Interest

Economic Values

53The Review of Religions – Nov 2004 In the economic sphere the basic concept in Islam is that absolute ownership of everything belongs to God alone (2:108; 3:190). Man is G o d ’s vicegerent on earth. God has subjected to man’s service ‘whatsoever is in the heavens and whatsoever is in the eart h ’ ( 4 5 : 1 4 ) . This has reference to the whole of mankind. ‘Allah is He Who has appointed you (mankind) His v i c e g e rents in the eart h , ’ and he who fails to recognise this dignity and to act in accordance therewith shall be answerable for his neglect and will not only suffer loss but will also incur the displeasure of his Lord ( 3 5 : 4 0 ) . Legal ownership of the individual, that is to say the right of possession, enjoyment and transfer of property, is recognised and safeguarded in Islam; but all ownership is subject to the moral obligation that in all wealth all sections of society, and even animals, have a right to share. ‘In their wealth they acknowledge the right of those who asked and of those who could not’ ( 5 1 : 2 0 ) . Part of this obligation is given legal form and is made eff e c t i v e through legal sanctions, but the greater part is sought to be secured by voluntary effort put forth out of a desire to achieve the highest moral and spiritual benefits for all concerned. In fact, this supple- menting of legal obligations through voluntary effort runs through every part of the Islamic system. Its operation can be observed in every sphere. The object of the Islamic economic system is to secure the widest and most beneficent distribution of wealth through institutions set up by it and through moral exhortation. Wealth must remain in constant circulation among all sections of the community and should not become the monopoly of the rich (59:8). by the late Sir Muhammad Zafrulla Khan (from The Review of Religions) Economic Values 54 Economic Values The Review of Religions – Nov 2004 Islam recognises the diversity of capacities and talents, which is in itself beneficent, and consequently the diversity in earnings and material rewards (4:33). It does not approve of a dead-level equality in the distribution of wealth, as that would defeat the very purpose of the diversity, and would amount to denying ‘ t h e favour of Allah’ (16:72). It is obvious that if the incentive of proportionate reward for labour, effort, skill and talent were to be removed, not only would initiative and enterprise be adversely affected, but intellectual progress would also be arrested. That is why the theoretical doctrine of equal reward irrespective of the diversity of skill, capacities and talents that have gone into the production of wealth has never been maintained for long, even where it has been proclaimed as State policy, and has had to be modified through recourse to various devices designed to secure diversity in reward. On the other hand, Islam does not leave the principle of competition and of proportionate rewards to work itself out mechanically; that too would lead to hardship and injustice, and would retard the moral and spiritual de v e l o p m e n t of individuals and of society as a w h o l e . The principal economic obligation is the payment of the capital levy called Zakat (22:79; 23:5). The word Zakat means ‘that which purifies’ and ‘that which fosters.’ All original sources of wealth – the sun, the moon, the stars, the clouds that bring rain, the winds that drive the clouds and carry the pollen, all phenomena of nature- are the gifts of God to the whole of mankind. Wealth is produced by the application of man’s skill and labour to the resources which God has provided for man’s subsistence and comfort and over part of which man enjoys proprietary rights, to the extent recognised by Islam. In the wealth that is produced, therefore, three parties are entitled to share: the workman, whether skilled or unskilled; the person who supplies the capital; and the community as representing mankind. The c o m m u n i t y ’s share in produced wealth is called Zakat. After this has been set aside for the benefit of the community, the rest is ‘purified’ and may be divided between the remaining parties that are entitled to share in it. The Zakat is assessed on both capital and income. Its incidence varies with reference to diff e r e n t kinds of property, but on the average it works out at two and one-half per cent of the capital value. The proceeds of the Zakat are devoted towards relieving poverty and distress, winning over the cheerful co-operation of those who have not yet completely adjusted their lives to the Islamic system, providing ransom for prisoners of war, helping those in debt, providing comfort and convenience for travellers, supplying capital where talent is available but funds are lacking, providing stipends for scholars and research workers, meeting the expenses involved in collecting and administering the Zakat, and generally towards all things beneficial for the community as a whole, such as public health, public works, medical services, and educational institutions (9:60). It thus ‘fosters’ the welfare of the community (9:103). Besides the Zakat, which was described by the Prophet as ‘a levy imposed upon the well-to-do which is returned to the poorer sections of the people’,1 implying that it is their just due and must be paid back to them, there are other institutions within the economic sphere operating constantly to further the objective of the whole system. One of these is the Islamic system of inheritance and succession. Under this system a person may not dispose of more than one-third of his property by testamentary directions. While he is in the enjoyment of normal health he may dispose of his property freely, subject, of course, to the moral obligations, some of which have been noted; but neither by will nor by gift, once he enters upon a stage of illness which terminates in death, may he dispose of more than the permitted one-third. By such disposition he may provide legacies for friends, for servants, and for charity. The rest of the inheritance must be divided among prescribed heirs in specified shares. No part of the one-third permitted to be disposed of by will may be used to augment 55 Economic Values The Review of Religions – Nov 2004 the share of one or more heirs to the prejudice of the remaining heirs. Each heir can take only his or her prescribed share and no more; nor can any heir be deprived of the whole or any part of his or her share. There is a wide circle of heirs. If a person should die leaving father, mother, wife or husband, sons and daughters, each is an heir and is entitled to a determined share of the inheritance. In some cases the share of a female heir in the same degree of relationship to the deceased as a male heir is equal to that of the male heir, but normally it is one half of that of a male heir in the same degree (4:8; 12-13). The difference between the normal share of female heirs and male heirs in the same degree of relationship to the deceased is not in fact discriminatory to the prejudice of the female heirs. Under the Islamic system, the obligation of maintaining the family always rests upon the husband, even when, as is often the case, the wife’s personal income may be larger than the husband’s . To enable the male to discharge his obligations towards the family, his share in the inheritance is twice that of a female in the same degree of relationship as himself. Far from operating to the prejudice of the female heir, this actually places her in a favourable position as compared with the male heir, because she does not have financial obligations to the family. Thus the Islamic system of inheritance operates to distribute wealth so that a large number of people may have a competence or, at least, a little, rather than that one or a few should have a large share and the rest nothing. As if all this left something to be desired, the exhortation is added: ‘If other relations, who are not included among the heirs, and orphans and the poor be present at the division of the inheritance, bestow something upon them there f ro m and speak to them words of k i n d n e s s ’ ( 4 : 9 ) . Another major provision is the prohibition against the making of loans on interest. The word used in this connection in the Qur’an is riba the connotation of which is not identical with that of the word ‘interest’ as commonly under- 56 Economic Values The Review of Religions – Nov 2004 stood; but for the present purpose “interest” may be used as a rough equivalent. Riba i s p r o h i b i t e d because it tends to draw wealth into the hands of a small circle and to restrict the exercise of beneficence towards one’s fellow beings. In the case of loans which bear interest, the lender in eff e c t takes advantage of, and makes a profit out of, the need or distress of a n o t h e r. Islam urges the making of loans, but says they should be beneficent loans, meaning without interest. If the debtor finds himself in straitened circumstances when the time for repayment of the loan arrives, he should be granted respite till his circumstances improve, but ‘if you remit it altogether as charity, that shall be the better for you, if only you knew’ ( 2 : 2 8 1 ) . It is a mistake to imagine that transactions involving interest bring about an increase in the national wealth. The Qur’an says that in the sight of Allah it is not a beneficent increase. ‘But whatever you give in Zakat, seeking the favour of Allah – it is these who will increase their wealth manifold’ (30:40). Trade, commercial partnerships, co-operatives, joint stock com- panies are all legitimate activities and operations (2:276). Islam does, however, lay down regu- lations with regard to commercial activities, designed to secure that they be carried on honestly and b e n e f i c e n t l y. All contracts, whether involving large amounts or small, must be reduced to writing, setting out all the terms thereof, as ‘this is more likely to keep out doubts, and avoid d i s p u t e s ’ (2:283). The writing should set out the terms agreed upon fairly, and as a further precaution it is laid down that the terms of the contract shall be dictated by the person who undertakes the liability. If the person on whose behalf the liability is undertaken is a minor, or of unsound judgment, then his guardian or the person repre- senting his interests should dictate the terms of the contract (2:283). Monopolies and the cornering of commodities are prohibited; so also is the holding back of produce from the market in expectation of a rise in prices.2 All this is opposed 57 Economic Values The Review of Religions – Nov 2004 to beneficence, and those who indulge in such practices seek to take advantage of the need or distress of their fellow beings. The seller is under obligation to disclose any defect in the article o ffered for sale.3 Goods and commodities for sale should go into the open market, and the seller or his agent must be aware of the state of the market before proposals are made for purchase of the goods or commodities in bulk. He should not be taken unawares, lest advantage be taken of his ignorance of the state of the market and the prevailing prices.4 There are stern injunctions in the Qur’an with regard to the giving of full weight and measure (26:182–185). ‘ Woe unto those who give short measure; those who, when they take by measure from other people, take it full, but when they give by measure to others or weigh out to them, they give them less.’ (82:2–7). Do not such people know that they will be raised again unto a terrible day, the day when mankind will stand before the Lord of the worlds? Defective or worthless goods or articles should not be given in exchange for good ones (4:3). In short, any kind of transaction which does not comply with the highest standards of honesty and integrity must be eschewed, ‘for God loves not the dishonest.’ (8:59). Gambling is prohibited, inasmuch as it promotes dissension and hatred and tends to deter those who indulge in it from the remembrance of God and from prayer, thus occasioning a great deal more harm than any possible benefit that may be derived from it (2:220; 5:91). It also brings sudden and undeserved accession of wealth and encourages extra- vagance. Indulgence in gambling often brings ruin and misery in its wake. All unlawful means of acquiring property are prohibited, as these in the end destroy a people (4:30). Acquisition of property or goods through falsehood falls in the same category. It is equally unlawful to seek to establish a title to property by obtaining judgment through corrupt means like bribery or false 58 Economic Values The Review of Religions – Nov 2004 evidence (2:189). The Prophet said that a party to a dispute which obtains a judgement in its favour, knowing that it is not in the right, only collects a quantity of fire for itself and not something from which it can draw any benefit.5 On the other hand, goods and property lawfully acquired are a bounty of God which is provided by Him as a means of support. They should be properly looked after and should not be wasted through neglect. A person of defective judgment should not be permitted to squander away his substance. It should be managed and administered for him, and provision should be made for his maintenance out of the income (4:6). Niggardliness is condemned as a negative and destructive quality. While, on the one hand, ostentation and vanity are dis- approved of, on the other, it is not considered right that a person who is well off should pretend to be poor, fearing lest he be called upon to help others. By doing this he makes himself poor in effect, and deprives himself of the benefits that may be derived from God’s bounty (4:38). The wealth of misers, instead of bringing them any advantage, becomes a handicap and arrests their moral and spiritual development (3:181). The other extreme, extravagance, is equally condemned. Even when giving to, or sharing with, others a person should not go so far as to render himself in turn an object of charity (17:30). Hoarding is absolutely prohibited because it puts wealth out of circulation and deprives the owner as well as the rest of the community of its beneficent use (9:34). The truth is that God alone is All-Sufficient, and all prosperity proceeds from Him. It is men who are in need, and prosperity is achieved not through miserliness of holding back, but through beneficent spending, which is spending ‘in the cause of Allah,’ namely, in the service of His creatures (47:39). As already stated, a legal owner of property is not the only person entitled to its use. Those in need who ask, and even those who do not ask or are unable to express their need, have a right in the property of those who are better 59 Economic Values The Review of Religions – Nov 2004 off, inasmuch as all wealth is a bounty of God and is acquired through the use of resources which God has provided for the benefit of the whole of mankind (51:20). That is why the Qur’an directs that kindred, the needy, the wayfarer, must be paid their due (30:39). To this end there is emphatic and repeated exhortation in the Qur’an. Such giving should be in proportion to the need of the person to be helped and in accord with the means of the giver, and should not proceed from any expectation of receiving a return (17:27; 74:7). It is indeed the highest bounty of God that He should have endowed man with appropriate faculties and capacities and then subjected the universe to man’s beneficent service to enable him to achieve the fullest development of his faculties in every sphere of life. Yet some people, instead of putting their faculties to beneficent use in the service of their fellow beings and spending that which they possess for the same purpose, have a tendency to hold back, not realising that even from the purely selfish point of view the greatest benefit is to be derived from beneficent spending and not from parsimonious holding back. This is the fundamental principle which is the basis of all prosperity, individual, national and universal. The Qur’an emphasises this repeatedly. For instance: ‘Behold, you are those who are favoured by being called upon to spend in the way of Allah; but of you there are some who hold back, yet whosoever holds back does so only to his own prejudice. It is Allah Who is All-Sufficient, and it is you who are needy’ (47:39). Holding back renders a person pro- gressively poorer in the true sense, inasmuch as he stultifies his faculties, and by putting that which he possesses out of service and out of circulation, renders it completely barren and unfruitful. The subject of charitable and beneficent spending has so many aspects that they can be better appreciated in the juxtaposition in which the Qur’an puts them. The following excerpts contain a whole philosophy of spending, giving and sharing, on which no detailed commentary is called for: 60 Economic Values The Review of Religions – Nov 2004 ‘The case of those who spend their wealth for the cause of Allah is like that of a grain of corn which grows seven ears, in each ear a hundred grains. Allah multiplies even more for whomsoever He pleases. Allah is Bountiful, All-Knowing. ‘They who spend their wealth for the cause of Allah, then follow not up what they have spent with reproach or injury, for them is their reward with their Lord, and they shall have no fear, nor shall they grieve. ‘A kind word and forgiveness a re better than charity followed by injury. Allah is All- Sufficient, Forbearing. ‘O ye who believe, render not vain your charity by taunt and injury, like him who spends his wealth to be seen of men, and he believes not in Allah and the Last Day. His case is like that of a smooth rock covered with e a rth, on which heavy rain falls, leaving it bare and hard. They shall not secure the benefit of aught of what they earn. And Allah guides not the disbelieving people. ‘The likeness of those who spend their wealth to seek the p l e a s u re of Allah and to strengthen their souls is that of a garden on elevated ground. Heavy rain falls on it so that it brings forth its fruit twofold, and if heavy rain does not fall on it, then light rain suffices. Allah sees what you do. ‘Does any one of you desire that there should be for him a garden of palm trees and vines with streams flowing beneath it, and with all kinds of fruit for him therein-while old age has stricken him and he has helpless offspring-and that a fiery whirlwind should smite it and it be all consumed? Thus does Allah make His Signs clear to you that you may ponder. ‘O ye who believe, spend of the p u re things that you have earned, and of what We bring forth for you from the earth; and seek not what is bad to spend out of it when you would not receive it yourselves except with closed eyes. Know that Allah is All-Sufficient, Praiseworthy. ‘Satan threatens you with 61 Economic Values The Review of Religions – Nov 2004 poverty and enjoins upon you what is foul, whereas Allah promises you forgiveness from Himself, and Bounty. Allah is Bountiful, All-Knowing.’ (2:262-269) ‘If you give alms openly, it is well; but if you keep them secret and give them to the poor, it is better for you. He will remove from you many of your ills. Allah is aware of what you do. ‘…Whatever wealth you spend, it is to the benefit of your own selves, while you spend not but to seek the favour of Allah. Whatever of wealth you spend, it shall be paid back to you in full and you shall not be wronged. ‘Charity is for the needy, who are restricted in the cause of Allah and are unable to move about in the land. The ignorant person thinks them to be free f rom want because of their abstaining from begging. Thou shall know them by their appearance; they do not ask of men with import u n i t y. Whatever of wealth you spend, s u rely Allah has perfect knowledge thereof. ‘Those who spend their wealth by night and day, secretly and openly, have their reward with their Lord, on them shall come no fear, nor shall they grieve’(2: 272-275). References 1. Bukhari 1, Sect.: Zakat, Ch.: Obligation of Zakat. 2. Ibn Majah II, Sect.: Trade, Ch.: Holding back Commodities; Muslim II, Sect.: sales, Ch.: Prohibition of holding back Foodstuffs. 3. Bukhari II, Sect.: Sales, Ch.: Revocation, etc., Ibn Majah II, Sect.: Trade, Ch.: Seller should disclose defects. 4. Bukhari 11, Sect.: sales, Ch.: Prohibition against purchase of goods before they arrive in the market 5. Bukhari IV, Sect.: Judgements, Ch.: Admonition to Parties. (PARANTHESSIS) All other references in parenthesis are to the Holy Qur’an. 62 Economic Values The Review of Religions – Nov 2004