Riba is an Arabic noun derived from the verb Raba, meaning ‘to increase’, ‘to grow’, and ‘to exceed’. Riba is a sure thing. It has element of guaranteed gain without any possibility of losses. All the risk is taken by the borrower.
Trade on the other hand has no element of Riba where because in trade, possibility of making or losing money is equal and dependent on negotiation skills and product pricing.
An interest free loan (Qard) reflects the spirit of brotherhood and is not taking advantage of the weak and the unfortunate.
The key point that must be highlight is that if money is offered by a lender to a borrower and the borrower does not provide any form of guarantee in terms of appreciation of the loan value, the act of lending and recovery of loan itself cannot be construed as Riba.
In other words, if someone is seeking a loan and the lender is given an opportunity to participate in a trade (business opportunity) in exchange of the loan WITHOUT any minimum guarantee of return (other than giving back the principal amount at face value), the opportunity to participate in a trade it is not right to construed it as Riba related activities as the trade does not guarantee any form of appreciation. There is an equal risk of losses or making profit.
Unfortunately many religious scholars has a very rigid view on this and consider that the "opportunity to participate in trade" itself is Riba despite that the whole arrangement is a trade. They rely on a weak Hadith that states "Every loan that brings some benefit (to the lender) is Riba." Cited by (Al-Matalib Al-'Aliyah 1/411,1373 and Irwaul-Ghalil 5/235,1398.)
There is sufficient literature to support this hadith is very weak. It is unfortunate that such a weak Hadith has gain prominence and making the Islamic scholars to lose sight of the fact that "trade is permissible" as cited in the Quran V217, Ch2.
Scholars then cite hadith narrated by at-Tirmidhi (2442), Ahmad (1630) and Ibn Hibbaan (722) from al-Hasan ibn ‘Ali (may Allah be pleased with him) not to dwell into this argument.
The hadith states that “Leave that which makes you doubt for that which does not make you doubt, for truth leads to reassurance and lies lead to uncertainty.” Classed as saheeh by Shaykh al-Albaani (may Allah have mercy on him).
The point of contention on this hadith is that it clearly focus on issue of doubt. In the business arrangement where Qard is involved, there is no doubt. Where is the element of doubt?
One must not forget that the 4 Madhabs in Islam looks at interpretation of many Islamic Finance activities differently and their views differs greatly. There is a consensus that application of business practices can be allowed if any of the Madhabs allows it.
In Malaysia the concept bay‘al-‘Inah loan concept is acceptable to Madhhab al-Shafie but not acceptable by majority Muslims legal experts ( fuqaha’) because it was considered as the hilah or legal trick or backdoor to riba’ . If this is doable then why are the scholars so set against the participating in a trade without any element of minimum guarantee in exchange of a Qard?
I welcome your thoughts.
As an expert in Islamic finance and jurisprudence, I would like to shed light on the concepts discussed in the article and provide a comprehensive understanding of the issues related to Riba, trade, and interest-free loans (Qard). My expertise in this field is grounded in a deep understanding of Islamic finance principles, Sharia law, and the diverse perspectives within the Islamic legal tradition.
Firstly, the article introduces the concept of Riba, emphasizing its Arabic origin derived from the verb "Raba," meaning 'to increase,' 'to grow,' and 'to exceed.' Riba is characterized as a sure thing with a guaranteed gain and no possibility of losses. This gain comes at the expense of the borrower who bears all the risks. The distinction between Riba and trade is highlighted, asserting that trade lacks the element of Riba because the possibility of making or losing money is equal and depends on negotiation skills and product pricing.
The article also introduces the notion of an interest-free loan (Qard) as reflective of the spirit of brotherhood, where the lender does not take advantage of the weak and unfortunate. The key point emphasized is that for an arrangement not to be considered Riba, the borrower must not provide any guarantee in terms of appreciating the loan value. If a lender offers money to a borrower, and the borrower has the opportunity to participate in a trade without a minimum guarantee of return, the trade is not considered Riba-related, as there is an equal risk of losses or profits.
The discussion touches upon the interpretation of a weak Hadith that states, "Every loan that brings some benefit (to the lender) is Riba." Scholars argue that the Hadith is weak, and there is sufficient literature supporting this claim. The article laments that reliance on such weak Hadiths has led some scholars to overlook the permissibility of trade, as cited in the Quran (V217, Ch2).
Additionally, the article mentions a Hadith emphasizing the avoidance of doubtful matters, but the expert challenges its applicability to business arrangements involving Qard, arguing that there is no element of doubt in such cases.
The diversity of views among the four Madhabs (Islamic legal schools) is highlighted, with a consensus that business practices can be allowed if any Madhab permits them. The example of the bay‘al-‘Inah loan concept in Malaysia, accepted by Madhhab al-Shafie but rejected by the majority of Muslim legal experts, demonstrates the varying perspectives on Islamic finance practices.
In conclusion, the article raises thought-provoking questions about the interpretation of Islamic finance activities, the reliance on weak Hadiths, and the divergent views within the Islamic legal tradition. The expert welcomes further thoughts and discussions on these complex issues.
