1. Prohibition of Riba (interest). Interest which means a fixed predetermined amount in addition to the principal is prohibited
2.4. PROBLEMS OF NON INTERESTING BANKING
These would be presented in detail in the subsequent sub-heading (i.e.
problems and challenges of Islamic banking system).
The following are responses of 5 Islamic Scholars interviewed on the Islamic stand on interest/usury and Islamic banking system generally.
All of the 5 Islamic Scholars interviewed presented and commented on some Qur'anic verses and prophetic tradition that prohibit usury/interest on loans or savings deposits.
They based their reason from the Holy Qur'an and the prophetic traditions, which are the two fundamental sources of Islamic law, have strictly forbidden interest for its tyranny. The Holy Qur'an has laid down rather strict injunctions with regards to interest on money.
These injunctions are repeated over and over with the same forces and emphasis. Sec. the following Surahs (chapters); Surah al-Rum (chapter 30), verse 39; Surah al-Nisaa (chapter 4), verse 160-162;
Surah al-Imran (chapter 3), verse 130; Surah-Baqarah (chapter 2), verse 275-281.
Surah al-Rum (chapter 30), verse 39 state
"They which you give in usury for increase through the property of (others) people will
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have no increase with Allah; but that which you give for charity, seeking the countenance of Allah (will increase): it is these who will get a recompense multiplied.
Surah al- Nisaa (chapter 4), verses 160-162 it is stated as follows;
"For the iniquity of the Jews we made unlawful for them certain (foods) good and wholesome which had been lawful for them;
and that they hindered many from Allah's way. (160)
"That they took usury, though they were forbidden; and that they devoured 'men's wealth wrongfully; - we have prepared for those among them who reject faith a grievous chastisement". (161)
But those among them who are well-grounded in knowledge, and the Believers, believe in what hath been revealed to thee and what was revealed be/ore thee: and (especially) those who establish regular prayer and pay Zakat and believe in
Allah and in the Last. Day: to them shall we soon give a great Reward". (162)
Moreover, in Surah al-Imran (chapter 3) verse 130, it is categorically stated;
"O ye who believe! Devour not usury, doubled and multiplied; but. fears Allah;
that ye may (really) prosper "
However surah al-Baqarah (chapter 2) verses 275-281 gives more detailed expression with full force on the issue of usury, thus;
"Those who devour usury will not stand except as stands one whom the Satan 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 admonition from 'their Lord, desist, shall be pardoned
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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). (275)
'"Allah will deprive usury of all blessing, but will give increase for deeds of charity: for He Lovett no! any ungrateful sinner". (276)
"Those who believe and do deeds of righteousness, and establish regular prayers and give Zakat, will have their reward with their Lord: on them shall be no fear, nor shall they grieve". (277)
"O ye who believe! Fear Allah, and give up what remains of your demand for usury, if ye are indeed believers ". (278)
"If ye do it not, lake notices of war from Allah and His messenger: but if ye repent ye1 shall have your capital sums: deal not unjustly and ye 'shall no! he dealt with unjustly. (279)
The five Islamic scholars interviewed made reference with some or all of the above Qur'anic verses and Hadiths to rule that the present day conventional banking is operating based on RIBA (usury/interest) which have been forbidden and prohibited as indicated above.
And this is the reason of global crisis in the world economy. They are all pleased with the idea of Islamic banking, which they know, are operating on interest free and profit and loss sharing basis. They opined that, despite the fact that, even the Islamic banks are not without some degree of problems but are more divinely inclined, and transact legitimate deals, hence, they are better than the conventional-banks, which based their transaction on interest.
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The problems of Islamic banks as identified by those interviewed among the customers and staff of Stanbic IBTC bank, the Islamic scholars and based on the existing literatures include:
The preferred investment patterns of Islamic banks have appeared to be a mix of a loan and investment. It is a mix, which has most of the characteristics of a Riba-based loan and flows of the western capitalist system. The system fails to highlight the features of Islamic investment
"If the debtor is in a difficulty, grant him time till it is easy for him to repay. But if ye remit it by way of charity, that is best for you if ye only knew". (280)
"And fear the Day when ye shall be brought back to Allah. Then shall every soul be paid what it earned, and none shall be dealt with unjustly "(281)
The Scholars also presented the following Hadiths:
i. From Abdullah Ibn Hamzah: The Prophet, Peace Be Upon him said; "A dirham (lowest denomination of currency) of riba (usury) which a man receives knowingly is worse than committing adultery thirty-six times".
Bayhaqi has also reported this Hadith with the addition that;
"Hell befits him whose flesh has been nourished by the unlawful. "
ii. From Abu Hura rah: The Prophet, Peace Be Upon him, said;
"RIBA (usury) has seventy segments, the ' least serious being equivalent to a man committing adultery with his own mother. "
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iii. From Jabir: who reported that the Prophet, Peace Be Upon him
"Cursed /he receiver of RIBA, the payer of RIBA, the one-who records it and the two witnesses to the transaction and said: They are all alike (in guilt)."