subject: Usury And Commercial Interest, Are Both Prohibited In Islam? [print this page] Usury and interest, two terms are used after the emergence of Western banking system.
1.Usury is the fixed amount of money charged on a loan taken for personal need and expenses.
2.Commercial Interest in the fixed amount charged on a loan taken for profitable and productive purposes
Some Muslim argues that the prohibited Riba (interest or usury) in the holy Quran is only usury while nothing is spoken of the commercial interest, it should, therefore, be allowed. They argue that:
Argument 1
In the time of the Holy prophet (S.A.W) the only Riba present was Usury.
Counter Argument 1
a)It is not true that only usury and not commercial interest was present in the time of the Holy Prophet (S.A.W). There are a number of evidences of commercial interest; only two examples are quoted here. In the trade caravans of Makkah, the people of Makkah used to invest on the basis of commercial interest. Moreover, the uncle of the Holy Prophet (S.A.W), Hazrat Abbas used to lend money on interest on commercial basis, which is nullified by the Holy Prophet (S.A.W) on the conquest of Makkah.
b) It is to be noted that whatever Islam prohibits, it does it in principle. Quran prohibits Liquor on the principle that it causes intoxication. In the modern age when the manufacturing methods of liquor are completely changed it is still prohibited.
c)Pork is prohibited in the Holy Quran. Now no matter what sophisticated means are used for the clean breeding and raring of pigs, principally, it stays prohibited.
Same goes for Usury. If a fixed amount on the principal amount of loan is not allowed, this prohibition goes for both: usury and commercial interest.
Argument 2
Some people say that if the matter of usury or interest is made with mutual consent, it is allowed. The basis of this argument is the following Quranic verse:
O ye who believe! Squander not your wealth among yourselves in vanity, except it be a trade by mutual consent (4:29)
Counter Argument 2
It is a misconception. Mutual consent is taken into consideration in the lawful matters only not in the unlawful ones. For example, trade is lawful, but it will become unlawful if mutual consent of the parties is absent. If we take mutual consent as ruling or principle behind the divine injunctions, it implies that any unlawful act is allowed when mutual consent is achieved. On this assumption, would you allow adultery with mutual consent?
Argument 3
Another argument put forwarded in this connection is that interest is prohibited in which a borrower has to pay the interest in spite of facing loss in his business while the lender gets an increase on his principal amount, this is exploitation and therefore prohibited, while in commercial interest both borrower and lender get profit from the investment made and therefore should be allowed, as there is no exploitation.
Counter Argument 3
This proposed provision has been made on the assumption that neither of the two will suffer loss. But actually, if loss does occur, it is but the borrower who bears it not lender. In this case borrower gets unconfirmed profit but lender gets confirmed profit, it is, therefore, not fair and unjust, so prohibited in Islam.
Conclusion
From the above discussion it is clear that Riba, whether it is usury or commercial interest, is prohibited in Islam. Islamic finance must be free of any traces of Riba in any from; Islamic finance has no room for Riba in its fundamental structure.
