Qur’an , Hadith and Riba Connotation

Abstract

The Qur’an categorically prohibits riba and provides a comprehensive principle with regard to its connotation so that the divine tenet could be appropriately implemented. Qur’anic verses on riba pertain to loans and debts. The Hadith extends the point in the Qur’an to cases that fall in the domain of trading but are, technically speaking, special cases of exchange. Hence, Hadith further explained the term with practical manifestations for effectively taking care of the strict commandment by the Qur’an. For centuries, it was believed that the rental for the use of money in any form or any amount is riba. But the circumventors adopted stratagems time to time to circumvent the divine prohibition and offered different arguments and rationale for validity of interest. A number of scholars have been interpreting riba in a manner which is radically different from the understanding of the majority of the Islamic scholars throughout the history of Islam and also sharply in conflict with the categorical statements of the Holy Prophet (pbuh). After lengthy discussions and debate, general consensus was achieved in 1970s and efforts were started to introduce riba free financial system in the light of academic leadership of Fiqh Council of the OIC as also of Rabi═ah al-Islami, supplemented by AAOIFI. In the meantime the problem created by the conventional interest based system became so severe that even some of the Western economists and finance experts emphasized the need for any value based / ethical 1 A similar article, “The Riba-Interest Equation and Islam: Reexamination of the Traditional Arguments” by Dr. Farooq was published in the Global Journal of Finance and Economics, Vol. 6, No. 2, September 2009, 99-111; and the Journal Transnational Dispute Management, Sep. 2007; Vol. 4, No. 5. In this paper the author referred to the Nobel Laureate Milton Friedman saying, “....I do not believe there is any merit to the argument that an interest-free economy might contribute toward greater economic stability. I believe indeed it would have the opposite effect. (Electronic copy available at: http://ssrn.com/abstract=1579324). 2 The Editor of the JIBM and Director Research & Training at the Riphah Centre of Islamic Business, Riphah International University, Islamabad. 2 Journal of Islamic Business and Management Vol.2 No.2, 2012 alternative to the present system. But, still there are a few scholars among the Muslims who continue raising the issue of definition of riba and whether the commercial interest is covered under riba. In recent years, Dr. Mohammad Omar Farooq is the most vocal among them, writing a number of articles for Journals and as also discussing on IBF Net to highlight the lack of any solid explanation of the term riba. Below is the rejoinder to one of his articles published in a London based academic journal of repute to highlight the issue of defining riba in the light of different Ahādith with reference to six Ahādith discussed by Abdulkader Thomas in his book. The rejoinder may cover most of his similar writeups on the subject.