Translation:
Those who take usury 152 (Riba) are like those whom the Devil had confounded by his touch. They say, “Trading (buying and selling) is like usury,” whereas God has allowed trading and forbidden usury. (Therefore), whosoever receives this admonition from his Sustainer, and he refrains, he can keep what has already passed, and his affairs are with God, and whoever continues with usury (after the admonition), they are the companions in fire—they will reside in Hell. God withholds His blessings on usury, whereas He causes charity to flourish. God does not love any ungrateful sinners.
Those who believe do good deeds, keep their prayers, and pay Zakat, their reward is with the Sustainer; they will have no fear or regret.
Interpretation:
152 Usury, or the concept of Riba, is a broad concept which favors those with capital or wealth and allows them to extract additional benefits or a fixed amount of benefits (in the case of interest) for their capital while the borrowers who are usually less wealthy and, hence, are without required capital are forced to assume a greater share of the trade risk. Islam does not allow guaranteed returns but a risk sharing arrangement where profit and loss are shared on a mutually agreed basis or mechanism so that it does not automatically disadvantage the segment of the society without capital. Hence, interest is disallowed since it automatically shifts wealth from the less wealthy to the wealthy, which is contrary to the spirit of charity and human compassion.
At the same time, trading is encouraged, whereby the trading parties (sharing and exchanging goods, cash, equity, and sweat equity) trade in a mutually agreeable manner in which both parties assume risks and rewards. In our current global system, where capital can flow relatively easily across countries and organizations, a virtual system of capital management without the burden of usury can be implemented with relative ease. The key questions are, are we, as people of faith and people of goodwill to our fellow men, committed to such moral and economic concepts, and do we have the intellectual rigor to create and implement a workable framework and demonstrate its effectiveness over a conventional financial system dominated by usury and interest? Muslim intellectuals and financial and management experts with backgrounds in economics, law, financial systems/institutions, and morality have a
serious challenge here.
Reflection:
Usury is looked upon as the opposite of charity and is forbidden in Islam. Usury can take on many different forms, but the common theme is that the creditor
is entitled to a predefined return irrespective of the success of that invested capital. Given that wealthy people are normally the creditors and people in need of capital are usually the borrowers, usury ensures a constant flow of added capital to creditors from the borrowers and is considered unjust in a sound economic system.
Action:
Muslims have failed in modern times to create a widespread financial system based on this broad concept of capital deployment where the risk and the reward will be borne by both parties as opposed to by borrowers alone. There is a fundamental challenge to help educated Muslims and other people of faith understand the proper definition of usury and its implications in terms of economic, social, and moral issues and create workable frameworks enabling average people as well as people of means to conform to this injunction of God. The argument should not be based on pure Qur’anic instructions but on a competitive alternative that is available to all people and that demonstrates that such financials are more sound and can thereby attract a larger pool of creditors and borrowers to make it a viable alternative to other systems. In today’s world, the power of an ideology or its moral standing should be based on demonstrated merit and efficacy rather than on faith (or argument) alone.
Key Arabic Terms
54. Riba