
in the Field of
Finance
Investment
Mechanism of
Islamic
Banking
Investment Mechanism of
Islamic Banking
There are three (3) investment mechanisms
in Islamic Banking System-
2. Musharaka
Joint Venture
3. Muzara-ah
4. Musaqot
Bearing
3. Bai-Salam
4. Bai-As sarf
-Trading in Currencies.
5. HPSM
Promise
Objective of
Islamic Finance
THANK
You FOR
LITENING
Cont
4. Michael Rowbtham
The Grip of Death
5. Cheryl Payer
The Debt Trap
6. Bade Onimode
The IMF, The World Bank and African Debt
7. Jaques B. Gelinas
Freedom From Debt
Cont
8. Dr. M. Umar Chapra
Prohibition of Interest: Does it make sense?
9. Michael Rowbotham
The Grip of Death: A Study of Modern Money
10. Dr. Taqi Usmani
The Historic Judgmen on Interest
11. John Tomlinson
Honest Money: A Challenge to Banking
Cont..
12. James Robertson
Transforming Economic Life: A Millennial
Challenge
13. James Robertson
Future Wealth: A New Economics for the
21st Century
14. Richard Thomson
Apocalypse Roulette: The Lethal World of
Derivatives