Gardens of Wisdom

[irfansaeed]

Asalam O Aliakum,
What is the concept of Riba in Islam. is the current model of so called Sharia based banking system is compatible with Islam?

Wasalam
Irfan

[Idris]

Salaamun alaikum

What is the concept of Riba in Islam. is the current model of so called Sharia based banking system is compatible with Islam?

Check out it here for USURY http://gardens.freeforums.org/viewtopic.php?p=80#80 Let me know precisely what is the sharia based banking system about.


USURY
الّذينَ يَأْكُلُونَ الرِّبا لا يَقُومُونَ إِلاّ كَما يَقُومُ الّذي يَتَخَبّطُهُ الشّيْطانُ مِنَ الْمَسِّ ذلِكَ بِأَنّهُمْ قالُوا إِنّمَا الْبَيْعُ مِثْلُ الرِّبا وَ أَحَلّ اللّهُ الْبَيْعَ وَ حَرّمَ الرِّبا فَمَنْ جاءَهُ مَوْعِظَةٌ مِنْ رَبِّهِ فَانْتَهى فَلَهُ ما سَلَفَ وَ أَمْرُهُ إِلَى اللّهِ وَ مَنْ عادَ فَأُولئِكَ أَصْحابُ النّارِ هُمْ فيها خالِدُونَ
Those who devour usury will not stand except as stand one whom the Evil one by his touch has driven to madness. That is because they say: "Trade is like usury," but Allah permitted trade and forbidden usury. Those who after receiving direction from their Lord, desist, shall be pardoned for the past; their case is for Allah (to judge); but those who repeat (The offence) are companions of the Fire: They will abide therein (for ever). (Q2:275)

يا أَيّهَا الّذينَ آمَنُوا اتّقُوا اللّهَ وَ ذَرُوا ما بَقِيَ مِنَ الرِّبا إِنْ كُنْتُمْ مُؤْمِنينَ
فَإِنْ لَمْ تَفْعَلُوا فَأْذَنُوا بِحَرْبٍ مِنَ اللّهِ وَ رَسُولِهِ وَ إِنْ تُبْتُمْ فَلَكُمْ رُؤُسُ أَمْوالِكُمْ لا تَظْلِمُونَ وَ لا تُظْلَمُونَ

O you who believe! Be careful of (your duty to) Allah and relinquish what remains (due) from usury, if you are believers.
But if you do (it) not, then be apprised of war from Allah and His Messenger; and if you repent, then you shall have your capital; neither shall you make (the debtor) suffer loss, nor shall you be made to suffer loss. (Q2:278-279)

There is difference between when a person lends out his excess money and when he deprives himself of his needs inorder to lend out the money. In the same sense, there is difference between a person borrows money to attend to essential needs and the person that borrows money to engage in business.

Usury takes place when an interest is demanded by a Lender who lends out of his excess money to a borrower who borrows the money to fulfil an essential need and not for luxuries nor for business.

A lender who takes money out of his needs has rendered a service that can be compensated in terms of interest. A borrower who does business with the money has informally entered into a partnership with the lender of which the lender can claim a right. The loss however does not concern the lender except where it is a formal partnership.

[irfansaeed]

Asalam O aliakum,
From a common sense perspective the difference between usury and trade is the lending money with guaranteed profit and no risk vs profit and loss sharing. The sharia compliant institue claims to be riba-free, but they don't participate in loss and profit. For example one of their model is “Lease-To-Purchase” (LTP) (Ijara Wa Iqtinaa/Diminishing Musharaka). Read the full detail of their model at this link
http://www.lariba.com/home-financing.htm
In brief the purchaser and the lender enter into a joint agreement in which the purchaser assure to buy the lender's shares over a fixed amount of time while paying an agreed upon rent to the lender based upon his investment share.
The rent amount changes as the purchaser's equity increases. In a true riba-free model this rent should be reevaluated periodically based upon the market value. Along with that the price of the house should also be reevaluated causing an adjustment into both partner's equity.
in this model the borrower will take all the losses and profit in case he decides to sell the property.

Read their FAQs at the following link
http://www.lariba.com/knowledge-center/faqs.htm
Please must read the question in FAQ section titled
Does LARIBA participate in the Profit & Loss as Islam Orders Us?

Beside the above discussion, what would be your Islamic answer to a riba-free lending (let's say housing loan).

Wasalam
Irfan saeed

[Idris]

Salaamun alaikum.

Please give me sometime to study the LARIBA links carefully and then give my response.

I do notice a problem however. Islam can never be subjugated/interpreted under a rebellious government (like a secular system) except there is full autonomy. There is no compromise either.

We need to exit as a single community under the same roof then our perspectives of issues will take the natural course. It is a question of setting up a separate government. This I consider to be the priority - all other things will fall in place.

Until we do not exist as an independent nation, all other issues are secondary.

When a person declares his independence, he sees the world differently and also see the solutions to the challenges clearly. Let us do the first thing first. That is the meaning of LA ILAHA ILLA ALLAH.

[Idris]

THE MISSION OF AMERICAN FINANCE HOUSE – LARIBA - IS TO USE OUR BEST EFFORTS TO PROVIDE “LaRiba” FINANCING ALTERNATIVE TO THE CONVENTIONAL “Riba” SYSTEM. THE “LARIBA” FINANCING OFFERED IS DESIGNED TO COMPLY WITH BOTH THE ISLAMIC SHARIAA AND THE STRICT UNITED STATES GOVERNMENT LAWS AND REGULATIONS

Al-Islam is a way of life in the same way that Secularism is; they are two opposite religions (deen). A compromise between the two is known as SHIRK. A Person is either a Muslim or he is not; there is no half Muslim.

Muslims come together to exist as brothers and sisters not just because they have common enemies but more importantly, because they have common goal in life. Muslims do not merely interact rather they relate. Relationship, unlike mere interaction, has love as the binding force. Muslims love and feel concerned for each other. Muslims are not merely a community of traders.

Al-Islam is not set of rituals to be practiced but a life to be lived.

Riba is discussed in the Qur’an with reference to Muslim Community Economy. It is not a ritual to be observed – it is a practical thing. There is no issue of RIBA between a Muslim community and a non-Muslim community. A person living in USA can interact with people under the system without caring about Riba because it is not a Muslim community. They may take from you and you from them – it is not an issue.

Al-Islam does not advocate Pure Capitalism or Pure Communism but a Middle course. Al-Islam advocates ownership and at the same time stresses spirit of giving and forgiving. The wisdom is to create a powerful economic situation along with strengthening the love in the community. In a Muslim community, economic deprivation is a crime.

A Muslim who has excess money is expected to assist his brother in need or at least lend him without any INTEREST (Not even in the name of lease). This is not business/Trade but pure assistance. It is in the light of this that Allah says : O ye who believe! Lo! many of the (Jewish) rabbis and the (Christian) monks devour the wealth of mankind wantonly and debar (men) from the way of Allah. They who hoard up gold and silver and spend it not in the way of Allah, unto them give tidings (O Muhammad) of a painful doom, (Q9:34)

LARIBA scheme is pure business transaction and must therefore be discussed on that basis. It has nothing to do with NO RIBA that Allah talked about in the Qur’an.

Those who trade their excess money for money are actually hoarding. We do not tolerate such hoarding in a Muslim community. Trading excess money for money is milking the poor ones and creating deprivation in a Muslim community.

In a true riba-free model this rent should be reevaluated periodically based upon the market value. Along with that the price of the house should also be reevaluated causing an adjustment into both partner's equity.

Even with this, it is still pure business. Of course there must be justice when two Muslims engage in any transaction.

Beside the above discussion, what would be your Islamic answer to a riba-free lending (let's say housing loan).

If there is a brother who is suffering from accommodation and there is a way he can be assisted by the community, he should be assisted. Allah rewards generosity abundantly. The government can take it upon itself to provide basic accommodation for all.

If on the other hand, he is to be given money of which he is expected to pay back, he should be given by the government without interest or by a rich person who has excess money. No rent payment.

If there is no person with excess money or the brother is not poor as such, he can enter into business agreement of which there is exchange of service for money. Lariba scheme can fit in here though with little adjustment.

I can make further clarification if there is the need. Try to ask specific questions.