(#109)
assalamu alaykom:
I hope this email finds you safe and well inshaAllah brother. I live in Christchurch and i have a question regarding loans from the bank. I would like to start my own business here in NZ and i am wondering whether it is ok to take a loan from a NZ bank seeing as there are no Islamic banks here in the country. I know that interest is haram but i am wanting to see what your thoughts are regarding this matter here in New Zealand.
Jazaka Allah Kheer and i look forward to hearing from you.
Thank you for your time.
Answer
بسم الله الرحمن الرحيم
السلام عليكم و رحمة الله و بركاته
حامدا و مصليا و مسلما
Muhtaram
We are in receipt of your query pertaining to the issue of Riba (interest). Our response is as follows,
Before answering your question we would like to firstly mention a brief introduction about interest in Islaam
Dictionary meaning of Riba (Interest, Usury):
“The dictionary meaning of Riba is increase and the reference in the verse of Surah Baqarah is to every increase against which there is no exchange or consideration” (Ibnul Arabi, Ahkaamul Quraan, Vol 2 Pg 101)
In terms of Shari’ah, any transaction where the payment of an additional amount on the principal is made conditional to the advance of such a loan is called Riba. (Contemporary Masaail Pg 167).
There is no distinction in Shariat between advancing a loan to a needy person or advancing it to a business concern(charging interest is in any case unlawful and impermissible.) (Contemporary Masaail Pg 167)
Various forms of Riba were in vogue in Arabia when Nabi Sallallahu alaihi wasallam was sent. Most common practice was to lend a specific amount for a specific period and at an agreed rate determined in advance. If the borrower repaid at the agreed time then only the agreed amount of interest was charged. If he was unable to repay at that time, then the amount of interest would be increased. In any case even before the revelation of Qur’an, the essence of Riba was considered to be the gain, made out of loaning money. This very aspect has been highlighted in the sayings of Nabi Sallallahu alaihi wasallam, “Every loan which brings a gain is a Riba based loan“. (The Issue of Interest Mufti Shafi Rahimahullah Pg 14-15)
In today’s times it ought to be noted that two kinds of interest are in vogue;
- Usury which is interest charged on loans for personal, temporary needs.
- Commercial interest which is charged on loans advanced for productive purposes.
Clear injunctions of the Qur’an and Hadith as well as the unanimous opinion of the Muslim community, classify all kinds of interest as strictly illegitimate and prohibited. (The issue of interest Mufti Taqi Pg 104)
Morals, Bad effects
(1) One of the reasons for the prohibition of interest is that it destroys all the desirable moral values and promotes selfishness, mercilessness, lust for money and miserliness. On the other hand Islam aims to build up a society which is based on kindness and mercy, love and reverence for others, cooperation for the good of all and brotherhood.
On the other hand, interest, whether commercial or usurious, results in a mentality wherein there is no room for the above mentioned virtues. The capitalist, who lends, cares only for his interest and does not think of anything else. He is least bothered if the borrower made a loss or a profit, how much profits, if at all, over what period and after how much effort. He continues to receive profit on his wealth regardless. It is his utmost desire that the borrower should be able to earn in as long a period as possible so that the lender is able to exact interest from him for the maximum time period. He has no sympathy even if the borrower suffers a loss because regardless of the borrower’s gain or loss, the lender’s gain remains assured. This phenomenon fosters selfishness to an extent that the a capitalist is not willing to lend without interest even for someone’s needs. (The Issue of Interest, Mufti Taqi Pg 138)
(2) The capitalist (lender) does not enter into a simple and fair partnership with the entrepreneur so that he shares in profits or loss of the business, therefore, he tries to estimate the profit the entrepreneur is likely to earn from his business. Accordingly, he decides on the rate of interest to charge. Generally, he makes an exaggerated and inflated estimate of the profit (pg 143).
- Sometimes capital is borrowed for large industrial and commercial projects and is subject to a specified rate of interest. Such loans are normally for 10,20 or 30 years and the rate of interest remains fixed for the likely changes in the market in the prices of different commodities and obviously, unless the parties possess knowledge of the unseen, they cannot ascertain this either.
Suppose that an entrepreneur borrows a substantial amount at 7% for 20 years, in 2010 and starts a major business. He is now bound to pay interest every year at this rate until 2030. If, however, by 2020 the prices fall to a level which is 50% of the 2010 level, it would mean that until such time that this person is able to sell twice as much, he can neither pay the interest on the principal nor the installment. The result will be that with the decrease in prices, such businessmen will either become bankrupt or they will resort to unfair means to avert the crisis, which will result in corrupting the economic system (The Issue of interest Mufti Taqi , Pg 143-4).
Sayings of Nabi Sallallahu alaihi wasallam about Riba or interest;
“Nabi Sallallahu alaihi wasallam is reported to have said; Abstain from seven disasters.” The people asked him: “What are they, O messenger of Allah?” He replied: “To ascribe partners to Allah,, to participate in sorcery, to unjustly kill one whom Allah has declared inviolable, to take Riba ( interest or usury), to exploit the property of an orphan, to run away from the battlefield at the time of war and to slander the chaste women who are believers, unwary.”(Bukhari, Muslim,)(Ma’ariful Qur’an Vol 1 Pg 705)
There are four kinds of people about whom Allah has decided not to admit them to Paradise and not to let them taste its bliss: The one who is addicted to wine, the one who takes Riba, the one who exploits the property of an orphan and the man who is disobedient to his parents. ( Haakim) ( Ma’ariful Qur’an Vol 1 Pg 706)
The society in which Riba becomes rampant is punished with famine,…….( Musnad e-Ahmed -) ( Ma’ariful Qur’an Vol 1 Pg 707)
Therefore we can deduce after the above prelude that it will not be permissible to take a loan on interest in order to purchase a house. We may use some alternative such as taking a loan from ones friends or family without interest. However in the meantime we should ask Allah Ta’ala to open for us some way. One should not be focused towards ones immediate benefit rather one should look towards the everlasting afterlife.
AND ALLAH TA’ALA KNOWS BEST
Muhammad Irshad Motara
4th Sha’baan 1437
11th May 2016
Checked and approved by:
Mufti Musayyab Sahib
4th Sha’baan 1437
11th May 2016
