Of Bank Interest and the Economic Misfortunes of Nigerian Muslims By Abdullahi Abubakar Lamido

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A misleading article titled Is bank Interest Riba or Not written by one journalist, Ali Abubakar Sadiq, went viral recently in which the writer tried to legitimize the devouring of bank interest. The author built his theory on the pretext that Muslims are economically backward because they have decided to shun interest. He claims that simple interest, and interest charged on productive/commercial loan are both not forbidden in the Sharī’ah. Reading his article presents him as someone who neither understands riba and its constituents, nor of the workings of modern banking. He also seems to be completely unaware of the developments about Islamic banking globally. Not even in Nigeria, at least judging by his essay.

The result is that he ended up not only confusing Muslims but, most dangerously, attributing the “enjoying” of interest to the Prophet peace be upon him (wal ‘iyādh bilLah!). This is serious! I hope he would seek Allah’s forgiveness on this. I am confident he will, especially as I gathered reliably that one great scholar has contacted him, and he had confessed that he actually did not understand the issues he wrote about.

The writer exclaimed that “to my utmost surprise I discover that there wasn’t a single judicial issue since early Islam that continues to bedevil Islamic scholars up to modern times like the issue of Riba” (sic). One would ask; why should a non-jurist be surprised if the qualified jurists, knowing the most important things in their field, realize for themselves what deserves most of their attention?

In fact, can the writer pinpoint any juridical issue that receives the kind of warnings declared by Allah and His messenger against its perpetrator? How many juristic issues has Allah declared war against their perpetrators? What other sin is the Prophet so serious in condemning: cursing its giver, taker, documenter and witnesses, and also equate the sin of the scribe with the devourer? What other sin is equated in its magnitude to committing multiple illicit sexual relations with the perpetrator’s mother?

First, the role played by banks is that of financial intermediation and most of their income, by law, comes from interest based transactions. They pay premium (interest) on deposits and charge higher interest on loans and advances. The difference between the two is their gains. This is how interest becomes the backbone of all banking transactions.

Riba occurs in a monetary transaction when a predetermined increase, above the principal, is put as a condition for lending. When X gives Y N1,000 with the condition that Y would return to X the sum of N1,100, then the additional predetermined N100 which is added as a condition for the loan is what constitutes riba. On the contrary, when no intention, and no mention of any expected addition at the level of effecting the loan contract, then any gift later given unilaterally to the lender by the borrower, out of his own volition, is rather a praiseworthy ṣadaqah. It will be wrong, therefore, to confuse ihsan and kindness (samāha) in repaying debt, which has been described by the Prophet peace be upon him as a source of mercy, and interest which has been unequivocally described as a source of ruin.

To make the point clearer, let us consider these definitions of riba. Al-Sarakhsī describes ribā as “the stipulated excess without a counter-value in sale”. Sheikh Yusuf al-Qaradawi says any loan transaction where an increase or benefit is put as a precondition. Sheikh Wahbah Zuhayli says a loan transaction will be regarded as ribā so long as an increase is “stipulated as a condition or conventionally implied in the loan contract.” Another definition says “Ribā in Islamic jurisprudence is an unjustified increment in borrowing or lending money paid in kind or in cash above the amount of the loan as a condition imposed by the lender”.

These are definitions offered by jurists.
Consider these ones from Islamic economists; Prof Umar Chapra (who I describe as being to Islamic economics what Adam Smith is to conventional economics) says ribā connotes the “premium” that the borrower must pay to the lender, along with the principal amount, for postponing, differing or waiting for a payment of the loan. Prof Monzer Kahf (call him a jurist economist) defines ribā in the context of financial transactions as any contractual increment in a loan or debt due to the time element, adding that “both legally and financially, interest is defined as an increment paid by the debtor to the creditor for granting a loan or for extending the maturity of an existing debt.”

An unjustified increment gained by the seller or the buyer when they exchange goods of the same kind in different qualities is also ribā.
Referring to the verse that forbids the taking of “double and redouble” riba, the writer claims “This is the standard definition of Riba according to the almighty as declared as the only one outlawed by Islam”.

He, however, is never preceded by any authority on this claim of “standard definition”, not even among the chief proponents of legitimizing bank interest. He describes verse as qat’ī, that is, definitive in meaning and implication. He does not, however, portray a clear understanding of the verse despite its being definitive in meaning and implications. After all, there is nothing in the verse according to scholars, which shows that only the “double and multiplied” is prohibited. Both simple and compound interest were practiced in jahiliyya.

Referring to the excessive does not in any way imply the exemption of what does not appear to be excessive. The verse condemns both using a statement that only emphasizes the worse. Nor is reference to the occasion of revelation (sabab al-nuzūl) of the verse any plausible evidence. After all, revealing a verse in a given circumstance does not restrict its application to that particular circumstance of revelation. It is a known principle that consideration is given to the general application of the text, not to the particular circumstance of its revelation (al-‘ibratu bi ‘umūm al-lafdh lā bi khusūs al-sabab).

But even if the verse is accepted to refer only to compound interest, the next question would be to ask, what happens with the other verses of interest? In fact, as Sheikh Yusuf al-Qaradawi states, the Qur’anic definition of interest is actually in 2:278 where Allah says: “O you who believe! Be conscious of Allah and give up what remains (due to you) from riba if you are (really) believers”. One finds in this verse – which was revealed few months before the closure of revelation – that the Qur’an forbids whatever remains of interest, irrespective of its magnitude or form. The Qur’an goes father to say, “And if you do not do it, then take a notice of war from Allah and His Messenger, but if you repent, you shall have your capital sums. …”.

The verse shows that whatever is stipulated above the principal or “capital sums” is not legitimate; what you only have is the capital, the rest is riba. Where then, do we find evidence for the author’s assertion that the Qur’an does not prohibit what is less than 100% interest if it is with mutual consent? Does mutual consent legitimize the illegitimate? Does the Qur’an or Sunnah talk about percentage? Now, if mutual consent is relevant, why does the Prophet peace be upon him curse the giver, the taker and even facilitators of the transaction?

Could there be taker and giver without mutual consent?
What commodities are subject to riba? The prophet peace be upon him enumerated six items in the Hadith of Abu Sa’id al-Khudri, which are gold, silver, wheat, barley, dates and salt (recorded by Muslim). Consider these items, you will find that four of them (wheat, barley, dates and salt share one thing in common; food value. The other two (gold and silver) have currency value. Whatever shares either of these two features; currency value and food value, therefore falls within the ribawī items. This is where your naira, your currency, comes into the equation. Now, with this, where do we put the example of riba given by the writer using camels? Is camel a ribawī item?

There are two claims also; that for productive loan, interest is allowed, and that the only form of interest practiced in the pre-Prophetic Arabia (jāhiliyyah) was compound interest (the doubled and redoubled riba). Imam al-Jassas states in his celebrated tafsir, Ahkam al-Qur’an, that the form of riba most practiced in jahiliyya was that which involved advancing loans in the form of gold and silver (currency) with a stipulated increase above the principal. This report is corroborated by al-Qurtubi and al-Razi. In his celebrated book, The Historic Judgement on Riba, Mufti Taqi Usmani cited Dr Jawed Ali whose work on the Jahiliyya Arabia is acclaimed globally; as saying, “What the historians have narrated about the caravans of Makkah reveals that the capital of a caravan never used to be the capital of one individual or a particular family; it rather belonged to the traders of different families and to those individuals who themselves had money or had borrowed it from others and had contributed it to the capital of the caravan, with a hope to earn huge profit.”

This clearly shows the case of collecting laon for commercial purposes during jāhiliyyah.

In fact commercial loan is mentioned in a Hadith of Imam Ahmad, Al-Bazzar and Al-Tabarani from Abdurrahman ibn Abi Bakr (RA) where the Prophet peace be upon him says “Allah Almighty will call a debtor on the Day of Judgment. He will stand before Allah and will be asked O son of Adam, why did you take this loan and why did you violate the rights of the people? He will say, My Lord, you know that I have taken this loan, but neither used it in eating or drinking nor in wearing clothes nor in doing something, instead, I was afflicted either by fire or by theft or by a business loss. Allah will say: My slave has told the truth.

I am the best One who will pay today on your behalf.” Clearly, the loan is collected not for consumption but for commercial purpose that ended in loss. Taqi Usmani also cited seven other clear examples of individuals collecting commercial loans from authentic traditions.
If the author claims that the prohibition of bank interest is the project of the so called Saudi Salafis, then one leaves this with the great scholars of Egypt, Syria, India, Pakistan, and other parts of the world who, in reality, were the actual pioneers in writing against bank interest. After all, the writing against bank interest started where modern banks started in the Muslim world, and that is Egypt.

And so, of all the leading champions of the Islamic alternative banking, from both the Muslim economists and jurists, hardly do you pinpoint the name of a Saudi.

The prohibition of bank interest is now a consensus of all global fiqh councils, fatwa committees, Islamic economics and finance bodies, Sharī’ah boards of Islamic banks, Islamic banking and financial institutions. All these agree that bank interest represents the most manifest example of the prohibited riba. Examples are the Islamic Fiqh Academy of the Muslim World League, the Islamic Fiqh Academy of the Organization of Islamic Conference, The Islamic Fiqh Academy of India, Al-Azhar Islamic Research Academy, The Fatwa Council of Europe, the Sharī’ah Board of the Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI), Islamic Financial Services Board (IFSB) and the International Association of Islamic Economics, Islamic Financial Services Board, and so on. Even if there is any minority view from any individual, that should be treated as the negligibly minority opinion that it is.

The claim of necessity as the reason for Muslims to take bank interest is also baseless. Necessity in the Sharī’ah has its principles and conditions. Necessity is measured to the extent of its seriousness. One takes the prohibited as necessity when one has no any window for a lawful alternative. We cannot as Nigerian Muslims, despite our large human and material resources, refuse to work for Sharī’ah alternatives only to keep looking for excuses about taking what is clearly prohibited. If, as the writer has stated, others have 24 banks, why not Muslims also establish theirs? One cannot refuse to look for halal, or even refuse to utilize the available halal around and go for haram in the name of necessity. And, alhamdulillah, we have branches of Islamic banks in most of the states of Nigeria.

We have two commercial banks and some Islamic microfinance banks. They provide Sharī’ah compliant alternative financing. And by the way, this writer’s call for embracing riba-based loans only came when, thanks to the consistent efforts of our scholars, a viable framework has been approved by the central bank for interest free interventions.

What then is the necessity? Allah has not put our source of economic strength in what he has prohibited. We should seek our development from halal, which He has given us in abundance.



Amir Lamido
IIUM, Gombak

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