Interest not haram?

Assalamualikum. Well I came across this piece while searching on different topics on interest and it has baffled me to say the least. Here are some " progressive muslims" who think that

The Quran prohibits interest charged to the poor and disadvantaged, not interest per se.

The URL is

http://www.free-minds.org/articles/economy/econsystem.htm 

Bi ismillahir rahanir raheem

These progressive muslims are basicaly unqualified muslims who are coming up with there own laws becouse they have a myopic view of islam.

The reason why we have things like the four madhhabs and the science of usul al fiqh is so people dont come along and invent there own rules, it insures there is a methodology and therefore a scientific method one has to follow which insures integrity and correctness in islamic law.


Edited by rami

Ghazzali wrote: The Quran prohibits interest charged to the poor and disadvantaged, not interest per se.

When you think about it, the idea that you must be able to masquerade a loan contract into an other type of agreement, makes sense from an economical and social point of view.

Take for example the situation of a mortgage. You have no sufficient savings to buy a house. You still need to live somewhere. What's the alternative? You rent a place to stay.

What if you rent that place for a higher rental fee, but you can stop paying rent after 20 years? After those 20 years, the owner gives you the house, as a gift.

Nothing necessarily unlawful there. Rental contracts are necessarily lawful (you must stay somewhere). Gifts are lawful (giving a house to someone who has no house).

Of course, it is absolutely possible to see such arrangement as a mortgage, and calculate the interest actually charged. The fact that an alternative unlawful representation of a lawful representation exists, may not make the lawful representation necessarily unlawful.

The more the arrangement really looks like a rental contract + gift, the more the lawfulness of the arrangement can be argued, especially if your inability to pay back the loan somehow also seriously fires back at the one who extends the loan.

Lending amounts to someone who cannot or can barely pay back, is socially abusive. Further, the more the consequences of not paying back the loan are the same as the consequences of not paying the rent, the more socially beneficial the contract.

In my impression, it is difficult to impossible to masquarade socially undesirable loan contracts into something lawful.

For example, what kind of lawful representation can you give to the situation in which someone goes on a shopping binge with his credit card, fails to pay the balance at the end of the month, and sees that balance turned into a loan, for which (usurious) interest is charged? It is unlikely that there is a lawful representation for this type of contract, and good so, because the ability to run up credit card debts is a social evil.

Many poor nation governments are deeply endebted to the World Bank, the IMF, American banks, and the US Treasury.

If you look at how they contracted the debt, you see that this is usually done in a very abusive way.

For example, the government of Kenya borrows 100 million USD to build a hospital that is actually worth 6 million USD, kicks back 7 million USD to the Keynian minister who signs the contract, and leaves 87 million USD as profit to the American company that will build the hospital, which kicks back 15 million USD to the American politician who made the arrangements on their side. The Kenyan government will need to levvy 350 million USD in taxes at gunpoint on its poor farmers to pay back interest and principal over the next 30 years.

Ok. How can we prevent this arrangement? Of course, the religious rule that charging interest is unlawful, is already very helpful.

Can they masquarade this arrangement into something else? Yes, but it will invariably involve the notion that the hospital remains property of the US company or the World Bank or another lender. If the Kenyans cannot keep paying, they will have to cancel the contract, and the lender will have to sell the hospital after a few years on the open market, where it will fetch the 3 million dollars that it is still worth, and lose the value of the remainder of the loan. As long as the Kenyan inability to pay, fires back at the lender, the masquaraded agreement is socially beneficial.

My impression is that socially beneficial loan contracts can somehow be masquaraded or represented as lawful contracts, while socially damaging loan contracts cannot.

Therefore, I believe that the religious rule that says that charging interest is unlawful, is a very good thing for the poor.



Edited by crasss

Assalamualikum. yes, to buy and sell is halal, but see, the reason for outlawing interest was to lessen the burden on the borrower. What islamic banks are doing is that they are selling the object at a higher market price to the borrower. So this is putting the same burden on the borrower for which interest on loan was outlawed. So, it puts a big question mark on islamic banking as well.

And about the article in the site, they do have some valid points. Especially the time value of money.