The Prohibition of Charging Interest (Usury) in Islam: Understanding the Core Issues
Why is Charging Interest Considered Usury in Islam?
Charging interest (usury) is forbidden in Islam based on several principles, primarily involving inequality and the exploitation of the less fortunate. According to the Islamic belief, wealth inequality can often be attributed to the accumulation of wealth by capital owners, such as banks, at the expense of debtors. This practice nurtures a cycle where the wealthy become richer through the use of interest, effectively exploiting those who are less financially stable. This is exemplified historically, where significant wealth has been associated with groups like the Jews or the Medici family, known for their prowess in moneylending.
The Difference Between Interest and Profit
Understanding the difference between interest and profit is essential to comprehending the religious prohibition of usury. While profit is earned through providing goods or services, earning interest involves leveraging one’s financial status to impose a rate of return without contributing labor. This is fundamentally seen as exploitative. For instance, a 3% interest rate per pound for administrative purposes is permissible, but no higher rate is allowed, emphasizing the moral and theological necessity of this distinction.
The Islamic Perspective on Usury
From the Quran
While not a Mufti or a Qualified Alim, a student of the Quran aims to share insights based on interpretations and understanding of key verses. The Quran explicitly addresses the issue of usury in Surah Baqarah and Surah Ale Imran.
Surah Baqarah, Verse 275-279 (Azafan Muzafeatan):
O you who believe, do not consume usury, doubling and redoubling.
And fear Allah, that you may be successful.
[And O you who believe,] entrance into Paradise will be by permission, and you will be given what you have for [the righteous deeds you have] done, and more; but those who disbelieve - their dwelling is Hell. It will be the promised abode.
Prohibition of Specified Terms without Proper Documentation
Juristic practices in Islam demand transparency and fairness in financial dealings. According to the Quran in Surah Ale Imran:
Surah Ale Imran, Verse 180-182:
“O you who believe! When you contract a debt for a specified term, write it down. Let a scribe write it down in equity between you. No harm shall a scribe do by writing [what is not true]. And let him who incurs the liability dictate. But let him who incurs the liability fear Allah his Lord and not leave anything out of it. But if the one who incurs the liability is of weak understanding or he is not [able to dictate himself because] ill, or he is not from among those trustworthy [men or women], then let his guardian be from among you read it [to him] in equity. And bring two witnesses from among your men. And if there are not two men [available] then a man and two women from those whom you approve as witnesses - so that if one of the women should err, [it is possible] that the other can remind her. And let not the witnesses avoid when they are being questioned. And let not the scribe or the witness refuse [to write] when they are being asked. For if you do not do this and fear Allah, then indeed, Allah is Everkipresent, Knowing [of all things].”
These principles aim to ensure that all financial transactions are fair and leave no room for exploitation. The Quran emphasizes the importance of transparency and fairness in contracts, indicating that any transaction involving usury is fundamentally against the teachings of Islam.
Conclusion
Islam’s view on usury and interest is rooted in the pursuit of social justice and the prevention of exploitation. Understanding the differences between profit and interest, along with the teachings from the Quran, provides a clear framework for decision-making in financial dealings. By adhering to these principles, Muslims can ensure that financial interactions remain ethical and just. The prohibition of usury serves as a foundational pillar in Islamic finance, fostering a system that prioritizes ethical and moral values.