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Home arrow Business & Finance arrow The art of RF (riba-free) Islamic banking and finance
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Paying a rent for the right to use something was called usury from the early days of the Catholic Church until the fifteenth century. The Roman Catholic Church's original prohibition against usury was slowly relaxed by using the word interest instead of the word usury. The original meaning of usury was to charge a price for using (or renting) money. Today, however, usury is defined as excessive interest.

In the case of fungibles (such as wheat, which will be consumed or changes its nature upon use), it would be unjust to pay a price for renting them. This means that fungibles can be sold through a process of title transfer, but not rented. Applying this concept to money, one cannot charge a rent (interest) for the right to use money, because money is a thing.

In the case of nonfungibles, like an owned real estate property, title can be transferred for a price in a buy/sell agreement as defined by the market forces of supply and demand. In Shari'aa, it is called Milk ul Raqabah (which means ownership of title). There is also another right that a nonfun- gible property offers, which is the right of the owner to rent (or lease) the use of that item (such as renting a car or a house) to a lessee. In Shari'aa, it is called Haq Ul Manfa'aa (which means the right of usufruct). One can charge for the right to use a nonfungible.

The original teachings of the Old and New Testaments agree with the rules that taking usury on money lent (rent for the use of money) is unjust because this implies selling what does not exist; this evidently leads to inequality, which is contrary to justice. This is not much different from Islam's position on riba.

Riba charging and its divine prohibition (haram) in Shari'aa become clearer after learning about the history of the prohibition of interest charging (usury) in the Jewish and Christian Bibles. It also brings to mind an exciting thought: If all faiths of the children of Abraham (pp) agreed on the issue of prohibiting the charging of interest on loans, perhaps we can develop a Judeo-Christian-Islamic window that could lead to cultural unity in the United States and the world. This unity eventually would bring better understanding and cooperation between the people and the leaders of the three Abrahamic faiths, which would eventually lead to a different mind-set and a new style of living that could ultimately lead to peace, fairness, justice, prosperity, and social harmony in the local communities of the United States and the world at large.

All divine revelations in Judaism, Christianity, and Islam started from prohibiting the grievous act of taking advantage of the poor and the needy by charging them interest on the loans that they needed to help them survive and meet their basic needs. Abstaining from cutting out a bite (qard) of one's own money and giving it as an interest-free loan to those who are in need is a difficult decision to make, because there is no return on it. The Judeo-Christian-Islamic revelations consider this qard as a loan to God, who promises abundant return on it in this life and the hereafter.

Some of the rich and affluent may lend to the poor and the needy reluctantly, with the intention of showing off in front of others or of using the loan as a tool to control the needy by exploiting their labor or eventually confiscating their lands, houses, and crops. Historically, some of the rich gave their lower-quality assets and foods to the needy and overvalued it when it is returned. They also used harsh language, gestures, and actions to remind the poor and needy of the favors that they have been bestowing on them. All original teachings in Judaism, Christianity, and Islam clearly prohibit such behavior.

Islam advanced and expanded the law (the Judeo-Christian-Islamic Shari'aa law) one step further by divinely institutionalizing the rules of lending to the poor and the needy, pronouncing that the only loan that is recognized is known as qard hassan (a good bite/benevolent loan). It is divinely considered the only loan allowed in Islam. The qard hassan can be a term loan, with a time limit for the money to be paid back — in a flexible and merciful way, depending on the specific situation and needs of the borrowing poor and needy — or, in most cases, without a time limit. In fact, in Shari'aa the qard hassan is looked upon as a donation to be paid back by the heavily indebted (for good reasons) whenever they can afford to. The forgiven qard (or the intended bite) that was supposed to be collected out of the owner's assets is considered a loan to God. In Islam, as in the original teachings of Judaism and Christianity, no additional direct or indirect benefit (such as free labor, free use of the indebted person's residence, or receipt of gifts from the person who took the loan) can be drawn out of such a loan because these are considered services that command a value and, hence, are considered payments of implied interest over and above the original value owed. The Judeo-Christian-Islamic Shari'aa law even encourages that the payback be made at the place of residence of the poor borrower or the place the loan was given, whichever is more convenient to the borrower, to relieve that borrower from paying the cost of travel (which itself can be considered an implied interest payment). Judeo-Christian-Islamic law (the Shari'aa law) and rules stress that the dignity of the borrowers should be preserved by never telling others and/or disclosing to the public about the loan given to the poor or their condition in respect of the borrower's privacy. The law also stipulates that the lenders should never try to take advantage of the borrowers, never try to pressure them to expedite the payback of the loan, nor even frowning in their face. The law (Shari'aa) goes further, encouraging the Muslim to forgive the loan in case the borrower is heavily indebted and in no position to pay the loan off. The Department of Treasury of the State (Bayt ul Maal) is also made responsible by the law (Shari'aa) to collect alms (zakah) from the citizens and use part of this money to relieve those who are heavily indebted and cannot pay the loans back (giving alms in Islam is called the ritual of zakah, which means the ritual of purifying one's assets by paying back the right of God in these assets). The law (Shari'aa) requires that if the indebted person dies, the lender forgives the loan as a gesture of good will if the family cannot meet the demand. If the family is able to pay back, the heirs are required to pay the loan off.

By the advent of Islam, the world economic systems had changed from the slavery system of the ancient Pharaonic Egyptians during the time of Moses (pp) and the agrarian systems that were prevalent when Jesus (pp) was commissioned. The world had progressed with the development of sprawling villages, towns, and cities. Larger commercial trading caravans managed by traders and money managers traded commodities and merchandise products and manufactured goods from one country to another. They needed money, not because they were poor and needy but because they wanted to raise additional capital to help them grow their business, finance the goods, and expand their commercial activities. To resolve this demand for capital and to develop divinely accepted rules for financing without riba (in a halal way), the law (Shari'aa), as prescribed in the Qur'aan and the tradition of Prophet Muhammad (pp), expanded on the original teachings of the Jewish and Christian Bibles to develop riba-free (RF) techniques that revolutionized business financing. Prophet Muhammad (pp) was also a businessman and a money manager. He understood the need to finance trading and business activities. Islam presented an expanded Judeo- Christian-Islamic set of rules concerning the financing of trade and business in the seventh century. This expanded on the original teachings of Moses (pp) and Jesus (pp) to develop a unique and complete Judeo-Christian-Islamic law (Shari'aa) concerning finance. This law brought about a pioneering new RF finance system that can be used for just, fair, and equitable RF banking and finance. The RF finance system makes credit available to all people without discrimination (to meet personal credit needs, to finance commercial activities, and/or to finance business) and considers the ability to obtain credit to be a basic human right. This RF Judeo-Christian-Islamic approach comes with an important goal in mind: to bring about peace, justice, fairness, harmony, prosperity, peace of mind, job opportunities, and mutual respect among all people of all faiths and backgrounds, leading to a wonderful future of peace and happiness in the whole world.

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