CSS Forums - Does Islam allow banking intrest?

[FONT=Verdana][SIZE=2]For millions of Muslims, banks are institutions to be avoided. Islam is a religion which keeps Believers from the teller's window. Their Islamic beliefs prevent them from dealings that involve usury or interest [COLOR=black][B](Riba).[/B][/COLOR] Yet Muslims need banking services as much as anyone and for many purposes: to finance new business ventures, to buy a house, to buy a car, to facilitate capital investment, to undertake trading activities, and to offer a safe place for savings. For Muslims are not averse to legitimate profit as Islam encourages people to use money in Islamically legitimate ventures, not just to keep their funds idle.[/SIZE][/FONT]
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[FONT=Verdana][SIZE=2]However, in this fast moving world, more than 1400 years after the Prophet (s.a.w.), can Muslims find room for the principles of their religion? The answer comes with the fact that a global network of Islamic banks, investment houses and other financial institutions has started to take shape based on the principles of Islamic finance laid down in the Qur'ân and the Prophet's traditions 14 centuries ago. Islamic banking, based on the Qur'ânic prohibition of charging interest, has moved from a theoretical concept to embrace more than 100 banks operating in 40 countries with multi-billion dollar deposits world-wide. Islamic banking is widely regarded as the fastest growing sector in the Middle Eastern financial services market. Exploding onto the financial scene barely thirty years ago, an estimated $US 70 billion worth of funds are now managed according to Shari'ah. Deposit assets held by Islamic banks were approximately $US5 billion in 1985 but grew over $60 billion in 1994.[/SIZE][/FONT]
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[FONT=Verdana][SIZE=2]The best known feature of Islamic banking is the prohibition on interest. The Qur'ân forbids the charging of Riba on money lent. It is important to understand certain principles of Islam that underpin Islamic finance. The Shari'ah consists of the Qur'ânic commands as laid down in the Holy Qur'ân and the words and deeds of the Prophet Muhammad (s.a.w.). The Shari'ah disallows Riba and there is now a general consensus among Muslim economists that Riba is not restricted to usury but encompasses interest as well. The Qur'ân is clear about the prohibition of Riba, which is sometimes defined as excessive interest. [B] "O You who believe! Fear Allah and give up that remains of your demand for usury, if you are indeed believers." [/B] Muslim scholars have accepted the word Riba to mean any fixed or guaranteed interest payment on cash advances or on deposits. Several Qur'ânic passages expressly admonish the faithful to shun interest.[/SIZE][/FONT]
[FONT=Verdana][SIZE=2]The rules regarding Islamic finance are quite simple and can be summed up as follows:[/SIZE][/FONT]
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[B][FONT=Verdana][SIZE=2]a) Any predetermined payment over and above the actual amount of principal is prohibited.
[/SIZE][/FONT] [/B][FONT=Verdana][SIZE=2]Islam allows only one kind of loan and that is qard-el-hassan (literally good loan) whereby the lender does not charge any interest or additional amount over the money lent. Traditional Muslim jurists have construed this principle so strictly that, according to one commentator "this prohibition applies to any advantage or benefits that the lender might secure out of the qard (loan) such as riding the borrower's mule, eating at his table, or even taking advantage of the shade of his wall." The principle derived from the quotation emphasizes that associated or indirect benefits are prohibited.[/SIZE][/FONT]
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[B][FONT=Verdana][SIZE=2]b) The lender must share in the profits or losses arising out of the enterprise for which the money was lent.
[/SIZE][/FONT] [/B][FONT=Verdana][SIZE=2]Islam encourages Muslims to invest their money and to become partners in order to share profits and risks in the business instead of becoming creditors. As defined in the Shari'ah, or Islamic law, Islamic finance is based on the belief that the provider of capital and the user of capital should equally share the risk of business ventures, whether those are industries, farms, service companies or simple trade deals. Translated into banking terms, the depositor, the bank and the borrower should all share the risks and the rewards of financing business ventures. This is unlike the interest-based commercial banking system, where all the pressure is on the borrower: he must pay back his loan, with the agreed interest, regardless of the success or failure of his venture.[/SIZE][/FONT]
[FONT=Verdana][SIZE=2]The principle which thereby emerges is that Islam encourages investments in order that the community may benefit. However, it is not willing to allow a loophole to exist for those who do not wish to invest and take risks but rather content with hoarding money or depositing money in a bank in return for receiving an increase on these funds for no risk (other than the bank becoming insolvent). Accordingly, under Islam, either people invest with risk or suffer loss through devaluation by inflation by keeping their money idle. Islam encourages the notion of higher risks and higher returns and promotes it by leaving no other avenue available to investors. The objective is that high risk investments provide a stimulus to the economy and encourage entrepreneurs to maximise their efforts.[/SIZE][/FONT]
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[B][FONT=Verdana][SIZE=2]c) Making money from money is not Islamically acceptable.
[/SIZE][/FONT] [/B][FONT=Verdana][SIZE=2]Money is only a medium of exchange, a way of defining the value of a thing; it has no value in itself, and therefore should not be allowed to give rise to more money, via fixed interest payments, simply by being put in a bank or lent to someone else. The human effort, initiative, and risk involved in a productive venture are more important than the money used to finance it. Muslim jurists consider money as potential capital rather than capital, meaning that money becomes capital only when it is invested in business. Accordingly, money advanced to a business as a loan is regarded as a debt of the business and not capital and, as such, it is not entitled to any return (i.e. interest). Muslims are encouraged to purchase and are discouraged from keeping money idle so that, for instance, hoarding money is regarded as being unacceptable. In Islam, money represents purchasing power which is considered to be the only proper use of money. This purchasing power (money) cannot be used to make more purchasing power (money) without undergoing the intermediate step of it being used for the purchase of goods and services.[/SIZE][/FONT]
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[B][FONT=Verdana][SIZE=2]d) Gharar (Uncertainty, Risk or Speculation) is also prohibited.
[/SIZE][/FONT] [/B][FONT=Verdana][SIZE=2]Under this prohibition any transaction entered into should be free from uncertainty, risk and speculation. Contracting parties should have perfect knowledge of the counter values intended to be exchanged as a result of their transactions. Also, parties cannot predetermine a guaranteed profit. This is based on the principle of 'uncertain gains' which, on a strict interpretation, does not even allow an undertaking from the customer to repay the borrowed principal plus an amount to take into account inflation. The rationale behind the prohibition is the wish to protect the weak from exploitation. Therefore, options and futures are considered as un-Islamic and so are forward foreign exchange transactions because rates are determined by interest differentials.[/SIZE][/FONT]
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[FONT=Verdana][SIZE=2]A number of Islamic scholars disapprove the indexation of indebtedness to inflation and explain this prohibition within the framework of qard-el-hassan. According to those scholars, the creditor advances the loan to win the blessings of Allah and expects to obtain the reward from Allah alone. A number of transactions are treated as exceptions to the principle of gharar : sales with advanced payment (bai' bithaman ajil); contract to manufacture (Istisna); and hire contract (Ijara). However, there are legal requirements for the conclusion of these contracts to be organised in a way which minimises risk.[/SIZE][/FONT]
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[B][FONT=Verdana][SIZE=2]e) Investments should only support practices or products that are not forbidden [/SIZE][/FONT] [/B][FONT=Verdana][SIZE=2]-or even discouraged- by Islam. Trade in alcohol, for example would not be financed by an Islamic bank; a real-estate loan could not be made for the construction of a casino; and the bank could not lend money to other banks at interest.[/SIZE][/FONT]

[QUOTE=nazish ali]i have question

1:do u have any any complete economical system in islam ?
dont say islam complete code of life put forward something practicaly ststmements ?[/QUOTE]
The Economic System of Islam
by Dr. Muhammad Hamidullah

ISLAM provides guidance to its adherents in all phases and activities of life, in matters material as well as spiritual. Its basic teaching with regard to economics is mentioned in several passages of the Qur'an. Far from despising material well-being, it recognizes (4 : 5) that, ". . . your goods which God has made as the very means of your subsistence . . . ."; and it orders, "and neglect not thy portion of this world" (28 : 77). It lays emphasis , however, on the dual composition of man, by reminding him thus: ". . . but of mankind is he who saith, 'Our Lord! give unto us in this world; and he hath no portion in the Hereafter. And of them is also he who saith, 'Our Lord! give unto us what is good in this world and what is good in the Hereafter, and guard us from the doom of Fire. For these there is in store a goodly portion out of that which they have earned: God is swift at reckoning." (2 : 200-2). In other verses we find it stated plainly and definitely that, all that is found on the earth, in the seas and the heavens has been created by God for the benefit of man; or that all that is on the earth, in the heavens, the ocean, the stars and others have been made subservient to man by God. It means for man to know and to profit by the creation of God, and profit in a rational way, paying due regard to the future.

338. The economic policy of Islam has also been explained in the Qur'an in the most unequivocal terms: ". . . so that this (wealth) may not circulate solely among the rich from among you. . . ." (Q. 59 : 7) Equality of all men in wealth and comfort - even if it is ideal - does not promise to be of unmixed good to humanity. First because natural talents are not equal among different men, so much so that even if one were to start a group of persons with complete equality, the spendthrift will soon fall into difficulties and will again look on the fortune of his comrades with greed and envy. Further, on philosophic and psychological grounds, it seems that in the very interest of human society, it is desirable that there should be grades in wealth, the poorer having the desire and incentive to work harder. On the other hand, if everybody is told that even if he works more than what is required of him as his duty, he would get no reward and would remain as those who do not do more than their duty, then one would become lazy and neglectful, and one's talent would be wasted to the great misfortune of humanity.

338/a. Everyone knows that human livelihood is in constant progress, through the domination and exploitation one after the other of all those things that God has created, whereas one sees that the rest of animals have changed nothing in their livelihood ever since God created their species. The cause of this difference, as discovered by biologists, is the simultaneous existence of a society - a co-operation, and a liberty of competition inside the members of the society, i.e., human beings. Whereas other animals suffer from the lack of some or all of these requisite conditions. Dogs, cats and snakes for instance do not create even a family, for they perpetuate their race by means of free and momentary "love". Others, such as crows and pigeons do create a family in the form of couples yet even if the male helps in the construction of the nest, each member in the 'couple' depends on its own gain for its livelihood. Perhaps the most developed social co-operation is found among bees, ants and termites (white ants). They live in a collective way, with complete equality in livelihood, yet without any competition among its members, and consequently it is not possible for the more intelligent or more industrious bee to live more comfortably than others. For this reason there is neither evolution nor change, much less progress in any of these species, as against the human race. The past history of man shows that every advance and every discovery of the means of comfort came into existence through competition and desire for improvement, and also through the existence of grades of wealth or poverty among men. Yet, absolute liberty would lead devilish men to exploit the needy, and draw them out gradually. So it was necessary for every progressive civilization and every healthy culture to impose certain duties on its members (such as the to pay taxes, the interdiction of having recourse to oppression and cheating, etc.), and to recommend certain supererogatory acts (like charity and expenditure for the sake of God), yet to nevertheless have a great deal of liberty of thought and action to its members, so that each one benefits himself, his family, his friends and the society at large. This is the exigency of Islam, and it also conforms to nature.

339. It is on the basis of this fundamental principle that Islam has constructed its economic system. If it tolerates the minority of the rich, it imposes on them heavier obligations: they have to pay taxes in the interest of the poor, and they are prevented from practising immoral means of exploitation, hoarding and accumulation of wealth. For this end there will be some orders or injunctions, and also some recommendations -- for charity and sacrifice -- with the promise of spiritual (other-worldly) reward. Further it makes on the one hand, a distinction between the necessary minimum and the desirable plenitude, and on the other hand between those orders and injunctions which are accompanied by material sanctions and those which are not so, but for which Islam contents itself with persuasion and education only.

340. We shall describe first in a few words this moral aspect. Some illustrations would enable us to better understand its implications. Most emphatic terms have been employed by Islam to show that to beg charity of others is something abominable, and it would be a source of shame on the day of Resurrection. Yet simultaneously, unlimited praise has been bestowed on those who come to the aid of the others, the best of men being in fact those who make a sacrifice and prefer others to their own selves. Similarly avarice and waste are both prohibited. One day the Prophet of Islam had need of considerable funds for some public cause. One of his friends brought a certain sum to offer as his contribution, and on the demand of the Prophet, he replied: "I have left at home nothing but the love of God and of His messenger." This person received the warmest praise from the Prophet. Yet on another occasion, another companion of his, who was seriously ill, told him when he came to inquire about his health: "O messenger of God! I am a rich man, and I want to bequest all that I possess for the welfare of the poor." The Prophet replied, "No; it is better to leave to thy relatives an independent means of livelihood than that they should be dependent on others and be obliged to beg." Even for two-thirds and for a half of the possessions the remark of the Prophet was, "that is too much." When the proposal was submitted to give one-third of the property in charity, he said: "Well, even the third is a large amount." (cf. Bukhari). One day the Prophet saw one of his companions in miserable attire. On enquiry, he replied: "O messenger of God! I am not at all poor; only I prefer to spend my wealth on the poor rather than on my own self." The Prophet remarked: "No; God likes to see on His slave traces of the bounty that He has accorded him! " (cf. Abu Da'wud and Tirmidhi). There is no contradiction in these directions; each has its own context and relates to distinct individual cases. We are afforded an opportunity of determining the limits of the discretionary choice in excess of the obligatory minimum, vis-à-vis the other members of society.

Inheritance

341. Both the individual right of disposing of one's wealth and the right of the collectivity vis-à-vis the wealth of each individual, in as much as one is a member of society, have to be simultaneously satisfied. Individual temperaments differ enormously. Sickness or other accidents may also affect a man out of all proportion. So it is necessary that a certain discipline should be imposed upon him in the interest of the collectivity.

342. Thus Islam has taken two steps: firstly the obligatory distribution of the goods of a deceased person among his close relatives, and secondly a restriction on the freedom of bequest through wills and testaments. The legal heirs do not require any testamentary disposition, and inherit the property of the deceased in the proportions determined by law. A testament is required solely in favour of those who have no right to inherit from a deceased person.

343. There is equality in the parents of the same category, and one cannot award to one son (elder or younger) more than to the other -- whether major or minor. The first charges on the property left by the deceased are the expenses of his burial. What remains then goes to his creditors, the debt having priority over the "rights" of the inheritors. In the third place, his testament is executed, to the measure and extent that it does not exceed the third of the available property (after burial and payment of debts). It is only after satisfying these prior obligations that heirs are considered. The (male or female) partner of life, the parents, the descendants (sons and daughters) are the first class heirs, and inherit in all cases. Brothers and sisters, and other more remote relatives inherit from a deceased person only in the absence of nearer relatives. Among these more remote relatives, we find uncles, aunts, cousins, nephews and others.

344. Without entering into technical details, certain basic rules may be described. A homicide is excluded from the inheritance of his own victim, even if the court decides that it was a case of death by involuntary accident. The underlying idea seems to be to prevent all temptation to kill a rich relative in view of an earlier inheritance. The Prophet has also prohibited inheritance among relatives of different religions, even between the husband and wife. However, the right of donating gifts and testament can be availed of in this respect. The Muslim husband, for instance, may bequest, even on his death-bed, a part of his property in favour of his non-Muslim wife. On the strength of the international and political conditions of their times, the classical Muslim jurists have instituted another hindrance, viz., the difference of the territory (i.e., political nationality) as barring inheritance. Evidently the statal treaties may regulate the question of private international law, in a contrary sense, on the basis of reciprocity.

345. In countries where the Islamic law of inheritance is not applied by governments, yet the right of testament is recognized, the Muslim inhabitants can (and must) utilize this facility, in order to fulfill their religious duty with regard to the disposition of their property after their death.

Wills

346. We have just mentioned that the right of testamentary bequests is operative only within the limits of a third of the property, in favour of persons other than creditors and heirs. The aim of this rule seems to be two-fold: (1) To permit an individual to adjust things, in extraordinary cases, when the normal rule causes hardship; and a third of the property is sufficient for fulfilling all such moral duties. (2) Another motive of the law of the will is to prevent the accumulation of wealth in the hands of a few, a thing which would happen if one should give all this property, by will, to a single person excluding totally one's near relatives. Islam desires the circulation of wealth among as large a number of people as possible, taking into account the interests of the family.

Public Goods

347. One also has obligations as a member of a larger family, viz., society and the State in which one lives. In the economic sphere, one pays taxes, which the government redistributes in the interests of the collectivity.

348. The taxation rate differs according to the various kinds of the sources of income, and it is interesting to note that the Qur'an, which gives precise directions with regard to budgetary expenditure, has enunciated neither rules nor rates of the income of the State. While scrupulously respecting the practice of the Prophet and of his immediate successors, this silence of the Qur'an may be interpreted as giving a latitude to the government to change the rules for income according to circumstances, in the interest of the people.

349. In the time of the Prophet, there were agricultural taxes, and the peasants handed over a tenth of the harvest, provided it was above a certain taxless minimum and irrigated their lands with rain or spring water, and half that rate in the case of wells as the means of irrigation. In commerce and exploitation of mines, one paid 2½% of the value of goods. As for import taxes on foreign caravan-leaders, there is an interesting fact which should profitably be brought into relief. In the time of the Prophet, these were subject to a tithe as customs duty. The caliph 'Umar reduced by half this tax on foreigners, concerning certain categories of victuals imported in Madinah (as reported by Abu 'Ubaid). This precedent of high authority casts light on the essential principles of the fiscal policy of Islam. In the time of the Prophet, there were taxes on herds of camels, sheep and goats, and oxen provided they were fed on public pastures and exceeded in number the taxless minimum. Exemption was accorded further to beasts of burden and those employed for ploughing and irrigation.

350. There was a tax of 2½% on savings on silver and gold. This obliged people to employ their wealth for increase, and not to indulge in idle hoarding.

351. The Qur'an (9:60) has prescribed the principles regulating the budget of State expenditure in Islam, in the following terms: "Verily the sadaqat (i.e., taxes on Muslims) are only for the needy, and the poor, and those who work for these (taxes), and those whose hearts are to be reconciled, and to free the necks (i.e., slaves and prisoners of war), and the heavily charged, and in the path of God, and for the wayfarer -- a duty imposed by God; God is Knower, Wise." These eight heads of expenditure, which cover practically all the needs of a collective, need elucidation to enable the understanding of their exact range and application.

352. The term sadaqat, which we translate as the State tax on Muslims, and which is a synonym of zakat, signifies all the taxes paid by Muslims to their government, in normal times, whether on agriculture, mines, commerce, industry, pasturing herds, savings or other heads. These exclude the provisional taxes imposed in abnormal times, the revenues levied on non-Muslims - subjects or foreigners and also all the non-obligatory contributions. Juridical literature of early Islam, and particularly the sayings of the Prophet, leave no doubt that the term sadaqat was employed in this sense. It did not refer at all to alms, which can be neither obligatory nor determined as to the quantity and the time of payment. The equivalent for alms is infaq fi sabil Allah, expenditure in the path of God, or tatauwu': voluntary charity.

353. The first two categories of the needy (fuqara) and the poor (masakin), which are almost synonymous, have not been explained by the Prophet; hence there is a divergence of opinion. According to sayings and constant practice of the caliph 'Umar (recorded by Abu Yusuf in his Kitab-al-Kharaj and Ibn Abi Shaibah in his Musannaf), fuqara are the poor among the Muslims, and masakin are from among the non-Muslims residing in the Islamic territory, such as Jews. In his Futuh al-Buldan, Baladhuri cites another case of the same caliph, who awarded pensions to Christians of Jabiyah (Syria) from the sadaqat, i.e. zakat revenues. The jurist ash-Shafi'i thought that the terms were absolutely synonymous, and that God, out of His bounty, named them twice in order to make a double provision. According to this authority, as each of the eight heads in the Quranic verse should receive one-eighth of the State income, the poor would receive two-eighths. Be it what it may, the first duty of the State is to see that no dweller on the Islamic soil is deprived of the means of livelihood: food, dress, lodging, etc.

354. The next item concerns the salaries of the functionaries: collectors, accountants, controllers of expenditure, auditors of accounts etc. If the truth is to be told, this category comprises the entire administration, civil, military and diplomatic, as one can see in the description of the categories of the beneficiaries. The historian al Baladhuri (in his al-Ansah) has preserved a document in which the caliph 'Umar demands of his governor of Syria: "Send us (to Madina) an expert Greek, who may put in order the accounts of our revenues." (hisaba fara'idina). We require no better authority for asserting that the non-Muslims could not only be employed in the administration of the Muslim State, but also be beneficiaries of the sadaqat levied exclusively on Muslims.

355. The category of those whose hearts are to be reconciled can more easily be understood by the modern term "secret funds." In his al-Ahkam as-Sultaniyah, the jurist Abu-Ya'la al-Ferra' says: "As to those whose hearts are to be won, they are of four kinds: (1) Those whose hearts are to be won for their coming to the aid of the Muslims; (2) or for abstaining from doing harm to Muslims; (3) for inviting them to embrace Islam; and (4) for inviting through them their clans and families to embrace Islam. It is lawful to spend on each and every one of these whether they be Muslims or polytheists."

356. By the term "freeing the necks," one has always understood two kinds of expenditure: the liberation of slaves, and ransoming of the prisoners of war in the hands of the enemy. According to the Islamic law (Qur'an 24:33), every slave has the right to purchase his emancipation by paying his value to his master; and in order to earn the necessary amount, he may compel his master to give him facilities to work, and during this period he is not required to serve his master. Moreover, as we have just seen, it is the duty of the government to allot every year in the budget a certain sum for aiding the slaves to buy their freedom. A document of the time of the Umaiyad caliph 'Umar ibn 'Abdal-'Aziz (reported by Ibn Sa'd) says that the payment of the ransoms by the Muslim government includes liberating even the non-Muslim subjects who would have been made prisoners by the enemy.

357. The category of those who are heavily charged has, according to the practice of classical times, a whole series of applications. One helped those who had suffered from calamities such as floods, earthquakes, etc. It does not refer to the poor, who have already been mentioned in the beginning of the verse, but to the well-to-do who have suffered from abnormal conditions, beyond their power. Caliph 'Umar started a special section in the Public Treasury, in order to lend money, free of interest, to those who had temporary needs and provided the necessary guarantees for repayment. The caliph himself had recourse to it for his private needs. It goes without saying that the "nationalization" of lending without interest was the necessary concomitant of the prohibition of interest in Islam. The same caliph used to lend public money even to merchants for fixed periods and the Treasury participated with them in a percentage of their business returns. They participated not only in gains but even in the event of losses. Another application of this State expenditure was for a kind of social insurance. If somebody was found guilty of involuntary homicide, and was unable to pay the blood money required by law out of his own means, the government came to his help under this heading of the budget, as is evidenced by several cases of the practice of the Prophet. We shall revert to this later in detail.

358. The expression "in the path of God," in the Islamic terminology, signifies, in the first instance, military defence and the expenditure for the personnel, equipment, etc. But the term applies in fact to all sorts of charitable works, such as helping students, grants and aids in religious causes such as the construction of mosques, etc.

359. The last category concerns communications and tourist traffic in a wide sense: construction of bridges, roads, hotels, restaurants, security of routes (police included), hygienic arrangements, transport of travellers, and every comfort provided to aliens in the course of their journeying, including extending hospitality to them without charge and in proportion to the means available. Formerly such hospitality was assured for three days in every place of stay.

360. In order to appreciate the merit of these Quranic dispositions, one must remember that the time was the very beginning of Islam, fourteen centuries ago. There is not much that could be added to these headings of expenditure. They seem to be well applicable to our own times in a progressive welfare State, having concern for the well-being of its subjects.

Exceptional Taxes

361. The sadaqat were the only taxes of the State in the time of the Prophet and the Orthodox Caliphs. In later times, on occasions of extraordinary need, the jurists have admitted the legal possibility of imposing supplementary charges, on a strictly provisional basis, for occasional exigencies. Such taxes are called nawa'ib (calamities).

Social Insurance

362. Only risks involving heavy charges form objects of insurance, and these differ according to the times and social conditions. Among the Arabs at the commencement of Islam, daily ailments were unknown and the cost of medical care was practically nothing. The average man built his house with his own hands, and did not pay even for the major part of the material. Thus it is easy to understand why one had no need of insurance against sickness, fire etc. On the contrary, insurance against captivity and against assassination were a real need. Already in the time of the Prophet, this point had received attention, and certain dispositions were made which had the elasticity of further development and adaptation to circumstances. Thus, in the Constitution of the City-State of Medina of the first year of the Hijrah, this insurance is called ma'aqil and it worked in the following manner. If someone was made a prisoner of war by an enemy, payment of ransom was needed to procure his liberation. Similarly, all bodily torts or culpable homicides required payment of damages or blood money. This often exceeded the means of the individual concerned, prisoner or criminal. The Prophet organized an insurance on the basis of mutuality. The members of a tribe could count on the central treasury of their tribe, to which everybody contributed according to his means. And if the treasury of the tribe proved inadequate, other related or neighbouring tribes were under obligation to render aid. A hierarchy was established for organizing the units into a complete whole. At Medina, the tribes of the Ansarites were well known. The Prophet ordered the Meccan refugees there, who belonged originally to the various tribes of Mecca, or were Abyssinians, or Arabs belonging to different regions, to all constitute a new "tribe" of their own, for purposes of the said social insurance.

363. Later in the time of the caliph 'Umar, the branches of insurance were organized on the basis of the profession, civil or military administration, to which one belonged (or even of regions). Whenever needed, the central or provincial government came to the succour of the branches, as we have described above when speaking of State expenditure.

364. Insurance signifies essentially the repartition of the burden of an individual on as many as possible, in order to lighten the burden of each. Instead of the capitalistic companies of insurance, Islam preferred organising insurance on the basis of mutuality and cooperation, aided by a pyramidal gradation of the branches culminating in the central government.

365. Such a branch could engage in commerce with the help of unutilized funds remaining at its disposal, so that the capital is augmented. A time might come, when the members of a branch could be fully exempted from paying further contributions, or might even receive amounts of the profits of commerce. It goes without saying that these elements of mutual aid could insure against all kinds of risks, such as accident of traffic, fire, loss in transit, and so on. Also, it goes without saying that the insurance business is capable of being "nationalized" for all or certain kinds of risks (i.e. temporary motives such as the dispatch of parcels, etc.).

366. Without entering into technical details, it may be pointed out that capitalistic insurance, in which the insured person does not participate in the benefits of the company in proportion to his contributions, is not tolerated in Islam as this would constitute a form of game of chance.

367. In passing, we might mention another social institution of the time of the caliph 'Umar. He had organized a pension system for all the inhabitants of the country, and according to the Kitab al-Amwal of Ibn Zanjuwaih and ar-Risalahal-'Uthmaniyah of al-Jahiz, even non-Muslim subjects were among the beneficiaries of these pensions - so much so that as soon as a child was born, he began to receive a certain pension. The adults received the minimum necessary for living. In the beginning, the caliph practised a certain discrimination amongst the different categories of the pensioners, and if the minimum was one, the most favoured person received forty; yet towards the end of his life, he decided to observe complete equality, but he died before this reform could be introduced. This institution, named "Diwan," by 'Umar, seems to have originated in the very time of the Prophet, as the following report implies: "The basis of this practice is the narration that the Prophet named Mahmiyah ibn Jaz' to be in charge of the governmental fifth of the booty captured on the Banu'l-Mustaliq; and in fact Mahmiyah was in charge of the governmental fifth of all booties. The sadaqat (zakat taxes) were controlled separately and had their own particular administration. However, peaceful revenues from the enemy (fay') were administered by separate functionaries. The prophet used to spend the sadaqat on orphans, the weak and the poor. If the orphan reached puberty and military service (Jihad) became his duty, he was transferred from the list of the beneficiaries of the sadaqat to that of the fay'. If he refused to render military service, he would not benefit any more from the sadaqat and was commanded to earn his livelihood himself." (cf. Sarakhsi. Sharh as-Siyar al-Kabir, ed. Munajjed. 1978).

Games of Chance

368. In prohibiting these, the Qur'an (5:90) has characterized them as the "work of Satan" for cogent reasons. It is recognized that most social evils emanate from the bad distribution of the national wealth wherein some individuals become too rich and others too poor and as a result, they fall victim to exploitation by the rich. In games of chance and lotteries, there is great temptation for quick and easy gain - and so often easy gain is bad for society. Suppose that in horse racing (and other forms) and in either public or private lotteries, as well as all other games of chance, the people of a country spend 3 million pounds every week (as is the case in certain countries) in the course of only ten years, a sum of 1,560 millions of pounds will be collected from a very large number of the inhabitants and redistributed among a ridiculously small number of people. Less than one percent of the people thrive at the expense of the remaining 99 per cent. In other words, the 99 per cent are impoverished in order to enrich the 1 per cent so that one creates one per cent of millionaries by systematically ruining the other 99 per cent. Whether games of chance, including lotteries, are private or nationalized, the evil of accumulating wealth in the hands of the few at the expense of a very vast majority, works with full force. Hence the total prohibition of games of chance and lotteries in Islam. As in capitalistic insurance, games of chance bear one-sided risks.

Interest on Money-lending

369. Probably there is no religion in the world which has not prohibited usury. The distinctive trait of Islam is that not only has it forbidden this kind of gain, but it has also remedied the causes leading to the existence of this evil institution in human society:

370. Nobody pays willingly an interest on what he borrows: he pays only because he requires money and he finds that he could not get it without paying interest.

371. Islam has made a very clear distinction between commercial gains and interest on money-lending. The Qur'an (2:275) says: ". . . God permitteth trading and forbiddeth interest. . ." A little later (2:279), it says: "If you do not give up (interest), then be warned of war against God and His messenger; and if ye repent, then ye shall have your principal, (without interest); neither ye wrong nor be wronged."

372. The basis of the prohibition of interest is also the unilateral risk. For when one borrows a certain sum for earning an increase by the rich. In games of chance and lotteries, there is a great temptation for quick and easy gain, it is possible that circumstances should not have been propitious enough for earning sufficiently to be able to pay the promised interest, the lender not participating in the risks of the exploitation.

373. It is not possible to compel an individual to deprive himself of his money, in order to lend it to others gratuitously and without interest. We have pointed out that Islam has ordered that one of the charges on State income is the obligation of helping those who are heavily charged. Hence, the Public Treasury organized interest-free loans, in addition to and for supplementing the loans offered by charitable men or organizations, to help those who are in need of them. The principle is mutual aid and cooperation.

374. In the case of commercial loans, there is also the system of mudarabah, in which one lends money and participates equally in gains as well as in risks. If, for instance, two individuals form a company, each one furnishing half of the capital and labour, then the distribution of the profit is not difficult. However, if the capital comes from one party and the labour from the other, or if the two furnish the capital though only one of them works, or the proportions of the partners' share are not equal, in such cases a reasonable remuneration of the labour, on the basis of the previously agreed conditions is taken into consideration before the distribution of gains and profit is effected. Of course all possible precautions are taken, in order to prevent risks, yet Islam demands that in all contractual negotiations, the profit as well as the loss should be shared by both the contracting parties.

375. As far as the banks are concerned, their activities are principally of three kinds (i) remitting of amounts from one place to another, (ii) assuring safety of the savings of the clients, and (iii) lending money to others on profit. The expenses of the functioning are borne by those who utilize the service of banks. The question remains of loans for commerce, industry or any other trade motive. If the bank participates in the profit of its debtors as well as in their risks, Islam allows such banking activities, otherwise not.

376. Confidence is born of confidence. If the savings banks of a government declare at the end of the year (and not at its beginning) that they are in a position to pay such and such percentage of profit to the clients, not only would this be lawful according to Islam, but the public also would have no hesitation in depositing its savings with governmental banks, in spite of the silence in the beginning with regard to the quantity of the expected profit. For one has confidence in the public administration.

377. To sum up, the principle of mutual participation in profits as well as in risks must be observed in all commercial contracts.

Statistics

378. In all planning, it is necessary to have an idea of the available resources. The Prophet organized the census of the Muslim population, as al-Bukhari informs us. In the caliphate of 'Umar, the census of beasts, fruit-trees, and other goods was organized; and cultivable lands were measured in the newly-acquired provinces. With a large spirit, full of concern for the well-being of the public, caliph 'Umar had the habit of inviting representatives of the people of different provinces, after the collection of taxes, to find out if they had any complaint against the behaviour of the collectors during the year.

Daily Life

379. We may end this brief sketch by mentioning two prohibitions of considerable importance, which form in fact characteristic features of the daily life of a Muslim - games of chance and alcoholic drinks. We have had the occasion to discuss games of chance, in which one spends sometimes continually during the course of years without obtaining anything in return. What a loss to those who are economically weak! The use of alcohol has the peculiarity that its consumption in a small quantity makes one gay and weakens his resolution to drink no more. And when one becomes drunk, one has loses control over one's acts. One may then squander money without noticing it. To these evils may be added the unhygienic effects of alcoholic beverages which are transmitted in the children and their progeny also. One of the Quranic verses (2:219) speaks of it in interesting terms: "They question thee about wine and games of chance; say: in both is great sin and some profits for men; but the sin of them is greater than their usefulness." (Qur'an 2:219).

The Qur'an does not deny that there are certainprofits in the use of alcohol, still it declares it a sin against society, against the individual himself, and of course against the Legislator. In another verse (5:90) it relegates it to the same level as idolatry, and decares it to be the handiwork of Satan. It adds that if one desires to be happy in both worlds, one should abstain from games of chance and alcoholic beverages.