Does Islam allow banking intrest?
 

aoa all active members............

we know that in our country after the retirement peoples are buying the save deposit certificate or saving certificate if bank. and every month those peoples take 936 paki rupees intrest every month on one lac and those are saving money in bank for one or two hours , my question is that is islam allow the banking intrest.

any thing having intrest is haram i think there is no question abt that.. what we do and what we a supposed to do are two seprate things... my dear fella!:)

1. Earning interest is not permitted according to the Shari'ah, and normally there are no reasons why a Muslim should earn interest. Muslims are required to use their money, funds and properties in businesses and investments that are compatible with the Islamic Shari'ah. Earned interest does not become a property of its earner because an interest-generating contract is not a means for earning. In other words earned interest is not yours and the principle is that you must return it to the person who paid it.



2. If for any reason a Muslim happens to have earned interest we must look at the ruling on returning it within the realm of the objectives of Shari'ah as well as the specific positions of the minute issue at hand. Earning interest from a person who sells Halal goods is different from earning it from a person whose business is to lend money on interest, especially banks whose basic and dominant activity is to earn interest from people with whom they deal.



Thus, retiring earned interest to a person (a bank is also a legal person) who makes his income from lending on interest, defeats the very purpose for which interest is prohibited and increases the power and income of those who actively spread the evil of interest.



3. Therefore, the ruling of the Second International Conference on Islamic Banking held in Kuwait in 1987 (may be earlier) which was attended by many Shari'ah scholars concluded that it is not permitted to return earned interest to conventional bankers; instead we must apply to such earned interest another Shari'ah rule that requires giving away to general charity any haram money, that happens to come under the hand of a Muslim (remember that it does not become a property of the Muslim, so it is not his), and it is better that such haram money should not be given to a Mosque just for keeping it clean of this dirty money (i.e. interest).


Donating Interest Money for Building a Mosque



4. Buying cars, houses and other properties on interest-based financing is also not permitted in the Shari'ah, and all Muslims in an area are required by the Shari'ah to establish financial institutions that provide financing on Islamically acceptable grounds. Actually, this is regarded as a fard kifayah (collective obligation) in nowadays since financing has become a necessary part of contemporary life.

Until such institutions exist, the First International Conference on Fiqh in the USA held in Oct. 1999 rightly resolved that for important things like housing for families who are in a dire need of them, interest-based borrowing is tolerated until Islamically compatible institutions are established.


May Allah guide us to the straight path, and guide us to that which pleases Him, Amen.

every person know that when we open a account in any bank,the bank manager ask us did u submited the affidavit for zakat,islam says in every year we have wont to give zakat to yateems or poors,when we did not submit zakat affidavit then bank will deduct charges of zakat from your account,is that right or wrong,or if any thing having intrest in islam is haram ,those peoples are knowing about it then why those are saving money in bank.is that mean those peoples are taking intrest money from bank,those take money haram from bank?

AOA

In modern secular economic systems interest plays a very important role.
In Islamic jurisprudence the word used for interest is 'riba.'

There is complete unanimity among all Islamic Schools of thought that Riba is prohibited in Islam, as it appears explicitly in the Holy Qur’an.

The word riba has been used in the Holy Qur’an on several occasions. Riba means addition, increase. literally it means to increase, to grow to rise, to add, to swell. In the Shari’ah, “riba” technically refers to the premium that must be paid by the borrower to the lender along with the principal amount as a condition for the loan or for an extension in its maturity. In this sense riba has the same meaning as interest in accordance with the consensus of all jurists without any exception.

In several verses of the Holy Qur’an, Allah(swt) has mentioned the consequences of riba. The Qur’an did not declare the prohibition of riba in the early stage of revelation, rather we find that the complete prohibition of interest came sequentially.

[U]In the Qur’an Allah (swt) says[/U]:

“That which ye lay out for increase through the property of (other) people, will have no increase with Allah: But that which ye lay out for charity, seeking the countenance of Allah (will increase): it is these who will get a recompense multiplied”. (30:39)

“That they took riba (usury), through they were forbidden and that they devoured men’s substance wrongfully – We have prepared for those among men who reject faith a grievous punishment.” (4:161)

“O ye who believe! Devour not usury doubled and multiplied; but fear Allah, that ye may (really) prosper.” (3:140)

“Those who devour usury will not stand except as stands one whom the evil one by his touch hath driven to madness. That is because they say: ‘Trade is like usury.’ But Allah hath 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 (forever)” (2:275)

“O you who have attained faith! Remain conscious of God, and give up all outstanding gains from Usury, if you are (truly) believers” (2: 278)

[U]Prohibition of riba in the hadith [/U]

Jabir reported: The Prophet (saw), cursed the receiver and the payer of interest, the one who records it (the contract) and the two witnesses to the transaction and said, “they are all alike (in guilt).”

Jabir ibn Abdullah, giving a report on the Prohet’s farewell pilgrimage, said: The Prophet (saw), addressed the people and said, “All the riba al-jahiliyyah is annulled, the first riba htat I annulled is our riba, accruing to al-Abbas ibn Abdul Mutalib (the Prophet’s uncle).”

Abu Hurayrah (ra) narrated that the Prophet (saw), said: “riba has seventy segments, the least serous is equivalent to a man committing incest with his own mother.”

Abu Hurayrah (ra) narrated that the Prophet (saw) said: “”God would not allow four persons to enter paradise or to taste its blessings: he who drinks wine, he who takes riba, he who usurps an orphan’s property without right and he who is undutiful to his parents.”

Reference:

* [url]http://www.shodalap.com/Interest_Zamir_I.htm[/url]
[url]http://www.inter-islam.org/Prohibitions/intrst.htm[/url]

"Islam permits increase in capital through trade. Referring to this, Allah Almighty says, “O you who believe, do not consume your property among yourselves wrongfully, but let there be trade by mutual consent...” (An-Nisa’: 29)

At the same time, Islam blocks the way for anyone who tries to increase his capital through lending on usury or interest (Rriba), whether it is at a low or a high rate, reprimanding the Jews for taking usury, even though they had been prohibited to do so.

Among the last revelations are the following verses of Surat al-Baqarah: “O you who believe, fear Allah and give up what remains due to you of interest if you are indeed believers. And if you do not, then be warned of war (against you) by Allah and His Messenger, while if you repent you shall have your capital. Do not do wrong and you shall not be wronged.” (Al-Baqarah: 278-279)

The Prophet (peace and blessings be upon him) declared war on usury and those who deal in it; he pointed out its dangers to society, saying, “When usury and fornication appear in a community, the people of that community render themselves deserving of the punishment of Allah.” (Reported by Al-Hakim; Abu Y'ala has reported something similar on good authority)

Judaism, prior to Islam, had also prohibited interest. In the Old Testament we read, “If you lend money to any of my people with you who is poor, you shall not be to him as a creditor, neither shall you require interest from him.” (Ex. 22:25)

As for Christianity, the Gospel according to Luke reads, Give away to every one who begs of you, and of him who takes away from your goods, do not demand them back again. (Luke 6:30)

It is, therefore, sad to see that the Old Testament has been subjected to such distortions that the meaning of "my people," which originally had a broader application, later became restricted to the Jews alone, as we read in Deuteronomy, You may lend on interest to a foreigner, but to your brother you shall not lend on inters". (Deut. 23:20)

[B]The wisdom behind the prohibition of interest [/B]

The strict prohibition of interest in Islam is a result of its deep concern for the moral, social, and economic welfare of mankind. Muslim scholars have sound arguments explaining the wisdom of this prohibition, and recent studies have confirmed their opinions, with some additions and extensions of their arguments.

We confine ourselves to what Imam al-Razi says in his tafsir of the Qur'an:

First: The taking of interest implies appropriating another person's property without giving him anything in exchange, because one who lends one dirham for two dirhams gets the extra dirham for nothing. Now, a man's property is for (the purpose of) fulfilling his needs and it has great sanctity, according to the hadith, “A man's property is as sacred as his blood.” (Reported by Abu Na'eem) This means that taking it from him without giving him something in exchange is haram.

Second: Dependence on interest prevents people from working to earn money, since the person with dirhams can earn an extra dirham through interest, either in advance or at a later date, without working for it. The value of work will consequently be reduced in his estimation, and he will not bother to take the trouble of running a business or risking his money in trade or industry. This will lead to depriving people of benefits, and the business of the world cannot go on without industries, trade and commerce, building and construction, all of which need capital at risk. This, from an economic point of view, is unquestionably a weighty argument.

Third: Permitting the taking of interest discourages people from doing good to one another, as is required by Islam. If interest is prohibited in a society, people will lend to each other with good will, expecting back no more than what they have loaned, while if interest is made permissible the needy person will be required to pay back more on loans (than he has borrowed), weakening his feelings of good will and friendliness toward the lender. (This is the moral aspect of the prohibition of interest.)

Fourth: The lender is very likely to be wealthy and the borrower poor. If interest is allowed, the rich will exploit the poor, and this is against the spirit of mercy and charity. (This is the social aspect of the prohibition of interest.) (Tafsir by al-Fakhr al-Deen al-Razi, vol. 7, p. 4.)

Thus, in a society in which interest is lawful, the strong benefit from the suffering of the weak. As a result, the rich become richer and the poor poorer, creating socio-economic classes in the society separated by wide gulfs. Naturally, this generates envy and hatred among the poor toward the rich, and contempt and callousness among the rich toward the poor. Conflicts arise, the socio-economic fabric is rent, revolutions are born, and social order is threatened. Recent history amply illustrates the dangers to the peace and stability of nations inherent in interest-based economies."

[B]SOURCE :- Group of Islamic Researchers[/B]

Riba: the personal dilemma




As a Muslim who bows his head to his Creator it is a serious question: How to obey Him? In a world that revolves around interest (Riba). A world that runs on it. Banks, financing, mortgage, all involve interest. There are millions of Muslims and non-Muslims who live without interest. This article discusses practical ways of living a successful life here without compromising success in the hereafter.

1. Interest from Credit and credit cards

Credit cards are the pillar of consumerism. They are also based on a system of interest-buy now, pay later, and the later you pay, the higher the interest.

I suggest that you send your credit card back to the company in two pieces.

If you still owe money, they will continue to send you bills. Plan now to make a final payment soon. Pray that Allah liberates you from this burden.

If you are sure that you must have a credit card, pay the bill in full as soon as you receive it. If you wait for the due date, it is likely that you will forget once in a while and end up paying interest on it. Since interest is forbidden, we must avoid it.

A Muslim forgot to pay his bill on time and ended up with finance charges on the next bill. He called the service representative, saying that he had always paid his bills in full and on time.

This was a mistake and he wanted the finance charges removed. It did not not take long for the service agent to check his record and delete the finance charges.

Another Muslim whose request for the same thing was denied, wrote a letter explaining that he had paid his bills on time in full for the last seven years. An excellent credit history.

He said: If you cannot remove the finance charges which I have incurred this time then maybe I need to take my business somewhere else. He made it clear that his position on interest was not to be compromised. With his letter he enclosed his Mastercard in two pieces. Within three days he received a call from the card issuing company consenting to his position.

They sent him a new card with the same credit line as before. Although the credit card contract obliges you to pay interest, your credit history helps you to take a stand for your belief.

2. Bank Accounts

Banks are the center of the interest-based economy.

Conscientious Muslims opt for a checking account instead of an interest-bearing account. This is also the reason why Islamic organizations and Masjids meet their banking needs through checking accounts. Certainly the bank is benefiting from your money but this is a compromise and you have little choice.

Although there are 50 Islamic banks offering banking services in 23 countries, including a few Western non-Islamic banks which have Islamic windows, none of these banks are available in the United States yet.

It is interesting to note that one in five American families, i.e. 17 million families, do not have a bank account. If they receive a check they cash it through a currency exchange. If they have to pay someone they get a money order from the post office. A majority of people in the world, in fact, live without a bank account.

3. How to deal with the interest you already own

If you have an interest-bearing account which you would like to close now, or the IRS has sent you a check with interest, or you owned a bond and you want to sell it now to get away from interest. I congratulate you on your decision.

Give the amount of interest to any poor person. Do not spend a single penny on yourself.

It is Haram for you but not for the poor and the needy. Some Masjids have a special account to dispose of this money for the poorest of the poor. Although some scholars recommend leaving the interest money in the bank, I would not give the banks one penny. True, it is not my money. But it is not theirs either.

4. How to deal with the interest which you owe

One Muslim was asked to pay interest by the IRS because of some problems on his tax return. His secretary told the auditing agent that her boss neither paid nor took any interest since he was a Muslim. The secretary was a non-Muslim who knew the Islamic position. When the secretary remained undeterred on the issue of interest, the IRS agent asked if she could give any references. She showed him the book which contained the Quranic verse prohibiting interest.

The IRS agent had to consult his supervisor-Guess what? He won. Well, the secretary won since the boss didn't know yet what a fight she-a non-Muslim secretary-was putting up with the IRS, knowing the belief and character of her boss. He did not have to pay interest to the IRS on religious grounds.

A Muslim physician was charged interest on a construction job because he inadvertently delayed payment of the bill for one month. He wrote to apologize for the delay and informed the authorities that Islam did not allow him to pay or receive interest on any transaction.

Not only were the interest charges removed, but an opportunity for Dawa came up. Taking a stand with sincere motives pays in this world and in the world to come.

If you owe interest through a legal contract, get out of the deal by paying off as soon as possible.

Dua, budgeting and planning is important in achieving this goal. There are thousands of Muslims in America who have done this. You are not alone. Allah will give Barakah in this right decision. The hardship you will go through because of this decision will be, Insha Allah, a sort of purification to seek Allah's forgiveness of past mistakes.

5. Buying a house

Owning a house is the American dream.

But the fact is that about one in three families in America, or 28 million families, do not own a house. Buying with financing is an option made easy since everyone does it.

It is not only Haram to buy anything through interest-based financing, it is, in many cases, non-economical and bound to lead to headaches. Hundreds and thousands of people lose their houses every year since they spend before they earn through the financing system. And when you lose in attempting the American dream, you lose big.

You even lose what you had already paid for.

So why not think of not losing on the Day of Judgment by opting for a simple life here.

I know a Muslim sister who, before accepting Islam, used to be a real estate agent and was married to another real estate agent. She not only lost her dream hose but suffered the breakup of her marriage as well. Now a Muslima, she lives in a mobile home in a mountainous countryside. She now deals in interest-free real estate transactions only. She feels that her life is simpler and more comfortable now.

Ask yourself these questions

Non-financing options are difficult but possible. However, do ask yourself some hard questions before you decide to buy a house:

Is it absolutely necessary that you buy a house even though you cannot afford it?

Is it necessary to buy a house which is beyond your means?

Is it wise to pay four times the amount of the actual price of the house just to own it now?

Is it not cheaper and headache-free to live in a rented apartment than to own a house where you do not have to worry about snow shoveling, lawn mowing, repairs, rising property taxes, etc.?

Have you made a budget for yourself?

Are you sure you are going to keep the income which you are counting on to buy the house?

Do you have enough of a financial cushion for any and every emergency?

After this analysis, if your answer is still yes, you must buy a house, then consider some of the interest-free options.

Make a budget which will allow you to save more money. Involve every one in the family in the process of saving money. The more money you can give as down payment, the better your chances of a contract which doesn't involve financing.

Do adequate research before you end up with any real estate agent. Read books about it. Seek friends' assistance who have bought houses without mortgage.

I know people who own good houses in safe neighborhoods for as little as $10,000 and $20,000. They were able to find good deals because of good
research.

As well, their firm anti-interest commitment made them look harder into other options. One of the neighbors told a new homeowner that he wanted to buy the same house for a long time but could not figure out whom to approach. The house had been advertised for six months in a newspaper. Information is certainly power.

HUD homes

Housing and Urban Development (HUD) houses are announced at least twice a month by the federal government for auction. They are good houses, which you can buy at 50 to 60 percent below market price.

In Chicago, where median price of a single family home is $116,000, I know at least six people who have bought their houses in the $10,000 to $30,000 range with three bedrooms and a 2,000 square foot lawn.

If you can save enough money or can get an interest-free loan for two or three years through friends and relatives, you can buy a house for cash. Buying for cash makes your offer more attractive to some sellers. You will be able to get a better deal.

One Muslim I know was able to reduce the asking price by 14 percent because of his cash offer. Since it is a buyer's market, you may be able to get an even better deal. Muslims have developed informal co-ops in which six or seven families help one to buy a house on a cash basis. They develop a personal loan contract among themselves, with witnesses and signatures.

Most of the Masjids and schools in North America are purchased without interest through collective purchasing power and good negotiation. Some Muslims have purchased apartment buildings similarly and in turn have offered them to trusted Muslims and friends on interest-free installments. Many of them, with common consent have turned the basements into a Masjid and school.

You can save the money to afford a higher down payment with a contract to pay off the rest within two or three years without interest.

The Bottom Line

If we consider Allah's Guidance to be essential for success in the Hereafter, then the struggle to stay away from interest despite the prevailing system is our way of achieving Allah's pleasure. I agree that it is difficult. But Allah promises Jannah in the life to come which is everlasting.

The example of this world compared to the world to come, as the Prophet (peace and blessings be upon him) said, is like a drop of water to an ocean.

Solution
 

AOA dear forum members

As from above posts, all of us agree that RIBA (interest) is prohibitted in Islam. My question is;

WHAT IS THE SOLUTION TO END THIS SYSTEM IN PAKISTAN?

Remember that Pakistan was made in the name of Islam only.

Banking In Islam
 

One view is that banking circumscribes those branches of knowledge that facilitate trade within the physical limits of the universe – the place or parameters entrusted to man as khalifa. This view means that in the olden days before commerce as we know it, some kind of banking or trade facilitations may have been part and practices of centres of concentration of human dwellings that remained connected through trade.

We, as Muslims, believe in the flow of knowledge from God to man through divine revelation to guide him on the right path. Let me quote one incident in recent history. When riba became a practice of Israelites, it was forbidden through commandments revealed to Moses. But they observed relaxation in implementation of the code and riba traveled with them wherever they went. Allah, in his greater wisdom, (hikmat and destiny) did not punish them en bloc as happened with many ummahs who transgressed in the past till the last of the Prophets (PBUH) was born in Mecca. He placed before all mankind the eternal message of Allah. At Arafat, when he performed Haj, He among delivered the message of Allah:

[B]Prohibiting riba[/B]

[B]Leave forgive and forget all past riba[/B]

[B]Transfer responsibility to the ummah to spread his message to all of mankind for the rest of time.[/B]

The message in physical terms means and includes a state of Islam circumscribing one man to all mankind in relevant time and space to practice one deen jointly as well as severally and beyond. At the time of his death he left behind ‘The Book’ and ‘His example’ to guide and keep Muslims on the right and desired path. This then is the gene of globalisation and what he left behind, contains a complete code command and solutions to problems of Muslims for all times.

With this very brief introduction, let us move a small step forward. The systems of trade facilities of the relative past had disappeared. They were not deep and did not answer the problems nor solve the difficulties that later developed; they had limited application and also included riba, an element of a practice that was forbidden. The history of man in the relevant time and space as available in Qasas-ul-Quran is the whole truth and not the account collected, unearthed and drawn from faulty and vague human memories. The books especially regarding the economic aspect will need a complete re-writing after riba is forbidden in Muslim states in accordance with the injunctions of the Holy Quran. It is the law of the lands that provides riba a safe haven to flourish and many may face questions when times change.

Some websites mention that the Arab world became aware about the prevalence of riba of today in 1870 when digging of Suez started and Anglo French Banks came to Egypt. Their reaction was: “No riba and riba free banking.” The obvious observations are: (i) For centuries Arab scholars had worked on riba in trade. What was their reaction to banking? It seems more likely that they had some concept of banking or trade practices, but had not given a proper name to describe this cluster of activities. It is more likely that for this reason they started developing products on the trade side to replace riba. This was a knowledge based exercise, not an economy based one as oil had not been discovered until then. It was in 1908 that oil was discovered in Kuwait and used to lubricate and drive the European war machine, while the Suez enabled them to maintain an iron clamp on India and beyond. Then came the commercial use of oil and so far limitless wealth of Arab rulers and Arab nationalism – partly a result of commercial activity influenced from various centres and even for other reasons.

As regards our part of the world, the slaves, it was ruled by a combination of European swords, colonial wisdom and local disorder. A very significant event was establishing Fort William College at Calcutta. Surprisingly the entire British commercial law was enacted from 1800 to 1900, also creating a large number of local knights. Mohammad Iqbal was the one who chose to return the honor. (The foregoing requires complete research which may be revealing). The Bank of Bengal was established in 1809 and one at Bombay in 1840, The cooperative movement was instituted in 1904 and the Reserve Bank of India in 1935. The atmosphere was slowly filled with branches if British banks. Consequently riba and banking spread to completely command the economic scene.

Then Allah provided a safe haven to Muslims of this part of the world and Pakistan came into being. In 1947, the founder father of the nation declared opening of the State Bank of Pakistan – encompassing Banking as per the law of the land. But he made it clear that it was the duty of the State Bank of Pakistan to arrange comprehensive research into the subjects of banking and economic system of Islam and to prepare/draft that system to be implemented in Pakistan.

An effort has been made to trace the path of history and travel through a part of the Holy Quran to trace the roots and requirements of some concepts. We know that no new knowledge has been revealed by Allah after the departure of the Prophet (PBUH). Whatever exists today appears to be borrowed from Al-Quran and used by mixing forbidden practices of past pre-Islamic days. Secondly, a banking system in Islam lies resting in the books of the history of Islam and needs to be discovered.

Let us trace the British time-line of riba based banking from 1.7.48 to the Dark Ages as described in dictionaries of Banking and Finance and the Encyclopedia Britannica.

1500 Discount market of discount houses facilitating fund flows by borrowing

1400 Middle ages. Jewish goldsmiths

1300 Extending prohibition of riba to Christian faith

1311 Pope Clement V following a debate of over 1000 years (History of Usury Prohibition). Christians hanged for practicing usury.

1200 Presence of Italian banks in England.

Dark Ages

This Information is evidence to the following;-

||-- Deposit function does not have roots in England.

||-- Banking existed in England during the period approximating the Dark Ages. The banks were Italian. Therefore we need to trace the origin of banking in Italy.

||-- Banking is not lending which was a business of goldsmiths.

||-- Banking means acceptance of deposits of money only.

||-- This was the basis of banking in Italy.

||-- There is no mention of riba in this definition.

We may conclude that the British banking disappears into darkness. This is why their economic history fails to answer questions on the origin of banking.

Let us follow the cycle of Islam regarding economic development. From Adam (AS) to the period before Mohammad (PBUH) we can trace and deduce from the Holy Quran evidence of trade circles in limited spheres. Thereafter there emerged regular travel routes from Mecca to Syria and Yemen. If we make a deeper probe, it coincides and appears as a direct answer by Allah to the prayers of Hazrat Ibrahim (AS) that he pleaded for while obeying the command of Allah to leave his son and wife in Mecca. These trade routes then get linked up to other trade routes connecting the then known world. These customs of trade followed a process called Bai allowed by Allah. This was based on cash or credit and later developed to be supported by Modarbah or Musharkah for expansion or to suit events and circumstances. In this process riba also entered the scene and gradually became the most important factor. As Islam spread in Mecca and Madina, Allah sent his message through his messenger (PBUH) to leave this practice. The financial system of Islam then was trade and agriculture and related professions and their produce. This has been shown in Fig-1 with the coming into existence of the state of Madina, following components that appeared on the economic scene to support and sustain an expansion of the Islamic state under the Holy Prophet (PBUH).

||-- Bai, Agriculture related professions and produce

||-- Addition of Modarbah, Musharkah Amana

||-- Further addition of Sadqat Ghaneemat

||-- Further addition of Zakat: voluntary contributions

||-- Setting up of Bait-ul-Mal

||-- Regulation of functions of this institution by Divine order

||-- Regulation of trade and commands to eliminate riba

||-- Expansion of state of Madina to the whole of the Arab Empire

||-- Total prohibition of riba

||-- Responsibility of the ummah expanded to the end of time and space and the last of mankind.

||-- Completion of deen, its codes in all respects.

||-- Death of the Holy Prophet (PBUH).

That was the termination and end of the institutions of Risalat and Nabowat. This was followed by the Khilafat.

The Islamic state continued to expand and so did its trade and economy and the components mentioned above. However during the days of Umar-Ibne Khatib as the Caliph, a financial product was put in place by Zubair bin Awam by combining credit and amanat to support expansion of trade. This product gained support of the Ashab-e-Rasool. Some even may have joined by adopting this practice (The words are very carefully chosen). The qualities, features and facilities circumscribed by this function resemble those of deposits of today.

Their activities thus became like those of large trading houses supporting their activities by deposits. The persistent and continued use of this financial technology cannot but be termed as ‘Banking Gene’.

As the state further expanding and so did trade and economy, the product needed support of other branches of knowledge such as:

||-- Arithmetic

||-- Accounts – Sector wise books

||-- Document development

||-- Expansion of Musharkah and its variations

||-- Many other support mechanisms

While this process moved forward it was helped by certain decisions of the Khalifas and their companions.

||-- Merging currency into a single coin

||-- Not agreeing to proposals of paper currency or leather currency

||-- Transfer of funds from one Bait-ul-Mal to other

||-- Lending from Bait-ul-Mal for trading activities, etc.

||-- Large scale economic activities such as canals, madaris, copying the Holy Quran, education, etc.

||-- Completing the cycle of an Islamic welfare state

Let it not be all praises. Yes the fact is that the later role of the Bait-ul-Mal was diverted in a questionable manner. Thus for this, as also other reasons, the new banking functions found safe passage in the private sector and by the time all the above functions were developed almost 100 years had passed. It was thus for Abu Hanifa (RA) to fully operate expand and implement the banking function. Thus he was the first man in the history of Islam to have enviisaged the full range of banking and thus established the principles that are the basis of Islamic banking today. “Banking means acceptance of deposits of money only for the purpose of investment or lending that can be withdrawn by cheque –”

No doubt in the practice of the above components, he only followed the Holy Quran and Sunnah and his vision of both was far superior to that of people today for obvious reasons (Fig-II) (CF Abu Hanifa ki Siyasi Zindagi - Manazir Ahsan Gillani)

In the foregoing we have traced roots of four kinds of banking and the banking gene. These can be described as;

Banking: Riba based banking practiced after middle ages. This is not our role model for obvious reasons.

Interest Free Banking: Conventional banking minus interest. But it still continues to include practices not permissible in Islam. This experiment has failed.

Islamic Banking: By creation of products (compatible) for continuity of the system.

Muslims have not responded positively to this mode as well. Now that we know banking, as it is available in Islam, it will be all the more difficult to follow this. Abu Hanifa (RA) a man of much deeper and wider vision did not improvise any of the standard practices. People engaged in this exercise may match their substance with his concepts. We need not come in this picture.

Banking in Islam: It is believed that the aim of this article was to find this fact. It is placed for consideration of the reader.

Although this is the end of Article, I shall be failing in my duty as a researcher if I do not answer the main question facing us today:

Where to start?

Why start with currency?

Riba is in the currency issue

All products are woven around currency.

Other un-Islamic element routed through currency.

Exchange rate problems.

Shifting dealing from currency to accounts.

All Muslims to open accounts to benefit from the Bait-Ul-Mal. (or discharge of duties of the Bail-Ul-Mal)

AH accounts Islamic digit based.

Complete documentation.

Change to Islamic currency gradually.

... ...

The writer is a former Advisor Banking, State Bank of Pakistan. This was written for the Institute of Chartered Accountants of Pakistan – Karachi.

[url]http://thepost.com.pk/vis.aspx#Position[/url]

[QUOTE=STRAIN2]AOA dear forum members

As from above posts, all of us agree that RIBA (interest) is prohibitted in Islam. My question is;

WHAT IS THE SOLUTION TO END THIS SYSTEM IN PAKISTAN?

Remember that Pakistan was made in the name of Islam only.[/QUOTE]
To claim that banking was not possible without interest has been proved baseless even in a report of the State Bank of Pakistan. The report informs that ‘interest’ was just one of the many instruments of banking; and 12 substitutes of interest were indicated. The various Commissions constituted by the past governments to suggest alternate modes, have provided detailed structural designs. But none of the governments was really serious to implement these recommendations which in fact, was necessary to understand what were the difficulties by way of introducing the interest-free system. One of the main reason not to implement the proposed interest-free schemes, has been that the privileged ruling class brings in soft loans worth billions of dollars on concessional terms and further extends it to public on exorbitant rates. The interest capital thus accumulated is transferred to the foreign banks accounts of these ‘Black and White" masters. Currently successful experiments have been carried out in various parts of the world including Kuwait, the Emirates, Sudan and Iran to eliminate ‘interest’ from the economy. Interest-free Banks are already working in Malaysia, Kuwait and Emirates. Al-Baraka Bank has an arm in Lahore also and that provides interest-free venture capital. Interest-free business based on profit and loss proves beneficial in the long run, particularly when business environment is healthy and proves absorbing periodic shocks better than the interest system currently in practice.

100% Right
 

AOA

@waqarabro
You are 100% right. All claims that banking is not possible without interest is baseless. Already so many banks througout the world are working with intrest-free systems.

I'm not into Banking line, but one thing is sure that already many banks worldwide have started thier operations with riba-free banking.

Coming back to the SOLUTION. In my opinion, we should start with invidual level. We should stop taking interest based offers from banks. As rightly mentioned in above posts by valuable members, there are so many ways to keep yourself away from this LAANAT.

@Anarkali
salam all respectable member.
simple thing Islam not allow the banking intrest there are many hadis about this matter.
But it is a big problem in Pakistan whose we cant slove.
Regards

The solution of the problem isn`t to refrain the banking system but to adopt Islamic Principles of banking. The basic principle of Islamic banking is the sharing of profit and loss and the prohibition of riba´ (interest). Amongst the common Islamic concepts used in Islamic banking are profit sharing (Mudharabah), safekeeping (Wadiah), joint venture (Musharakah), cost plus (Murabahah), and leasing (Ijarah).


In an Islamic mortgage transaction, instead of loaning the buyer money to purchase the item, a bank might buy the item itself from the seller, and re-sell it to the buyer at a profit, while allowing the buyer to pay the bank in installments. However, the fact that it is profit cannot be made explicit and therefore there are no additional penalties for late payment. In order to protect itself against default, the bank asks for strict collateral. The goods or land is registered to the name of the buyer from the start of the transaction. This arrangement is called Murabaha. Another approach is Ijara wa Iqtina, which is similar to real-estate leasing. Islamic banks handle loans for vehicles in a similar way (selling the vehicle at a higher-than-market price to the debtor and then retaining ownership of the vehicle until the loan is paid).

There are several other approaches used in business deals. Islamic banks lend their money to companies by issuing floating rate interest loans. The floating rate of interest is pegged to the company's individual rate of return. Thus the bank's profit on the loan is equal to a certain percentage of the company's profits. Once the principal amount of the loan is repaid, the profit-sharing arrangement is concluded. This practice is called Musharaka. Further, Mudaraba is venture capital funding of an entrepreneur who provides labor while financing is provided by the bank so that both profit and risk are shared. Such participatory arrangements between capital and labor reflect the Islamic view that the borrower must not bear all the risk/cost of a failure, resulting in a balanced distribution of income and not allowing lender to monopolize the economy.


And finally, Islamic banking is restricted to Islamically acceptable deals, which exclude those involving alcohol, pork, gambling, etc. Thus ethical investing is the only acceptable form of investment, and moral purchasing is encouraged.

Islamic banks have grown recently in the Muslim world but are a very small share of the global banking system. Micro-lending institutions founded by Muslims, such as Grameen Bank, use conventional lending practices, and are popular in some Muslim nations, but some do not consider it to be true Islamic banking.


Allah Nagheban,

Hi Guys.No doubt islam does not permit interst and there is no doubt that its solution is the islamic banking which has been explained again and agin by all people who posted there comments but i want to show a different perspective.When u talk about islamic banking ,u have to see its credibilty in different countires.In paksitna u can bring people toward it and they will come surley but only in northern areas.If u will ask a mulit billionare (who is compating open market )he will surely smile and in this smile he will be accompanied by goverment machinaries or and intellectual too . So there is no need to inforce this shariah right now because paksitna will go down and other musluim countries will go up .just like dubai.U know how fastly the dubai is growing specially there new projects which attract american billionares too. I am not saying we shall not enforce shariah but compulsuion is factor that produce (Nazriya zarroorat in paksitna )whether its in politics ,power sharing ,dealing or enforcing islamic values collectively.

the poor are permanently poor, and the rich, permanently rich, that is oppression! All around the world today that economic oppression exists, and is constantly increasing, - the poor grow poorer and the rich, richer. Riba is the cause. A predatory global elite, centered in the West, but also present around the world, is constantly sucking the wealth of mankind and impoverishing the masses through riba. Their ultimate objective is to utterly enslave all of mankind in a new sophisticated slavery. Political, legislative, judicial and legal systems, the media etc., are all created by the oppressor, and all function to preserve the system of economic oppression. Allah, the Most High, has strictly prohibited riba. Yet the world today, including the Muslim world, is saturated with riba. This has confirmed the ominous prophecy of Prophet Muhammad (s) who prophesied, in a hadith received from Abu Hurairah (ra), the following:

What is Riba?There will come a time, he said, when you will not be able to find a single person in the world who will not be consuming riba. And if anyone claims that he is not consuming riba then surely the vapor of riba (In another text the dust of riba) will reach him.

[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]

Interest and Islam
 

Islam is complete code of life.Islam has its own manifesto regarding economic affairs.islam condemns accumulation opf wealth thats why islam forbids interest and encourages partenership and investment thatshow we can creat job oppotunities and our economy can flourish.Allah says that He destroys interest and encourages mudarbat.Allah recons interest awar against Allah and His Prophet PBUH. We should devise a certain strategy to avoid interest and to creat interest free economy.

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=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.