An Academic Question on Riba. Need help. Please tag your friends. Any help would be appreciated

[AsifAmeer]

>>$10000@ 0% for 1 year (inflation rate 0%)
No RIBA involved there.


Lets clarify something here

>>Islam doesn't recognize the loss in the purchasing power of the paper currency

Its not Islam. Its the Islamic Scholars. If they do not recognize this issue, they are at fault.


I can say this with Humility that I'd more more finance and Economics than Islamic Scholars. And 0% Interest loan in an inflationary environment is RIBA in reverse.

lets add one more condition,

I borrow:
​

$10000@ 0% for 1 year (inflation rate 0%) , now do you see any element of Riba in this transaction?

Islam doesn't recognize the loss in the purchasing power of the paper currency , the loss which is the result of the capitalistic system.

 

[AsifAmeer]

My kids will be free men. Free to choose anything - including religion. But I am responsible to answer then their questions.

Read up @iceberg 's thesis on it. Interest inherently destabilizes the system. It is truly a rent-seeking system.

Why worry about your kids?......they may choose not to follow your religion...........
btw why this discussion when you know that even if you get a clear cut answer either way you will still deal in riba, will you not?............

 

[AsifAmeer]

You really are good with this.

Lekin how can a payment be made in advance? Something doesnt sound right here. This would slow down commerce.

This would fall under Bai Salam, the conditions for such contract is that seller undertakes to supply specific goods to the buyer at some future date in exchange of advance payment (full) on spot. Only Imam Maalik is of the view that a concession of 2-3 days can be given for payment and that also should not be the part of the agreement.

This kind of sale is to facilitate the farmers.

 

[AsifAmeer]

Exploitation has a negative connotation to it. What if I say bigger the exploitation (margin ratios), the more it attracts competition?

But its interesting to understand what RIBA exactly stands for. I find out its the very concept I am against too - RENT-SEEKING Economic model.

Renting money is Riba for sure if the rent paid does not reduces the principle by the whole amount of the payment. So is renting a hose. Both of these have a common evil " exploitation " If their are more renters than and less houses there can be exploitation. I see exploitation everywhere the best way is do not exploit anyone and don't let anyone exploit you.

 

[imran1976]

You really are good with this.

Lekin how can a payment be made in advance? Something doesnt sound right here. This would slow down commerce.

As i said, this kind of sale is to facilitate the farmers, Muslim Jurists are unanimous that the payment should be advance in full. There's another kind of sale Istisna where a manufacturer is ordered to manufacture a specific commodity. In this sale the payment could be in advance, on installment or deferred.

 

[Unicorn]

Exploitation has a negative connotation to it. What if I say bigger the exploitation (margin ratios), the more it attracts competition?

But its interesting to understand what RIBA exactly stands for. I find out its the very concept I am against too - RENT-SEEKING Economic model.

I would be against rent seeking model as well. I don't think it exist I think it is there to fill a demand. I had a Bachakoe and some tools rented for three days to dig out my driveway. I was able go get the work done at a lot less had I hired a contractor to do the work when I bought my first house. I am thank full that I was able to rent it. It is good to know that I am able to rent a lot of equipment that I would need on very rare occasions.

 

[imran1976]

>>$10000@ 0% for 1 year (inflation rate 0%)
No RIBA involved there.


Lets clarify something here

>>Islam doesn't recognize the loss in the purchasing power of the paper currency

Its not Islam. Its the Islamic Scholars. If they do not recognize this issue, they are at fault.


I can say this with Humility that I'd more more finance and Economics than Islamic Scholars. And 0% Interest loan in an inflationary environment is RIBA in reverse.

Islamic Scholarship verdict comes in the light of Hadith equal for equal, they cannot change the verdict in order to the facilitate the capitalistic system which itself is responsible for the loss in the purchasing power of paper (fake/fraudulent) money.

One can always lend money in gold or silver to avoid the effect of loss in the real value of paper money.

 

[imran1976]

$10000@ 0% for 1 year (inflation rate 0%)

No RIBA involved there.​

Lets take a look at the Hadith once more:

"Gold for gold, silver for silver, wheat for wheat, barley for barley, dates for dates, salt for salt,like for like, equal for equal (that is, in equal weight or measure), and from hand to hand."

Doesn't my example break the rule "from hand to hand", meaning there shouldn't be delay?

There are two types of Riba:
a) Riba al fadal, excess of weight or measure, e.g. A borrows $1000 to be paid back $1100 after one year
b) Riba al nasiah, excess of delay, e.g. A borrows $1000 to be paid back $1000 after one year​

 

[AsifAmeer]

I see a problem with this in terms of the "VELOCITY OF MONEY"

Also, I find it odd that farmers would have a special entitlement in a JUST system.

As i said, this kind of sale is to facilitate the farmers, Muslim Jurists are unanimous that the payment should be advance in full. There's another kind of sale Istisna where a manufacturer is ordered to manufacture a specific commodity. In this sale the payment could be in advance, on installment or deferred.

 

[AsifAmeer]

Sahi kaya! Lekin this thing here

>>they cannot change the verdict in order to the facilitate the capitalistic system
Thats like saying they cannot differentiate b/w an Orange and a Tablet of Vitamin C. They arent the same!

Speaking of Purchase power, here's another shock I wanna share with ya
"We Make it the Might Dollar"

Islamic Scholarship verdict comes in the light of Hadith equal for equal, they cannot change the verdict in order to the facilitate the capitalistic system which itself is responsible for the loss in the purchasing power of paper (fake/fraudulent) money.

One can always lend money in gold or silver to avoid the effect of loss in the real value of paper money.

 

[imran1976]

I see a problem with this in terms of the "VELOCITY OF MONEY"

Also, I find it odd that farmers would have a special entitlement in a JUST system.

Islam sees beyond the material world , this kind of sale is allowed with the purpose to facilitate the farmers who needs money to grow crops and feed their families upto the time of harvest.

traders can also avail this form of Bai.

 

[imran1976]

Sahi kaya! Lekin this thing here

>>they cannot change the verdict in order to the facilitate the capitalistic system
Thats like saying they cannot differentiate b/w an Orange and a Tablet of Vitamin C. They arent the same!

Speaking of Purchase power, here's another shock I wanna share with ya
"We Make it the Might Dollar"

there's a saying "clean up your own mess" - Islam can only give solutions from within it's own economic system, Islam will never jump in the river of capitalism to give solutions like interest rate to compensate for the loss of purchasing power and if capitalism is this much concerned ; it must come up with inflation rate compensation not interest rate.

Will check the article tomorrow.

 

[imran1976]

Speaking of Purchase power, here's another shock I wanna share with ya
"We Make it the Might Dollar"

It was all going good in the article until we reached the funny part "The State Bank of Pakistan should demand payments for its exports to be settled in Pak rupees"

aren't you asking too much, i mean these guyz don't even change their pants unless the orders comes from the big boss, demanding (a strong word) payments to be made in Pak rupees is a far far away thing.

The article strengthens my view point that the loss in purchasing power of the money is a phenomena related to capitalism -- How can Islam intervene with solutions that are designed by capitalism, Islam can only provide genuine solutions which falls within the ambit of Islamic principles. The only solution which i see ( vast majority of Islamic Scholarship will disagree with this) is to go back to the Gold standard -- i don't think that the big boss will be able to manipulate the Gold as it do with the poor useless paper.

I await your response to my post#57.

 

[iceburg]

@iceberg

You took it head on... turning the very argument of income and production against Interest! beautiful! Lekin it was a tough read. Felt I was going thru the "Treatise on Human Action" by Von Mises.

Now I feel more confident on this definition of Riba as "Guaranteed Profit", hence a rent-seeking economic model, which is truly what todays financial sector is. A blood-sucking parasitical economic sector.

If there was anything I dont totally agree upon was the definition of money. If you consider Gold as money, well its a commodity too. Whereas there's a subtle difference b/w currencies and commodity because currency's supply pool can be increased/decreased a million fold in seconds! Using Fiat currency controlled by an entity is truly a sick sick religion.

Acha there was this Hadith which I didnt understand very well

I heard Abu Said Al-Khudri saying, "The selling of a Dinar for a Dinar, and a for a Dirham (is permissible)." I said to him, "Ibn 'Abbas does not say the same." Abu Said replied, "I asked Ibn 'Abbas whether he had heard it from the Prophet or seen it in the Holy Book. Ibn 'Abbas replied, "I do not claim that, and you know Allah's Apostle better than I, but Usama informed me that the Prophet had said, 'There is no Riba (in money exchange) except when it is not done from hand to
hand (i.e. when there is delay in payment).' "​

So its a weak hadith?

Well ... you may be right on "Guaranteed Profit" thing. In Principle, Riba is unequal exchange of same thing whether it is Gold or Currency.

The phrase "except it is from hand to hand" implies that there is no value addition involved in any time period (which is the main premises of "interest" theory which is based on "time value of money".

"There is no value addition involved in just time period" this is more accurate position because if you put your money in safe place for as long period as you wish ... it will get no value addition. Hence "Time Value of Money" also lacks sound logical footings.

Money cannot create value addition. It is a factor of production which creates value addition.

While writing this thesis ... I started studying Meezan Bank as case study and found that this 'Riba Free' Bank transacts all kinds of Riba things .. Big Muftis of our country (from Taqi Usmani family) are directors of this bank and their justification of their system was full of errors....

Then I decided to discontinue my work as I had no intention of going in any panga with powerful maulvis.

 

[imran1976]

While writing this thesis ... I started studying Meezan Bank as case study and found that this 'Riba Free' Bank transacts all kinds of Riba things .. Big Muftis of our country (from Taqi Usmani family) are directors of this bank and their justification of their system was full of errors....

Then I decided to discontinue my work as I had no intention of going in any panga with powerful maulvis.

can you share your findings, if possible?

 

[imran1976]

Exactly my point. I actually took this question to the Imam of my masjid. He goes now how bad RIBA is there should be Interest-free lending. He had a pen in his pocket. I pointed to his pen and said "Would you lend me your pen?" He pulls the pen out and says "Sure!". Before taking the pen I uttered "indefinitely". He looks confused and says "What do you mean?" I repeat "I want to BORROW your PEN indefinitely" . He smiles and gets my point. He has referred me to another Aalim who lives 60 miles away from my home. Before I see him, I wont to make my thought process crystal clear - the main reason why I posted the question here. Bro, plz do read all my posts in this thread and let me know if you have any input.

I would have gifted the PEN saying "Qarz e Hasana"- means, i am gifting you the right to use my pen.

As i said before, Money is just a tool to facilitate the business transactions and not the business it self - There's no concept of making money from money in Islam, the concept is to invest the money in a business venture and than make money -

"Allah has allowed the sale and has prohibited interest." [Al-Baqarah 2:275]

Islam is concerned with promoting real business activities whereas capitalism promotes financial activities having nothing to do with production/business activities.

 

[AsifAmeer]

I was simply trying to illustrate the unintended consequence to the Imam. I guess this thing of Interesting is here to stay with us like prostitution.

This very ayah.. its deeper than it looks. Looking at the Global Financial Markets, the Equities, the bonds, Currencies, the derivatives & the commodities markets, when you put forth this Ayah, i see what God was trying to warn us against.

Also, there is an issue with the lingo here. Capitalism is free market forces. Its pretty Islamic in my view. Its the darn Banking in Capitalism that twists the forces inefficiently.

I would have gifted the PEN saying "Qarz e Hasana"- means, i am gifting you the right to use my pen.

As i said before, Money is just a tool to facilitate the business transactions and not the business it self - There's no concept of making money from money in Islam, the concept is to invest the money in a business venture and than make money -

"Allah has allowed the sale and has prohibited interest." [Al-Baqarah 2:275]

Islam is concerned with promoting real business activities whereas capitalism promotes financial activities having nothing to do with production/business activities.

 

[imran1976]

This very ayah.. its deeper than it looks. Looking at the Global Financial Markets, the Equities, the bonds, Currencies, the derivatives & the commodities markets, when you put forth this Ayah, i see what God was trying to warn us against.

is it the big balloon that's being inflated on daily basis by new financial transactions having no relation whatsoever with the real economy you referring to, if not , please elaborate.

 

[iceburg]

can you share your findings, if possible?

There is Meezan Bank Guide available in market. I wrote down many points but they have lost ... I also had lost interest. It was year 2005. Now I don't remember exact point. But keeping in view this definition of Riba, if you go through that Meezan Bank Guide ... you will find many points.

Now I also don't have that Guide.

 

[AsifAmeer]

>>Hence "Time Value of Money" also lacks sound logical footings.
Point taken. Since no inflation, no need for premium. Lekin what about default? Credit quality, business prospective, market volatility. These are the factors of cost in doing a business. Whats the way to handle that?


Acha tell me something. This State Bank of Pakistan. I heard from somewhere big Muftis have endorsed the operations of the State Bank of Pakistan too.. Is that true? SBP creates the Bond market, it sets the discount rate window, its the player in the repo market. It handles the BoP for Pakistan. How can a bank like this be endorsed by Muftis (I heard Muneeb-ur-Rehman's name) . How come there isnt a fatwa against SBP?

I m thinking about writing an article on SBP, inflation, hoarding, interest and Fatwa for Express tribune and the news. I'm just gonna lay it out for the Islamic Scholars.

Well ... you may be right on "Guaranteed Profit" thing. In Principle, Riba is unequal exchange of same thing whether it is Gold or Currency.

The phrase "except it is from hand to hand" implies that there is no value addition involved in any time period (which is the main premises of "interest" theory which is based on "time value of money".

"There is no value addition involved in just time period" this is more accurate position because if you put your money in safe place for as long period as you wish ... it will get no value addition. Hence "Time Value of Money" also lacks sound logical footings.

Money cannot create value addition. It is a factor of production which creates value addition.

While writing this thesis ... I started studying Meezan Bank as case study and found that this 'Riba Free' Bank transacts all kinds of Riba things .. Big Muftis of our country (from Taqi Usmani family) are directors of this bank and their justification of their system was full of errors....

Then I decided to discontinue my work as I had no intention of going in any panga with powerful maulvis.