Riba, Economics, and Islamic Finance: A Different Perspective (2)

In addition to the topic of Islamic banks, the book “Riba, Economics, and Islamic Finance: A Different Perspective” examines the history of the global economy and the evolution of economic science. It also discusses the concept of Islamic economics and the misinterpretation of Sayyid Muhammad Baqir al-Sadr’s book, “Our Economics.” The book explains the political and economic conditions that led to the establishment of the Islamic Finance Bank. It thoroughly discusses the prohibition of riba (usury/interest) in Islam and in all revealed and non-revealed religions. It clarifies that there is a consensus on the prohibition of riba across all religions, including Judaism. In the Book of Exodus from the Torah (Old Testament), it states: “If you lend money to any of my people among you who is poor, you shall not be like a moneylender to him, and you shall not exact interest from him.” In the Book of Leviticus: “If your brother becomes poor and cannot maintain himself with you, you shall support him as though he were a stranger and a sojourner, and he shall live with you. Take no interest from him or profit, but fear your God, that your brother may live with you. You shall not give him your money at interest, or your food for profit.” From the Gospel: “Give to everyone who begs from you, and from one who takes away your goods do not demand them back.” Even in Hinduism and Buddhism, there are references to the prohibition of riba, but ultimately they set a maximum limit on permissible interest at 5%; anything above that is considered riba. The Catholic Church prohibited riba for more than 16 centuries. However, the Pope granted exceptions for widows and specific cases allowing the taking of interest. In Britain, a British lawyer published a book on riba in 1572, describing those who took interest as mad dogs. Subsequently, the British House of Commons issued a decree criminalizing interest-based transactions, forcing British merchants to travel to the Netherlands to obtain banking facilities, which compelled the House of Commons to repeal its decision. However, a revolution occurred in Christianity regarding the concept of riba in the 16th century, led by Reverend John Calvin, beginning with the redefinition of riba. Calvin defined riba as: “The interest that the rich take from the poor when the poor are forced to borrow to buy bread.” But for Calvin, when the rich borrow from another rich person to finance trade or build a ship, this is not considered riba. Calvin’s redefinition of riba sparked a revolution in finance in European countries following the Protestant doctrine, leading to the flourishing of trade and industry in countries such as England and Belgium, while Catholic countries like Spain, Italy, and France lagged behind. The Catholic Church in France continued to prohibit banking transactions until the 19th century. Therefore, generally speaking, there is a misconception that the prohibition of riba is exclusive to Islam. In fact, there are still provisions in the laws of some European countries prohibiting riba (usury), but they define riba as “excessively high interest.” For example, if the interest rate is around 5%, but the loan carries a 15% rate, this is considered riba, and courts usually dismiss it if the borrower appeals. Riba has been frowned upon throughout history and in literary heritage. The story of the merchant of Venice is well known to readers, and there is also a reference to riba in Dostoevsky’s novel “Crime and Punishment,” where the old student is described as evil and malicious, and it is said that she is prone to whims. It is enough for the debtor to delay repayment by one day to lose the collateral; she does not lend an amount less than a quarter of the collateral’s value, and charges a monthly interest of five or seven percent. Thus, the moneylender is a despised figure in all global literature and heritage. In Islam, there are six Quranic verses prohibiting riba. However, there is no consensus on the definition of riba in Islam. The verses were revealed to the Prophet (peace be upon him) during the last two years of his life, and there were no clear commercial transactions at the time that could be relied upon to clarify the true meaning of riba. Caliph Umar ibn al-Khattab (may Allah be pleased with him) acknowledged that the issue of riba in Islam is somewhat ambiguous, and therefore he said: “We have prohibited nine-tenths of what is lawful out of fear of riba.” There is a strong possibility that the just Caliph would have understood the Christian cleric John Calvin’s definition of riba as high interest on debts owed by the poor. The term “Islamic economics” is awkward even for enthusiasts of Islamic finance, as they recognize that this is a controversial and losing topic, which could weaken their profit-driven goals of promoting investment in Islamic finance. It is worth noting that the expression “Islamic economy” is a new term first used by Abul A’la Maududi in the 1940s, and he did not intend it in an economic sense but rather to strengthen Islamic identity. Moreover, the concept of “economics” as a term is relatively new. Even Adam Smith, in his book “The Wealth of Nations,” did not present an economic theory, and he himself was not an economist but a philosopher who observed the revival of commercial exchange activity in the second half of the 18th century and sought to present a vision and principles for governments to adopt to regulate commercial exchange between Western countries, in particular. Prior to his book, works had been published in philosophy that had no relation to economics. However, his book “The Wealth of Nations” could not have been written earlier because global commercial exchange was weak at the time. Even economics was not studied as an independent subject under this name until 1905 at the University of Cambridge in England, under Alfred Marshall, when he decided to teach his book “Principles of Economics,” which remained the main reference for students for forty years. Thus, the world had to wait until it accepted the economic theory as presented by John Maynard Keynes. Dr. Hamed Al-Humoud