why has islam prohibited interest

8/13/2019 Why Has Islam Prohibited Interest

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Why Has IslamProhibited

Interest?An explanatory presentation on M. Umer Chapraarticle Why Has Islam Prohibited Interest:Rationale behind the prohibition of interest


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Inquiries

Questions raised from the article abstract:

1. Would it be possible for an Islamic society to realize humangoals by using a different strategy?

2. Why a system of financial intermediation that encourages sreliance on interest-bearing debt endangers the goal realiz

3. Why the Islamic strategy may be more conducive to achievehumanitarian goals?


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Introduction

Before providing relevant explanation to those inquiries, weunderstand why Moslem countries, especially Pakistan shoul

different mechanism for financial intermediation. The obviousbecause of Islamic injunction against interest. This premise th

another question; Is there any solid rationale behind the pro

The rationale might be difficult to comprehend if we do not takthe maqasid al-shariahor the goals of Islam. The strategy shline with these goals. If it is not, the goals may not be attained

need to see what the goals of Islam first.


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Flow of Rationale

The central goal

of Islam

Establishment of

justice

The imp

of ju

Umer Chapra, 1982


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Establishment of Justice: The central goal of

The Quran and the Sunnah have both emphasized on considered it one of the central objectives of shariah.

Establishment of justice is one of the primary purposes forhas sent His prophets (al-Quran,57:25).

The Quranplaces justice nearest to righteousness or taqwa

5:8) due to its importance in the Islamic faith.

The Prophet, peace and blessings be upon him, warned:injustice for injustice will lead to absolute darkness on Judgement.


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Establishment of Justice (contd)

All leading jurist throughout Muslim history have held justicindispensable ingredient of maqasid al-shariah.

Abu Yusuf (d. 182/798) in his letter to Chalip Harun al193/809): Rendering justice to those wronged and injustice, raises tax revenue, accelerates development of the cbrings blessings in addition to reward in the Hereafter.

Al-Mawardi (d. 450/1058) stressed that comprehensinculcatesmutual love and affection, obedience to the law, deof the country, expansion of wealth, growth of progeny, andthe sovereign.


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Establishment of Justice (contd)

Ibn Taymiyyah (d. 728/1328) zealously upheld the adages phis times that: Godupholds the just state even if it is unbedoes not uphold the unjust state even if it is Islamic,and thacan survive with justice and unbelief, but not with injustice an

Ibn Khaldun (d. 808/1406) elaborated further about injusticeon opression that: Oppressiondoes not consist merely in twealth and property from its owner without cause or comOppression has rather a wider connotation. Anyone whoproperty of others, forces them to work for him against their unjust claims on them, or imposes on them burdens not santhe shariah, is an oppressor.


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The Implications of Justice (Contd)

Umer Chapra wrote in his article: confining the rationale prohibition of interest to just this limited objective is not onwrong but also unduly restrictive in terms of the concept oIslam.

Chapra used the trader and financier case in Prophetstime trationale behind the prohibition of interest.

Chapra then elaborated the idea to reorganize the economespecially in financial intermediation with the basis of equityand-loss sharing. It would make the financier share in the rias the reward of business.


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The Humanitarian Goals

Needfulfillment

Optimumgrowth and

fullemployment

Equitabledistribution

Economicstability

Umer Chapra, 1982


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Need fulfillment (Contd)

When the governments apply for borrowed funds, it will bwith debt-servicing payment consisting of interest and amort

Chapra had a notion that if the country had undertaken junction seriously, it would have tried to reduce its deficits by miborrowing.

The higher the interest payment as a percentage of total expenditure, the less will be available for development purposes.


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2. Optimum growth and full employment

The basic ingredients fogrowth are:

Saving

Investment

Hard and conscientiou

Technological progrescreative management

Helpful social behaviogovernment policies


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3. Equitable distribution

Zakatand inheritance system.

The replacement of interest-based financial intermediationwith profit-and-loss sharingsystem.

According Laster Thurow, credittends to go to those who are luckyrather than smart or meriocratic.


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4. Economic stability

Lenders should not only rely on ones ability in providingcollateral and the strength or prospect of the project.

Borrowed funds should be allocated to productive spendings.

Do not depend too much on short-term loans which are abinstability toward foreign exchange trading.

Choose long-term loans and equity financing.


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Conclusion

1. Yes, it would be possible because the Islamic society uhumanitarian strategy emphasizing on establishment of mankind.

2. Because an interest-based financial intermediation tenborrowed funds easily. Problems come up when the funds aunproductive and wasteful purposes that squeeze

availability for need fulfillment and social development.

3. As Chapra mentioned in his article, humanitarian goahumanitarian strategy. Abolition of interest in Islamic juIslamic values themselves enable to provide conducive predthe goal realization.


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Raise your hand.

Ask us any questions.Zaiful Bahri 12820038

Irsa Wafiatul Qisthi 12820092

why has islam prohibited interest

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