Monday, May 28, 2007

Ibn Qayyim on Riba and more expensive Riba: Which should we choose?

Let's hear the voice of ibn Qayyim al-Jawziyya on the ruses used today in Islamic finance (be it named `ina, murabaha, tawarruq, or anything else):

فمن المستحيل على شريعة أحكم الحاكمين أن يحرم ما فيه مفسدة و يلعن فاعله و يؤذنه بحرب منه و رسوله و يوعده أشد الوعيد ثم يبيح التحيل على حصول ذلك بعينه سواء مع قيام تلك المفسدة و زيادتها بتعب الاحتيال في معصية و مخادعة الله و رسوله. هذا لا يأتي به الشرع؛ فإن الربا على الأرض أسهل و أقل مفسدة من الربا بسلم طويل صعب التراقي يترابى المترابيان على رأسه

فيالله العجب. أي مفسدة من مفاسد الربا زالت بهذا الاحتيال و الخداع؟

It is impossible for the Law of the Wisest of the wise [God] that He would forbid a harmful dealing [riba, or usury], curse its perpetrators and warn them of a war from God and his Messenger, and then to allow a ruse to result in the same effect with the same harm and added transaction costs in constructing the ruse to deceive God and his Messenger. This cannot be in accordance with the law, because riba on the ground is more facile and less harmful than riba with a tall ladder atop of which the two parties conduct the riba

I wonder, which of the harmful effects of riba was removed by this deception and lies?"

Source: Ibn Qayyim Al-Jawziya, I`lam Al-Muwaqqi`in `an Rabb Al-`Alamin, Beirut: Dar al-Kutub al-`Ilmiyya, 1996, vol.3, p. 92.

And the legal abitrageurs will still come around quoting "God permitted trade and forbade usury" (deceptively, twisting the meaning) to justify their trade!!


Blogger Daniel said...

I have recently begin reading, with great interest, your postings concerning the Hayderabad fatwa, allthough I realize this discussion begin more than a year ago. I spent a fair amout of time reading a re-reading the various Hadiths that discuss on-the-spot and equal quantities trading. At face value they seem to prohibit interest accumulated on loans but their rational leaves me confused.
1. Why the prohibition against trading two units of bad dates for one unit of good dates? This seems like a reasonable bussiness transaction. What is the unethical business transaction the Prophet is trying to prevent from happening?
2. Another hadith allows for such a trade but only if the bad dates are sold for currency and then the currency is used to purchase good dates. Why the need for this extra step?
3. Why the insistance that gold be traded in equal quantities? Doesn't that go without saying? Who would trade two ounces of gold for one ounce?
I guess I'm asking for a little historical contextualization. Otherwise applying these hadiths to the modern wold of finance is like applying medieval medical manuals to modern medicine.

12:18 AM  
Blogger Mahmoud El-Gamal said...

Please see my paper "An Economic Explication of the Prohibition of Riba in Classical Islamic Jurisprudence" for discussions of all three points.

6:45 AM  
Blogger Daniel said...

Thank you! your article was very helpful in clairifying the Hadiths in question. In your article you mention that many classical scholars allow for payment on a loan over and above the principle because "time has a share in the price". Could you please give me some references for these scholars, preferably english ones?

12:57 PM  

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