بِسْمِ اللَّهِ الرَّحْمَٰنِ الرَّحِيمِ

In the Name of God, Most Merciful and Compassionate,
and (with) prayers and blessings on Muḥammad and his family.

Contents

• 1  The Causes of Failure
• 2  Simple Interest and the Verses of Ribā
• 3  Is the Meaning of Ribā Explained by the Sunnah? Is Ribā Found in Sales Alone?
• 4  The Meaning of Bay‘ and Dayn—One Last Time
• 5  Ṣarf, Loans and Copper Coins
  • 5.1  Copper Coins (Fulūs)
  • 5.2  Loan (Qarḍ)
• 6  A Modern Definition of Ribā

1  The Causes of Failure

The problem of the prohibition of ribā and its meaning have been debated for more than one century by modern scholars. The topic of ribā has been the focus of books, journal articles, lectures, talks, conferences, fatwas and even judicial decisions. The Qur’ānic verses on ribā, the traditions from the Prophet (pbuh) containing numerous sunan, the opinions of the Companions (R), of their followers, the different meanings of usury in history, especially among the Jews, its literal meanings in Arabic and other languages have all been deeply studied. These studies have been carried out by scholars of Islamic sciences, by economists, by bankers, by lawyers, ulama’, students and by almost all those people who have a genuine interest in Islam and a special interest in ribā. More recently studies have been carried out by the Federal Shari‘at Court of Pakistan and by the Shari‘at Appellate Bench of the Supreme Court of Pakistan.

On the basis of the prohibition of ribā, banks and financial institutions have been launched, and an entire industry has been set up to manage and invest the funds in, presumably, a different way. In the academic world Islamic economics has emerged as a new field of study, just as doctoral degrees are being awarded in the field of Islamic banking and finance.

Despite all this activity and the accompanying enthusiasm, no one understands the true meaning of the prohibition of ribā. This appears to be a shocking statement. The proof of this “shocking” statement is in the fact that the Federal Shariat Court of Pakistan, after having been occupied with the examination of the issue of the prohibition of ribā, and after issuing a copious judgement (along with two others by the Shariat Appellate Bench of the Supreme Court) has announced that it will sweep aside the entire work of the last one century and first take up the “definition” of ribā to ascertain the real meaning of ribā. We may reproduce part of the report of this announcement in the Express Tribune dated March 14, 2017:

FSC agrees to first define ‘Riba’

ISLAMABAD: The Federal Shariat Court (FSC) on Monday agreed to define ‘interest’ and ‘Riba’ after resuming the hearing of a case on which it delivered a verdict 25 years ago.

The four-judge bench of the Shariat Court is headed by Justice Riaz Ahmad Khan. In 1992, the FSC had termed ‘Riba’ repugnant to the injunctions of Islam in a case filed by the Jamaat-e-Islami (JI). Later, hearing an appeal against the decision in 1999, the Supreme Court’s Shariat Appellate Bench upheld the FSC ruling, asking the then government to amend all banking laws and other statutes, prohibiting Riba, within two years.

However, the government and some banks filed a review petition before the Supreme Court. In 2002, the case was referred to the FSC by the Supreme Court to reconsider its ruling, which had declared interest or ‘Riba’ unacceptable. The apex court also directed the FSC to solicit input from contemporary jurists from the Muslim world. The matter has been pending before the FSC for the past 15 years.

On Monday, the FSC observed that the court will first define ‘Riba’ and ‘interest’ before deciding on its jurisdiction in this matter. Dr Muhammad Anwar, who is amicus curiae in the case, stated that the court should first define ‘Riba’ and ‘interest’ before issuing any ruling.

Agreeing with this proposal, the court adjourned the case for 15 days. Last year, the State Bank of Pakistan (SBP) on October 29, 2015 had informed the FSC that the Constitution did not explicitly define ‘interest’ or ‘Riba’.

Published in The Express Tribune, March 14th, 2017.

For us, the problem is: why is the Federal Shariat Court not sure about the meaning of ribā and whether it is the same thing as interest, even after so much has been written on the subject and after so much activity has been generated on the basis of these writings? The answer can be given in one sentence: In modern times, the scholars, ulama’, economists, bankers, lawyers and judges have not read, understood, or appreciated the work of the earlier jurists on the issue of ribā. The reason for not understanding the work of the earlier jurists means the work of the fuqaha’ of the acknowledged schools of law up to, say, the year 1200 of the Hijra. There can be several reasons for not understanding the work of these earlier jurists. We shall take up these reasons and their explanation one by one.

The first reason is: “It takes a Muslim JURIST to understand the work of the earlier jurists, but there have been no true Muslim jurists after the year 1200 of the Hijrah.” Of course, there have been and still are outstaning scholars of Islam, who are masters of the Arabic language, experts in knowledge of the traditions, specialists in knowledge about Islam and its history, and above all great writers of tafsīrs or commentaries of the Qur’ān, but SADLY NO JURISTS.

Institutions like al-Azhar and other Islamic universities, as well as madāris, do not produce jurists; they produce scholars of the Arabic language, who have other skills like oratory and so on. The Dars-i-Nizami in India, for example, produces reproducers of rulings in the area of ‘ibādāt and family law. The question as to what is “Ṣarf” in fiqh has been asked many times from many students from all over the world who had takhassus (specialization) from some madrassah, and who were pursuing LLM in the shariah and law programme, but 90% offered a blank face in response, with the remaining ten percent saying that it had something to do with currency exchange, however, that was the limit of their knowledge of this contract.

To illustrate this further, pick up any writing of the last one hundred years on ribā and check how many authors have talked about the contract of ṣarf in the context of ribā. The answer will be: none! Examine the standard on currencies issued by the AAOIFI. The standard does not talk about this contract directly although its rules are stated in the standard. There is no indication in the standard that the rules for currencies might have something to do with the topic of ribā. It is extremely painful for this writer to make these statements, especially about the quality of education at the institutions mentioned, after having spent a greater part of his life in this field and at such institutions.

If the reader is wondering why the contract of ṣarf is important in relation to ribā, then he or she should note that the problem of ribā and loans in Islam cannot be understood without understanding the details of the contract of ṣarf. Writers on this topic have sometimes wondered why there is so little discussion on loans in Islamic law. In fact, it was suggested before the Supreme Court, in the arguments on the Review petition, that Islamic law has no concept of loan. The reader, and such experts, will find that loans are discussed by al-Sarakhsi right in the middle of the Book of Ṣarf.

Another reason could be that when the real meaning of ribā and its implications dawn on these scholars, they simply shut their eyes; they do not wish to acknowledge its true meaning and consequential implications. This, however, cannot be said about the great scholars and ‘ulamā of the past century mentioned above. Such motives may be assigned to some bankers and the employees working in Islamic banks who are out to make money from the issue of riba, without changing anything that is practiced in the modern world with respect to conventional banking. For the economists, we can only say: “What is wrong with these people; they fail to understand a simple statement.”¹ The issue and the discussions of the scholars about ribā, however, are much older than these banks or Islamic economics. The assumption here is that if one of our worthy scholars had really analyzed the contract of ṣarf he would have understood it and revealed its details to his readers.

A third and final reason could be that the methodology adopted by modern scholars, in the last one century, on the issue of ribā has brought in distortions that have prevented the experts from understanding even the “definition” of ribā let alone its various implications. In our view, on the issue of ribā, modern scholars of the last century, whoever they might be have cut the integral bond between the Qur’ān and the Sunnah during interpretation. This is an error that some of the present day scholars may be embarrassed to admit when they identify it for they have generated a tremendous body of literature on the subject, all in a different direction. It is on the basis of this error that Muslim investors have been asked to commit vast sums of money. We understand that all this may be difficult to retract, but retract they must before further damage is done.

To elaborate the defect in methodology mentioned; namely, the severing of the bond between the Qur’ān and the Sunnah within the issue of ribā, we will consider below all the twelve verses of the Qur’ān on the topic and try to prohibit simple interest, which is charged by banks and all money-lenders. After considering the verses, we will look at the explanation given by the leading present day scholars. If the reader is not satisfied with the explanation, he must turn to al-Sarakhsi for the definition of ribā as well as the ruling on loans with or without interest, that is, he must examine the text provided in this book.

Before we take up the discussion of the verses of ribā to show the weakness in the methodology of modern jurists, and to highlight the reason why a definition of ribā is not available to modern scholars, it is essential to indicate which of the three reasons mentioned above is the real reason for the failure of modern scholars to understand the issue of ribā. Has there been no jurist in the Muslim world in the last two centuries? Do modern scholars evade the issue when the true meaning of ribā is presented to them, due to the embarrassment that might result if they admit their error? Is there something wrong with their methodology when they discuss the issue of ribā?

In our view, all three reasons are the cause of the failure of the scholars to understand the issue of ribā. The cause for the later two reasons is the first cause. It is a cause that had, perhaps, started developing during the time of Imām al-Sarakhsī, for he complains about the “inadequacy of ability,” mentioned in the previous chapter.

2  Simple Interest and the Verses of Ribā

Our purpose in this section is not to indulge in detailed reasoning. All we want from the modern scholars is to tell us which verse out of the 12 main verses prohibits a simple interest transaction, like a man borrowing one hundred dollars today and paying back one hundred and ten after exactly one year. After listing the verses, so that the reader knows what verses we are talking about, we will provide an answer by the leading scholar in the field today.

Before we list the verses and seek the answer from modern scholars about the verse that clearly or directly prohibits the simple transaction that we have presented (borrowing 100 and paying back 110), let us say that modern scholars do not have a satisfactory answer to our simple question of simple interest. The reader will find their response to be mere insistence on prohibition, not real prohibition of any kind.

The reader should note, however, that we are not talking here about compound interest or interest “doubled and multiplied,” our main purpose is to find out the prohibition of simple interest.

Here are the verses:

2: 275:

الَّذِينَ يَأْكُلُونَ الرِّبَا لَا يَقُومُونَ إِلَّا كَمَا يَقُومُ الَّذِي يَتَخَبَّطُهُ الشَّيْطَانُ مِنَ الْمَسِّ ۚ ذَٰلِكَ بِأَنَّهُمْ قَالُوا إِنَّمَا الْبَيْعُ مِثْلُ الرِّبَا ۗ وَأَحَلَّ اللَّهُ الْبَيْعَ وَحَرَّمَ الرِّبَا ۚ فَمَن جَاءَهُ مَوْعِظَةٌ مِّن رَّبِّهِ فَانتَهَىٰ فَلَهُ مَا سَلَفَ وَأَمْرُهُ إِلَى اللَّهِ ۖ وَمَنْ عَادَ فَأُولَٰئِكَ أَصْحَابُ النَّارِ ۖ هُمْ فِيهَا خَالِدُونَ

275. Those who devour usury will not stand except as stands one whom the Satan by his touch hath driven to madness. That is because they say: “Trade is like usury,” but Allah hath permitted trade and forbidden usury. Those who after receiving direction from their Lord, desist, shall be pardoned for the past; their case is for Allah (to judge); but those who repeat (the offence) are companions of the Fire: They will abide therein (for ever).

2: 276: يَمْحَقُ اللَّهُ الرِّبَا وَيُرْبِي الصَّدَقَاتِ ۗ وَاللَّهُ لَا يُحِبُّ كُلَّ كَفَّارٍ أَثِيمٍ

276. Allah will deprive ribā of all blessing, but will give increase for deeds of charity: For He loveth not any ungrateful and wicked.

2: 278: يَا أَيُّهَا الَّذِينَ آمَنُوا اتَّقُوا اللَّهَ وَذَرُوا مَا بَقِيَ مِنَ الرِّبَا إِن كُنتُم مُّؤْمِنِينَ

278. O ye who believe! Fear Allah, and give up what remains of your demand for ribā, if ye are indeed believers.

2: 279: فَإِن لَّمْ تَفْعَلُوا فَأْذَنُوا بِحَرْبٍ مِّنَ اللَّهِ وَرَسُولِهِ ۖ وَإِن تُبْتُمْ فَلَكُمْ رُءُوسُ أَمْوَالِكُمْ لَا تَظْلِمُونَ وَلَا تُظْلَمُونَ

279. If ye do it not, take notice of war from Allah and His Messenger. But if ye repent, ye shall have your capital sums: Deal not unjustly, and ye shall not be dealt with unjustly.

2: 280: وَإِن كَانَ ذُو عُسْرَةٍ فَنَظِرَةٌ إِلَىٰ مَيْسَرَةٍ ۚ وَأَن تَصَدَّقُوا خَيْرٌ لَّكُمْ ۖ إِن كُنتُمْ تَعْلَمُونَ

280. If the debtor is in a difficulty, grant him time till it is easy for him to repay. But if ye remit it by way of charity, that is best for you if ye only knew.

3: 130: يَا أَيُّهَا الَّذِينَ آمَنُوا لَا تَأْكُلُوا الرِّبَا أَضْعَافًا مُّضَاعَفَةً ۖ وَاتَّقُوا اللَّهَ لَعَلَّكُمْ تُفْلِحُونَ

130. O ye who believe! Devour not ribā, doubled and multiplied; but fear Allah that ye may (really) prosper.

3: 131: وَاتَّقُوا النَّارَ الَّتِي أُعِدَّتْ لِلْكَافِرِينَ

131. And fear the Fire, which is repaired for those who reject Faith:

4: 161: وَأَخْذِهِمُ الرِّبَا وَقَدْ نُهُوا عَنْهُ وَأَكْلِهِمْ أَمْوَالَ النَّاسِ بِالْبَاطِلِ ۚ وَأَعْتَدْنَا لِلْكَافِرِينَ مِنْهُمْ عَذَابًا أَلِيمًا

161. That they (Jews) took ribā, though they were forbidden; and that they devoured men’s substance wrongfully; We have prepared for those among them who reject faith a grievous punishment.

30: 39: وَمَا آتَيْتُم مِّن رِّبًا لِّيَرْبُوَ فِي أَمْوَالِ النَّاسِ فَلَا يَرْبُو عِندَ اللَّهِ ۖ وَمَا آتَيْتُم مِّن زَكَاةٍ تُرِيدُونَ وَجْهَ اللَّهِ فَأُولَٰئِكَ هُمُ الْمُضْعِفُونَ

39. That which you give in ribā for increase through the property of (other) people, will have no increase with Allah: but that which you give for charity, seeking the Countenance of Allah, (will increase): it is these who will get a recompense multiplied.

The reader should note that the words of verse 2: 279 above “ye shall have your capital sums” can mean a large number of things: capital sum of the credit sale, capital sum in a partnership, capital sum in the contract of salam, capital sum in muḍārabah, capital sum in a loan, capital sum in the contract of istiṣnā‘ and so on.

WHEN MODERN SCHOLARS ARE ASKED, “WHICH OF THESE VERSES PROHIBITS SIMPLE INTEREST?” THESE SCHOLARS HAVE NO ANSWER.

Some answers were provided in what is called the “historic” judgement on ribā by the Supreme Court. The first by Justice Khalil ur Rahman and the other by Mufti Taqi Usmani, as follows:

Justice Khalil ur Rahman correcting the meaning given to Mufti Shafi’s view said the following (Mufti Shafi was Mawlana Taqi Usmani’s learned father):

Mufti Sahib’s approach is poles apart. In his masterly treatise entitled Maslah-e-Sūd, he has categorically stated: “Upon hearing verses of the Qur’ān everybody immediately realized that Qur’ān referred to the obvious well known meaning of the term Riba, i.e. charging of anything in excess (of the principal) in credit or loan transactions. Everybody took it as prohibited and gave it up immediately.”²

What? Is that a legal argument? Believe it or not, this is the main argument. It means that ribā was so well known to the people that the moment it was mentioned the people knew what it meant and they had no difficulty in understanding and following the meaning.

Mufti Sahib’s equally illustrious son, Mawlana Taqi Usmani, then elaborates this at somewhat greater length in his part of the Judgement. He does so while answering the question posed: What is ribā?

36. Now we come to the question what is meant by Riba? The Holy Quran did not give any definition to the term for the simple reason that it was well known to his addressees. It is like the prohibition of pork, liquor, gambling, adultery etc. which were imposed without giving any hard and fast definition because all these terms were well known and there was no ambiguity in their meaning. Similar was the case of Riba. It was not a term foreign to Arabs. They all used the term in their mutual transactions. Not only Arabs but all the previous societies used to practice it in their financial dealings and nobody had any confusion about its exact sense. We have already quoted the verse of Surah Al-Nisa where the Holy Quran has reproached the Jews for their taking Riba while it was prohibited for them. Here this practice is termed as Riba in the same manner as it is termed in Surah Al-Imran or Surah AlBaqarah. It means that the practice of Riba prohibited for Muslims was the same as was prohibited for the Jews.³

This is the argument then: all the transactions of interest are automatically implied by the word ribā when it is used in the Qur’ān. In other words, this is the argument they give when Rashid Riḍa says that the term ribā in these verses applies only to “compund interest” or transactions where it is “doubled and multiplied.” Thus, in response they insist, it includes the loan transaction whether it is based on simple interest or on compound interest, that is, doubled and multiplied. The reason is that the word ribā may be said to have a meaning whose nature is like the words gambling, pork, liquor, and adultery, because anyone will understand what it means. Why get confused then? Why attempt to derive meanings that apply to things that are not ribā? The reader can easily see that these are very weak arguments, and they really do not have a reply to the argument given by Rashid Rida, nor can they show that one of the verses applies to “simple interest.”

The earlier jurists, the true fuqaha’, do not give such weak arguments for the prohibition of ribā. The reason is that even if it is conceded that the transactions mentioned above were known to the Arabs, it does not lead to the certain conclusion that this is what the term ribā implied. Thus:

• First, it is not correct to say that the term khamr was understood to mean “liquor.” There is a big dispute as to what the term means.
• The same may be said about gambling and adultery. The term zinā was elaborated by the Sunnah, because it means different things for different people—married, unmarried, slaves, and so on.
• In reality, the word ribā is like the terms ṣalāt, zakāt, sariqah and other terms that require further detailed elaboration.
• Thus, ṣalāt means supplication, which can take any and multiple forms depending on the imagination of the worshipper, and so can ribā. The same applies to zakāt. These terms are in need of further detailed elaboration if they have to be applied.
• It is for this reason that ṣalāt (prayer) was explained in all its details by the Sunnah, and so was zakāt with all its detailed rates. The details cannot be known unless recourse is had to the Sunnah. No amount of rationalization and arguments based on reason are sufficient or even valid for such a term.
• In the discipline of Islamic Jurisprudene, such a term is called mujmal. This means that the explanation or elaboration of such a term must come from the Sunnah.

Most earlier jurists consider the word ribā, as used in the Qur’ān, to be mujmal, that is, a word in need of greater detail.⁴ In other words, the jurists say that the true meaning of ribā must be elaborated by the Sunnah, just like the terms salāt, zakāt, sariqah and so on. This is where modern scholars differ with the jurists. Let us explain this further.

3  Is the Meaning of Ribā Explained by the Sunnah? Is Ribā Found in Sales Alone?

Our purpose in this introduction is not to discuss the issues of ribā, because we have already discussed them in other publications. The objective here is to point out the difference between modern scholars and the jurists, and by jurists up to Ibn ‘Abidīn also called al-Shāmī.

In the previous section we have shown that simple interest is not clearly prohibited by the verses of the Qur’ān. This has been acknowledged by modern scholars. Nevertheless, these scholars insist that ribā or simple and compound interest is prohibited by the Qur’ān, and the Sunnah deals with a minor or lighter form of ribā that is found in sales. They say this when they cannot show how the verses prohibit simple interest, as we have shown in the previous section.

As compared to modern scholars, institutions, and banks, the jurists hold a different view, and have held it from the day Islamic law was born. The jurists maintain that the prohibition is found in the verses of the Qur’ān, but it is in the mujmal or unelaborated or hidden form. This meaning is to be elaborated by the Sunnah, just as the Sunnah elaborates the meaning of ṣalāt and zakāt. These jurists do not say that ribā of the Sunnah or sales is of a minor type. In fact, they say that RIBĀ IS FOUND IN SALES ALONE. THIS MEANS RIBĀ IN THE QUR’ĀN AND THE SUNNAH IS OF THE SAME TYPE AND BOTH SOURCES TALK ABOUT RIBĀ IN SALES ALONE.

This is the crucial difference between modern scholars and the jurists. Those who do not understand this difference do not understand the work of the jurists, and they can never understand the meaning of ribā, unless they understand the explanations given by the jurists.

In this section then, we shall just record the views of modern scholars and then give a quotation or two from al-Sarakhsī to show the difference between the two groups. We have included Shāh Walī Allāh (God bless him) in the group of modern scholars.

As for the statement of Shāh Walī Allāh, it is as follows:

Know that ribā has two aspects: actual and figurative. The actual form is in debts, and we have mentioned that it has a central place within the topic of mu‘āmalāt. The people in jāhilīyah were intensely occupied with it, and it was the cause of continuous wars, and a little of it used to lead to more. It became necessary to seal its door as a whole, therefore, the revelation in the Qur’ān. The second type is ribā al-faḍl, the source for it being ḥadīth …and this was called ribā by extension and as a metaphor for the true form of ribā …. It was then that ribā in this meaning was practiced widely till the true legal form came to be realized in this too.⁵

The learned author, thus, divides ribā into two types, that of the Qur’ān and that of ḥadīth, which is of a metaphorical type, that is, not really significant.

As compared to him, ‘Abd al-Razzāq al-Sanhūri, the well known Egyptian lawyer, undertook a detailed study of Islamic law, especially on the topic of ribā. Dr. al-Sanhūrī classified the types of ribā in a slightly different manner. He is conscious of the discrepancy between the views of the earlier jurists and those of Ibn al-Qayyim. Finding it difficult to classify ribā al-nasī’ah, he says:

If the manifest (jalī) form of ribā according to Ibn Qayyim is ribā al-jāhilī, which is the first type, and the lighter (concealed) form of ribā is ribā al-faḍl, which is the third type, then, where do we place ribā al-nasī’ah, which occurs in the noble ḥadīth? Is it the manifest (jalī) form of ribā that is to be linked with ribā al-jāhilīyah? Or is it the concealed (lighter) form of ribā that is to be linked with ribā al-faḍl? It is obvious that Ibn Qayyim links it—without expressly saying so—with ribā al-jāhilīyah and considers it a manifest form of ribā like it. Thus, when he speaks of ribā al-nasī’ah, considering it the manifest form of ribā, he intends thereby both ribā al-jāhilīyah and ribā al-nasī’ah that is mentioned in the ḥadīth.⁶

Sanhūrī, who had spent some time studying the problem deeply, is forced to acknowledge that ribā al-nasī’ah, which modern scholars equate with ribā of the Qur’ān, and the real as well as major form is also found in the ḥadīth. It appears that this view of al-Sanhūrī led both Abū Zahrah and Mawlāna Mawdūdī to classify ribā al-nasī’ah as ribā al-jāhilīyah in explicit terms, that is, the ribā of the Qur’ān. Al-Sanhūrī himself did not do so. He considered ribā al-nasī’ah to be of the same lighter category as ribā al-faḍl. This he attributed to Rashīd Riḍā.⁷ The ribā of the Qur’ān in his view was only ribā al-jāhilī. The ribā of traditions in his view was permitted in case of mere need, while the ribā of the Qur’ān was permitted in case of necessity. He made a distinction between need and necessity saying that necessity was similar to the consumption of carrion under duress (state of iḍṭirār).

Abū Zahrah, who was a well known leader of modern scholars in Egypt, a Shaykh of Al-Azhar, said:

Before we put down the pen, we will discuss the legal issue related to ribā, which is that the excess in lieu of the period [of repayment] is the ribā of jāhiliyah. It is also called ribā al-nasī‘ah, because the excess in it is in lieu of the period, that is, the duration of delay. The scholars are all in agreement about its prohibition, and it is the ribā of the Qur’ān…. There is a technical form of ribā or that of the Islamic usage. This is the ribā of sales (ribā al-buyū‘).⁸

He goes on to show that ribā of sales is prohibited by the Sunnah. His view on exemption due to necessity from the provision of ribā in the Sunnah appears to be no different from that of Rashīd Riḍā. He says:

It is a settled matter in fiqh that a primary prohibition is not made permissible except under duress, and there can be no absolute duress that would permit the consumption of interest. A secondary (li-ghayrihi) prohibition, however, may be permitted in the case of need. Thus, if one is facing an acute need for borrowing on interest, because he cannot find anyone who would grant him a qarḍ ḥasan, then, Allāh would remove the sin from him, and associate two sins with one who does not grant a loan except on interest. If, therefore, a state is faced with an acute need for a loan with interest, because she cannot find another way to satisfy her needs, then, it is to be hoped that Allāh will forgive those who do so.⁹

The distinction between the forms of ribā prohibited by the Qur’ān and those prohibited by the Sunnah, is also made by the learned Sayyid Abul ‘Alā Mawdūdī. He describes ribā al-nasī’ah as follows:

We have stated earlier that ribā, in fact, is that excess or fā’idah which a creditor receives from the debtor as a stipulated excess over and above the principal amount. In the terminology of the law, this is called ribā al-nasī’ah. Thus, it is ribā that is paid and received in a loan transaction. It is this ribā that has been prohibited by the Qur’ān. The whole Ummah agrees about its prohibition.¹⁰

As distinguished from this form of ribā, which is prohibited by the Qurān, he describes ribā al-faḍl as a form of ribā prohibited by the Sunnah:

Ribā al-faḍl is the excess that is found in the spot exchange of two things of the same genus. The Messenger of Allāh (p.b.u.h.) has prohibited this form.¹¹

This is the same view as that of Abū Zahrah. Thus, some of the leading scholars of this century make a distinction between the type of ribā prohibited by the Qur’ān, which they designate as ribā al-nasī’ah, and the type of ribā prohibited in sales by the Sunnah, which they call ribā al-faḍl.

We have quoted just two of the leading scholars of the last century; namely, Abū Zahrah and Abū al-‘Alā Mawdūdī. The fact, however, is that all modern scholars, without exception, uphold these views. These views are also held by all the Islamic institutions today. This is natural as the institutions rely on these scholars. The institutions include the Islamic Fiqh Academy of the OIC, the Accounting and Auditing Organisation of Islamic Financial Institutions (AAOIFI), all the sharī‘ah boards of Islamic banks and central banks. In addition to this, the same view has been advanced in the two famous judgements of the Courts in Pakistan (FSC and SC).

We have already stated that in comparison to modern scholars, institutions, and banks, the jurists hold the view that ribā is only of one type. A normal ribā transaction contains both ribā al-nasī’ah and ribā al-faḍl. These two types are compensation for each other, but the transaction is present in the conventional system, because Islamic law considers this transaction to be unlawful. A person who does not understand the nature of these two sub-types cannot understand the texts of fiqh, especially the texts of the Ḥanafī jurists.

Related to this idea is the assertion that ribā is only found in bay‘ or reciprocal exchange. Accordingly, the jurists DO NOT SAY THAT ribā OF THE SUNNAH OR SALES IS OF A MINOR TYPE. They say that this is the only type. Let us repeat what we stated above: RIBĀ IS FOUND IN BAY‘ ALONE and is of the same type in both the Qur’ān and the Sunnah.

We may point out that this difference is reflected in the definitions of ribā that these scholars try to give, something that the FSC is determined to discover. Their definitions are obviously influenced by Western ideas. Thus, a definition given by Abdel-Rahman Yousri Ahmad, and which we found on the net is: “Unjustified increment in borrowing or lending money, paid in kind or in money above the amount of loan, as a condition imposed by the lender or voluntarily by the borrower. Riba defined in this way is called in fiqh riba al-duyun (debt usury).”¹² Something similar to this definition is given in The Khyber Pakhtunkhwa Prohibition of Interest on Private Loans Act, 2016.

2(f) “interest” includes any amount, big or small, over the principal, in a contract of loan or debt, regardless of whether the loan is taken for purpose of consumption or for some production activity, whether the same is charged or sought to be recovered specifically by way of interest or otherwise, or found so to be recoverable by a competent Court;

This is the reason why we say that these scholars are not jurists. They are stuck in the words “loan” and “debt,” which shows that their confusion is buried deep into their reservoir of borrowed concepts. We will try to remove this confusion in the next section, but first let us look at how a jurist defines ribā.

Shams al-A’immah al-Sarakhsī, in the first few paragraphs of the Kitāb al-Buyū‘, gives us the definition of ribā. Notice that he does not mention loan or debt, but only bay‘.

وَفِي الشَّرِيعَةِ: الرِّبَا: هُوَ الْفَضْلُ الْخَالِي عَنْ الْعِوَضِ الْمَشْرُوطِ فِي الْبَيْعِ؛ لِمَا بَيَّنَّا: أَنَّ الْبَيْعَ الْحَلَالَ مُقَابَلَةُ مَالٍ مُتَقَوِّمٍ بِمَالٍ مُتَقَوِّمٍ فَالْفَضْلُ الْخَالِي عَنْ الْعِوَضِ إذَا دَخَلَ فِي الْبَيْعِ كَانَ ضِدَّ مَا يَقْتَضِيهِ الْبَيْعُ فَكَانَ حَرَامًا شَرْعًا، وَاشْتِرَاطُهُ فِي الْبَيْعِ مُفْسِدٌ لِلْبَيْعِ، كَاشْتِرَاطِ الْخَمْرِ وَغَيْرِهَا.

In the sharī‘ah, ribā is the excess (faḍl) that is without a (lawful) counter-value and is stipulated in reciprocal exchange (bay‘). This conforms with our explanation that permitted reciprocal exchange (bay‘ ḥalāl) is the exchange of marketable wealth with marketable wealth. Thus, an excess without any marketable value inserted in reciprocal exchange (bay‘) is contrary to what is required by reciprocal exchange. It is, therefore, ḥarām (prohibited) according to the shar‘ (law). Its stipulation in reciprocal exchange renders the exchange vitiated (fāsid), like the stipulation of khamr (wine) or other (prohibited) things (as payment).

This is not the first time that we have quoted this definition, and yet modern scholars are seeking out a definition. The reason is that they do not read these words like jurists. When a jurist reads this passage, he knows that the great Imām is mentioning both sub-types of ribā. The reason, and the secret, is contained in the words “marketable wealth.” According to the jurists, the period of delay is not “marketable wealth,” nor is the excess paid in lieu of it. They are not marketable wealth whether they are found alone or in lieu of each other. The secret revealed, we may now turn again to the rule that ribā is found only in sales.

The texts of the jurists—Sarakhsī, Kasānī and others—often mention the rule within cases and issues that ribā is not found because there is no sale. Here is one case where the issue arises whether ribā can exist between a slave and his master. Imām al-Sarakhsī says:

He (God bless him) said: There is no ribā between a slave and his master, due to the words of the Prophet (pbuh), “There is no ribā between a slave and his master.” THE REASON IS THAT THIS IS NOT SALE, because the earning of the slave belongs to his master. Sale is the exchange of owned property with property owned by another. As for placing part of one’s property within another part of one’s property is not sale (exchange). …There is no ribā between them irrespective of his having bought a dirham from him for two dirhams. The reason is that what he has given is not a counter-value, whether or not it is less or more.

The rule that ribā exists only in sales is the first of the four rules that we derived from the texts of Imām al-Sarakhsī. The four rules are like conditions, and all four must be met for ribā to exist. The rules were stated in another text as follows:

1. A usurious transaction involves the exchange of two countervalues, that is, it will be found only if there is a reciprocal exchange (bay‘).
2. Ribā is found when ownership in the item exchanged is passed on to the other party.
3. Ribā is found when the items exchanged are the same or are species of the same genus.
4. An excess (based on weight and/or measure, or on period of delay) must be found and passed on to the other party either in one of the exchanged items or in both.

The rules have been elaborated by us in different texts. All this, however, may prove to be highly confusing for the non-jurist. This is despite the fact that we have elaborated these meanings again and again. It was not our intention to elaborate these meanings further, but we will do so one last time for the sake of the great Imām al-Sarakhsī, whose wonderful texts the Muslims of the present times, we are convinced, do not deserve. We will have to work hard to explain the meaning of “debt” and “loan” to the scholars, as these meanings are understood by the jurists.

4  The Meaning of Bay‘ and Dayn—One Last Time

The term dayn is understood by modern scholars as “debt.” The nature of this word as understood by the jurists is not understood by them. To illustrate this, let us quote Abū Bakr al-Kāsānī, the well known Ḥanafī jurist, about the types of reciprocal exchange (bay‘) on the basis of the counter-values exchanged:

Reciprocal exchange (bay‘) with respect to the counter-values exchanged is divided into four types: the exchange of ‘ayn for an ‘ayn, which is the exchange of goods for goods and is called barter; the sale of an ‘ayn with a dayn, and this is the sale of goods for absolute prices, which are dirhams and dīnārs, or their sale for copper coins or with a described measured commodity attached to the dhimmah or a described weighed commodity or described identical counted items; the sale of a dayn with an ‘ayn, which is salam; and the sale of a dayn with a dayn, which is the sale of an absolute price for an absolute price, and is called ṣarf.¹³

If the term ‘ayn is translated as a physical thing, or “thing” for short, and the word “dayn” is translated as “debt” as modern scholars do, then the four types of sales according to al-Kasānī will be as follows:

• Sale of a thing for a thing;
• Sale of a thing for a debt;
• Sale of debt for a thing; and
• Sale of a debt for a debt.

This is preposterous, and al-Kāsānī obviously does not mean this. The reason is that he is giving the term dayn the meaning of dinars and dirhams as well as things that can be attached to the dhimmah. What does this mean? And, how do the jurists assign the meaning of dinars and dirhams to the term “dayn”?

The reason happens to be another illustration of the claim that modern scholars really do not ponder over the texts as the jurists do.

2: 275:

يَٰٓأَيُّهَا ٱلَّذِينَ ءَامَنُوٓا۟ إِذَا تَدَايَنتُم بِدَيْنٍ إِلَىٰٓ أَجَلٍ مُّسَمًّى فَٱكْتُبُوهُ ۚ وَلْيَكْتُب بَّيْنَكُمْ كَاتِبٌۢ بِٱلْعَدْلِ ۚ وَلَا يَأْبَ كَاتِبٌ أَن يَكْتُبَ كَمَا عَلَّمَهُ ٱللَّهُ ۚ فَلْيَكْتُبْ وَلْيُمْلِلِ ٱلَّذِى عَلَيْهِ ٱلْحَقُّ وَلْيَتَّقِ ٱللَّهَ رَبَّهُۥ وَلَا يَبْخَسْ مِنْهُ شَيْـًٔا ۚ فَإِن كَانَ ٱلَّذِى عَلَيْهِ ٱلْحَقُّ سَفِيهًا أَوْ ضَعِيفًا أَوْ لَا يَسْتَطِيعُ أَن يُمِلَّ هُوَ فَلْيُمْلِلْ وَلِيُّهُۥ بِٱلْعَدْلِ ۚ وَٱسْتَشْهِدُوا۟ شَهِيدَيْنِ مِن رِّجَالِكُمْ ۖ فَإِن لَّمْ يَكُونَا رَجُلَيْنِ فَرَجُلٌ وَٱمْرَأَتَانِ مِمَّن تَرْضَوْنَ مِنَ ٱلشُّهَدَآءِ أَن تَضِلَّ إِحْدَىٰهُمَا فَتُذَكِّرَ إِحْدَىٰهُمَا ٱلْأُخْرَىٰ ۚ وَلَا يَأْبَ ٱلشُّهَدَآءُ إِذَا مَا دُعُوا۟ ۚ وَلَا تَسْـَٔمُوٓا۟ أَن تَكْتُبُوهُ صَغِيرًا أَوْ كَبِيرًا إِلَىٰٓ أَجَلِهِۦ ۚ ذَٰلِكُمْ أَقْسَطُ عِندَ ٱللَّهِ وَأَقْوَمُ لِلشَّهَٰدَةِ وَأَدْنَىٰٓ أَلَّا تَرْتَابُوٓا۟ ۖ إِلَّآ أَن تَكُونَ تِجَٰرَةً حَاضِرَةً تُدِيرُونَهَا بَيْنَكُمْ فَلَيْسَ عَلَيْكُمْ جُنَاحٌ أَلَّا تَكْتُبُوهَا ۗ وَأَشْهِدُوٓا۟ إِذَا تَبَايَعْتُمْ ۚ وَلَا يُضَآرَّ كَاتِبٌ وَلَا شَهِيدٌ ۚ وَإِن تَفْعَلُوا۟ فَإِنَّهُۥ فُسُوقٌۢ بِكُمْ ۗ وَٱتَّقُوا۟ ٱللَّهَ ۖ وَيُعَلِّمُكُمُ ٱللَّهُ ۗ وَٱللَّهُ بِكُلِّ شَىْءٍ عَلِيمٌ

The verse is usually translated as given below. The translation is from the King Fahd translation, but other translations are more or less similar.

O ye who believe! When ye deal with each other, in transactions involving future obligations in a fixed period of time, reduce them to writing. Let a scribe write down faithfully as between the parties: let not the scribe refuse to write: as Allah Has taught him, so let him write. Let him who incurs the liability dictate, but let him fear His Lord Allah, and not diminish aught of what he owes. If the party liable is mentally deficient, or weak, or unable himself to dictate, let his guardian dictate faithfully. And get two witnesses, out of your own men, and if there are not two men, then a man and two women, such as ye choose, for witnesses, so that if one of them errs, the other can remind her. The witnesses should not refuse when they are called on (for evidence). Disdain not to reduce to writing (your contract) for a future period, whether it be small or big; it is more just in the sight of Allah, more suitable as evidence, and more convenient to prevent doubts among yourselves but if it be a transaction which ye carry out on the spot among yourselves, there is no blame on you if ye reduce it not to writing. But take witnesses whenever ye make a commercial contract; and let neither scribe nor witness suffer harm. If ye do (such harm), it would be wickedness in you. So fear Allah. For it is Allah that teaches you. And Allah is well acquainted with all things.

The jurists, however, focus on the following words first: “When ye deal with each other in dayn delayed for a named period, reduce it to writing.” Arguing for them we may say first that if dayn means “debt” then there is no point in saying “delayed for a named period,” because a debt is always delayed for a fixed period. As the words of the Almighty have to be given a meaning, the words must mean something else. Is this transaction a loan here?

Imām Fakhr al-Dīn al-Rāzī, the great Shāfi‘ī jurist, who while commenting on the words of the Exalted, “O ye who believe, when ye contract a dayn for a stipulated period, write it down,” said: “The linguists say that loan (qarḍ) is different from debt (dayn), because a qarḍ is the giving of dirhams and dinārs or of dates or the like, in which a period of delay is not permitted, but in a debt a delay is permitted.” Al-Rāzī then records opinions as commentary for the verse and follows one of these with a statement that implies that the meaning in the verse is that of a loan (qarḍ). He then says, “This is weak, as we have explained, because in a loan it is not possible to stipulate a period.”¹⁴

That leaves the consideration of the word dayn as “debt.” The jurists consider dayn to be something that can be attached to the dhimmah, that is, it is something that will remain the same over a long period of time. A slave or horse or a fruit cannot remain the same or have similars. The thing that is eligible for being a debt is something that is sold by weight, cubic measure, or even count when the thing is quite similar to others like walnuts, for example. It is for this reason that the Prophet (pbuh) laid down conditions for the subject-matter of salam that was to be delivered later; it had to be in a known weight, or known measure, and delayed for a known period.

Once this is understood, the next point to understand is that a thing of such a type does not have to be physically present at the time of offer and acceptance in a contract. Thus, if I say “ten kilograms of A grade salt,” when it is known what A grade of salt is, or I say “ten cubic measures of wheat,” then these are things that can be supplied today and probably after one or more years without any dispute. In the same way dinars and dirhams are gold and silver of a particular weight. They do not have to be present at the time of offer and acceptance and I can just say ten dinars or hundred dirhams and everyone knows what that means. Two more explanations are needed to complete our understanding of this issue.

The first is that when we say that these things may just be named in offer and acceptance and that they do not have to be physically present, we do not mean that they do not have to be present in the session of the contract. Thus, if I buy ten kilograms of salt for one dirham, these two things do not have to be present at the time of offer and acceptance. Nevertheless, before the session of the contract ends and the seller and I end the session and go our separate ways, we have to take possession of the counter-values, the dirham and the salt, and then part otherwise the contract will be void.

The other difference between the salt as dayn and a dinar as dayn is that the dinar has been pre-ascertained, that is, its weight is determined before it is stamped as a dinar at some mint. The salt, however, needs to be weighed within the session of the contract to find out if it is actually ten kilograms. This is called ascertainment. Goods that are not eligible for being dayn may just be pointed to, as in the case of a horse. THE TRUE dayn, HOWEVER, IS ONE THAT IS NEVER ASCERTAINED WITHIN THE SESSION OF THE CONTRACT. THIS TRUE dayn IS DINARS AND DIRHAMS.

To end this discussion we may say that the true type of dayn in a sale contract is either the dinar or the dirham. If we wish to delay any one of these beyond the session of the contract, for example, the dinar, then the period of delay has to be mentioned. If the dinar is delayed for a year, the sale will be a credit sale that is called bay‘ al-nasī’ah or bay‘ mu’ajjal. If both counter-values are taken possession of within the session of the contract, it will be a spot sale.

The verse under discussion is telling us that “when you undertake a bay‘ mu’ajjal or contract in dinar or dirham for a named period then write it down.” Let us read some of the words of this verse again:

O ye who believe! When ye undertake a dayn transaction with a named period (that is, beyond the session of the contract), reduce it to writing.

[a few lines later]

BUT IF IT BE A TRANSACTION WHICH YE CARRY OUT ON THE SPOT AMONG YOURSELVES, THERE IS NO BLAME ON YOU IF YE REDUCE IT NOT TO WRITING.

The comparison in this verse then is between a credit sale and a spot transaction. Imām al-Kāsānī’s description of sale on the basis of counter-value will now be:

• Sale of a thing for a thing;
• Sale of a thing for a currency;
• Sale of currency for a thing; and
• Sale of a currency for a currency.

We may end this section by saying that all discussion of debt, dayn and loans is to be understood within the meaning of the four types of sales mentioned above. In other words, all debt arises from buyū‘ (sales), and the term dayn is to be understood primarily as currency. The only way debt can be created is through sales. Qarḍ or loan finds its place within the contract of ṣarf. It is to this contract that we may move now to end our introduction to this book

5  Ṣarf, Loans and Copper Coins

Qarḍ or loan is possible in many things besides dinars and dirhams. The most important of these are fulūs or copper coins. We will first describe the nature of copper coins and then turn to loans. The reader will find these topics discussed in detail in Imām al-Sarakhsī’s book, therefore, we will turn to its source, which is Imām Muḥammad’s book Kitāb al-Aṣl. This is the first book in Islamic law, and is also the book of highest authenticity, even more authentic than Imām al-Sarakhsī’s book itself. Accordingly, there should be no doubt about the existence of the rules mentioned right from the very early days of Islam.

5.1  Copper Coins (Fulūs)

Modern scholars try to use the discussion of copper coins (fulūs; sing. fals) to justify paper currency. They also become very excited about having discovered something unique when they find that one copper coin can be exchanged for two copper coins, when this transaction is not allowed in dinars and dirhams, that is, one dirham for two dirhams is unlawful. The idea being that interest may be allowed in paper currency, just as it is in copper coins. As the discussions of the jurists become complex when they take up complex issues, we shall try to simplify the rules laid down in volume 3 of Kitāb al-Aṣl.

Due to their insignificant value, one dirham being equal to one hundred copper coins, copper coins were not weighed precisely when weighed, nor were they weighed in a transaction of copper coins exchanged for other copper coins. The lack of weighing precisely led to a variation in their sizes and weights. In this respect they are not like dinars and dirhams, which are weighed with very sensitive scales when they are made.

It is for this reason that according to Imāms Abū Ḥanīfah and Abū Yūsuf, if one identified specific fals (copper coin) is exchanged for two other specified and particular coins, it is allowed. This is not allowed in the case of dinars and dirhams as they are currencies proper. There are two reasons for not weighing the copper coins when they are being exchanged for other copper coins. The first is their insignificant value and varying weights and sizes. As the value of one hundred of these coins is equal to a dirham, their value is so insignificant that the attempt to discover the occurrence of ribā here will be a waste of time. The time spent on weighing them may be worth more than the ribā accruing to the person charging ribā. A transaction that goes beyond one hundred will be undertaken in dirhams and not fulūs. It may be mentioned here that the weights used for copper will be in tonnes, maunds, or kilograms, while the weights used for gold and silver are in grams. Another reason could be that the variation in the shapes, sizes and weights of copper coins will compel the treatment of one set of copper coins to be of a different species as compared to another set of copper coins. The rule for ribā is that when the species are different, identification of faḍl or weighing is no longer necessary. Thus, two different species of copper coins may be exchanged in the ratio of one is to two, as if dirhams are being exchanged for dinars. The two jurists, therefore, permitted such an exchange.

Accordingly, Imām Abū Ḥanīfah, for the above reasons, also maintains that salam is allowed in copper coins, because they are treated as metal and not currency in such a case. This is when they are used as the subject-matter. Accordingly, they may also be used as the capital sum in salam. To draw the distinction with currencies proper, salam is not allowed in dinars and dirhams.

If a person borrows ten copper coins from a person, but then the coins are demonetized, with people adopting other copper coins in their place, the borrower is under an obligation to pay back the same type of copper coins that he borrowed (now demonetized). He is under no obligation to pay in the new coins that are now prevalent. In other words, the rule of currencies is not to be applied to them in the complete sense.

Imām Muḥammad (God bless him), on the other hand, is inclined to give copper coins the rule of currencies proper. The argument being that variation in their sizes, shapes and even weights, due to their insignificance, is to be treated as a variation in quality. As bad quality and good quality are not taken into account when exchanging currencies. Consequently, one copper coin cannot be exchanged for two copper coins. Copper coins will be treated exactly like currencies proper in his view, that is, like dinars and dirhams.

In case the copper coins are demonetized, they will take the rule of copper metal, because copper has an intrinsic value. When paper currency is demonetized, the paper that remains has no intrinsic value. Copper coins, therefore, have nothing in common with paper currency. It is suggested that modern scholars should not confuse readers by making such strange comparisons.

5.2  Loan (Qarḍ)

The discussion of loan (qarḍ) occurs within the book of ṣarf in the Kitāb al-Aṣl of Imām Muḥammad. This is natural as a loan is nothing more than the delay of one counter-value beyond the session of the exchange of currencies. Thus, it belongs to the category of exchange of currencies, which is ṣarf.

Imām Muḥammad (God bless him) has discussed a large number of issues pertaining to qarḍ within the Book of Ṣarf. This is the reason why Imām al-Sarakhsī does the same in this book. We may give a few quotations from the Kitāb al-Aṣl.

Each qarḍ that stipulates a period of delay is due immediately. The period of delay is a nullity. The reason is that it is ‘āriyyah (commodate loan), and it has the status of a person lending a garden for a month (say). He has the right to take it back prior to a month.

This is the most important rule pertaining to loans in Islamic law. It is upheld by most schools of Islamic law. We have quoted Imām al-Rāzī above, a leading Shāfi‘ī jurist, who interprets a verse of the Qur’ān on the basis that a loan cannot have a fixed period. Modern scholars have gone against this fundamental rule in their enthusiasm to implement Islamic banking. It is a great disservice to Islamic fiqh that they pretend to uphold in their money making business.

“If a person gives another one thousand dirhams for use [as weights, for example] and he takes possession of them, it is a qard.” The same applies to fulūs. In the case of jewellery borrowed, this rule does not apply, and the borrower is under an obligation to return the same.

We need not go into other rules as the detailed rules of qarḍ will be studied in the excellent work of Imām al-Sarkhsī that is presented here in translation. We may, however, recall the rules of ṣarf to end this section. These are mentioned in points below:

• If a person lends to another person 100 dirhams on the condition that he pay back 110 dirhams after one year, then the rules of ṣarf contain two commands for this transaction. The first is: make the two counter-values equal. The second command is: exchange the two values at once.
• If a person lends ten (10) dinars to another person on the condition that he pay back 120 dirhams after one year, then there is a single rule or command: exchange at once.
• If a person lends 10 dinars to a person on the condition that he pay back exactly ten dinars after one year, then a single rule apples: exchange at once.
• If a person lends 10 dinars to another on the condition that he pay it back whenever he can, then there is one rule: the lender can take back the ten dinars whenever he likes.

These rules are based on the tradition mentioned in the last and following section.

6  A Modern Definition of Ribā

The detailed rules of ṣarf, which happen to be the rules for regulating ribā, are governed by the tradition of ‘Ubādah ibn al-Ṣāmit and others like it. The tradition is given below:

The tradition of ‘Ubādah ibn al-Ṣāmit: All the authors of the six sound compilations, except for al-Bukhārī, have related the tradition of ‘Ubādah ibn al-Ṣāmit, who said, “The Messenger of Allāh (God’s peace and blessings be upon him) said, ‘Gold for gold, silver for silver, wheat for wheat, barley for barley, dates for dates, salt for salt, like for like, in equal weights, from hand to hand. If these species differ, then, sell as you like, as long as it is from hand to hand.’ ”

Imām al-Sarakhsī discussing the tradition says the following:

فَأَمَّا الْحُكْمُ فَفِي الْحَدِيثِ حُكْمَانِ: حُرْمَةُ النَّسَاءِ فِي هَذِهِ الْأَمْوَالِ عِنْدَ الْمُبَايَعَةِ بِجِنْسِهَا وَهُوَ مُتَّفَقٌ عَلَيْهِ، وَحُرْمَةُ التَّفَاضُلِ، وَهُوَ قَوْلُ الْجُمْهُورِ مِنْ الصَّحَابَةِ - رَضِيَ اللَّهُ عَنْهُمْ -

As for the ḥukm, the tradition contains two of them (ḥukmān):

1. the prohibition of nasā’ (delay) in these commodities during exchange in the same species, which is agreed upon;
2. and, the prohibition of tafāḍul, which is the opinion of the majority of the Companions, may Allāh be pleased with them.¹⁵

The rules for the same species are two, as indicated by the Imām, while those for different species, the rule is one as indicated in the tradition. It is on the basis of this tradition and the rules of ṣarf that we formulated a detailed definition. This has already been published, and we are reproducing it here.

The definition proposed here represents a strict traditional position in conformity with the teachings of Islamic law, but it is not comprehensive insofar as it covers transactions in currencies and precious metals (gold and silver) alone. The definition, therefore, is based upon the contract of ṣarf and does not apply to everything that falls under the purview of the prohibition of ribā in fiqh literature. In case, a comprehensive definition is desired, one that applies to everything measured and weighed as explained in the rules above, the word “counter-value” should be substituted for the word “currency-value” in the text of the definition that follows.

The definition assumes that paper money is not to be treated as an acknowledgment of a debt (which it actually is), but as commodity money, that is, currency minted from gold and silver. Questions of inflation and indexation are, therefore, eliminated.¹⁶ We may mention a related problem here. People who give an interest free loan without mentioning a period, as is required by Islamic law, is that when the borrower returns the money after a long time on demand or on his own, the paper currency has shed considerable value. To overcome this, Muslims should always lend in terms of gold or silver, that is, the equivalent in gold of the paper currency lent should be worked out and the borrower should be asked to return the same amount in gold or its eqwuivalent.

The definition of ribā: For the sake of precision, the definition has been framed in the form of provisions of a code of law. The definition is stated in four sections and their accompanying explanations.

§1. Ribā is of two types: manifest and concealed.
§2. Manifest Ribā is

(1) ribā al-faḍl, which is the excess stipulated in the exchange of two currency-values of the same specie, whether the transaction is spot or delayed, and/or

(2) ribā al-nasī’ah, which is the potential benefit to be derived during the period of delay stipulated for either of the exchanged currency-values.

Explanation 1: The word “excess” means an excess revealed through weighing for gold and silver and by count for paper currency. The word “exchange” means transfer of ownership in the currency-value exchanged. A “spot” transaction is one in which both currency-values are exchanged in a single session ( majlis). The word “delayed” applies to the period of delay stipulated for the delivery of one of the exchanged currency-values, however, the delivery of both currency-values may be delayed in which case the word includes a futures transaction.

Explanation 2: Fiat money (paper money), gold and silver belong to three different species, but to the same genus called currency-value. Currencies of two countries belong to two different species, but have the same genus called currency-value. Wrought gold and gold dust are a single specie as are wrought silver and silver dust, but gold and silver, whatever their form, belong to the same genus called currency-value.

Explanation 3: The rules of ribā al-faḍl apply within the same specie, while those of ribā al-nasī’ah apply within the same genus as well.

Explanation 4: Qarḍ ḥasan is an exchange of two currency-values with a delay in which the period of delay is not fixed and the potential benefit derived during the delayed period (time value) is consciously gifted to the beneficiary. It is, therefore, an exception to §2(2) obtained by keeping the period of repayment open.

§3. Ribā is concealed when the primary objective of two or more related transactions is the same as that of a single transaction of manifest ribā.

§4. Ribā, whether manifest or concealed, is prohibited and all transactions involving ribā are void.

Explanation: According to the Ḥanafī school, transactions involving ribā are not void, but vitiated, and they can become valid if the offending condition is removed.

1

Qur’an 4 : 78

2

Judgement on Riba, PLD 2000 SC 225.

3

Judgement on Riba, PLD 2000 SC 225 (italics added).

4

In the case of ribā, this is the view all well known jurists: Jaṣṣās, al-Sarakhsī, al-Kāsānī, al-Bazdawī, al-Nawawī and many others.

5

Shāh Walī Allāh, Ḥujjat Allāh al-Bālighah, vol. 2, 106–107.

6

Al-Sanhūrī, Maṣādir al-Ḥaqq, vol. 3, 218.

7

Ibid. 219

8

Foreword to Zakī al-Dīn Badawī, Naẓarīyat al-Ribā al-Muḥarram (Cairo: 1940).

9

Ibid. Al-Sarakhsī maintains that need does not permit ribā, because a need can be met without the commission of ḥarām. Al-Mabsūṭ, vol. 14, 7.

10

Abul ‘Alā Mawdūdī, Sūd (Lahore, 1989), 163.

11

Ibid. 65.

12

Somewhere on the net. We may point out that the confusing term ribā al-duyūn was used by Ibn Rushd. The term he used is to be interpreted as arising from the credit-sale and not from a loan. The interest in such a transaction is applied in the second period of delay granted to the debtor. It amounts to the creditor saying to the debtor seeking an extension: “I will sell you the 100 dinars that you owe me for 110 dinars to be paid after one more year.” This can be done for extending the period in other existing debts, as in the case of the unpaid amount of sulḥ or of dower. In each such case, it will be deemed a sale, as the jurists say.

13

Al-Kāsānī, Badā’i‘ al-Ṣanā’i‘, vol. 6, 532.

14

Al-Rāzī, Mafātīḥ al-Ghayb, vol. 2, 363.

15

He mentions the majority, because Ibn ‘Abbās (R) is reported to have said: “Verily! Ribā is in nasī’ah.” By this he meant that ribā does not really occur unless there is delay.

16

This means that the solutions to the problems of inflation, aggravated due to the prohibition of ribā, lie elsewhere and not in indexation.