Riba: Is it permissible for anything due to necessity?

[muslimah]

Assalamu alaiqum wa rahamatullah

Sheikh, I hope you are in good health inshaAllah. If you could please advise us on the topic of riba and shed some light on how a Muslim can survive without it in a country like Australia, that will be great. Also please consider everyday finance, house loan etc in your reply.

Jazakullah Khair
Wassalam

[domenic]

On the subject of Riba, I went to a seminar on inheritance at Buranda Mosque a while back and they said that the Commonwealth bank is bring out a halal loan package soon. Has anyone heard anything about that ?

[Aslam AbuIsmaeel]

Assalamu alaikum wa rahmatullahi wa barkatuh

The topic is a big topic.  It is also very important - one way it may make worldy life in Australia without Riba somewhat diffcult but on the other hand, Riba is a major sin too!!   

I'll post some of its reply now and try to complete the answer over the next few posts soon inshallah.


Riba is MAJOR SIN and not a matter to be taken lightly at all
Firstly, as we all know Riba (usury, interest) is forbidden in Islam for all times to come until the Day of Judgement.  Also, Riba is one of the biggest sins in Islam and one of the Kabaair (major sins).  Allah revealed not just one verse but a number of verses in different places in Quran to forbid exploitation by Riba.  This shows that it is a major sin and not a little matter.



Some muslims MAY face hardship today due to abstaining from Riba
Second, Muslims in today's society where the economy is run by the non-Muslims as they like - especialy a big say in it by the Riba dealing banks, a number of Muslims in this society find life difficult without taking some loans on Riba.  At least, alhamdulillah, no Muslim would consider taking Riba for himself, the problem faced is with giving Riba in a loan.



Is Riba permissible temporarily: difference among Muslim scholars
Third, there is difference of opinion between Muslim scholars about temporary limited permissibility of giving Riba in return for a loan - as an exception out of necessity - although alhamdulillah, at least, all Muslim scholars agree that Riba in itself is haram when there is no necessity.  As for necessity, there are pricinciples in Shariah based on Shariah that say that when a necessity gets stronger than the reason for prohibition, then the prohibited matter may become permissible for a short time to the extent that is required to avert the pain of the necessity on the Muslim/s.  The principle is that, "The smaller bad/harm is allowed to occur by preventing the bigger bad/harm - if one has to happen."  Examples of this from the Shariah include: (a) eating of pork for starving person; (b) saying one has done kufr if in danger of losing life; (c) men wearing silk clothes in case of illness that causes itchiness with other fabric; (d) permissibiliy to use little silver in utensils if afraid of them breaking although silver utensils are forbidden for drinking and eating from; (e) permissiblity of a male shop salesman asking woman shop customer to uncover her face to know who she is for sake of contract identifications; (f) permissiblity of a male doctor touching a female patient or vice versa if no doctor of same sex is found - even for illnesses such as cold and flu and not just for severe illnesses; and other examples.  There are many examples in Shariah with which the Prophet (s) showed this prinicple and the scholars generally agree with this prinicple of averting the bigger of the two harms/bad - but ONLY with conditions. 

What are these conditions?
These conditions include: (1) the necessity is greater than haraam; (b) the necessity will be stopped if allow that haraam temporarily; (c) the haraam may be allowed to occur to prevent the worse scenario but this is allowed only temporarily for only as long as is required; (d) no more is allowed than is needed to avert the necessity; (e) the necessity is real and not just imagined or a small theoretical possiblity.


Necessity & haraam weighed by scales of Shaiah
Another point the scholars mentioned is that the necessity being more sever than the harm of the haraam (prohibited act) is weighed according to scales of Shariah and the principles are known to scholars - such as the severity with which one is prohibited and the severity with which the necessity is encouraged to be prevented in Shariah etc.



Need may also make a smaller haraam permissible as necessity does to a greater haraam
Another point to note is another principle that a Need takes the place of a Necessity in the above prinicples.  But for a need which is less severe than a necessity, only a smaller haraam may be permitted due to the need but not a big haraam which can only be permitted by an even more severe necessity.


Agree on prinicple but disagreement on its appraisal of current situation
Despite agreeing on principle of averting bigger harm, scholars today differ: is the need/necessity for some loan repayments with Riba severe enough to make some loans permissible temporarily due to need/necessity or not?  Assessing our situation today according to above mentioned shariah guidelines to determine whether need/necessity is strong or not, this is a VERY DIFFICULT MATTER and scholars may differ due to: (a) difference in their knowledge, awareness and understanding of some shariah principles; (b) what each scholar has seen in peson of the circumstances in a part of the world for which the fatwa is given; (c) how each scholar perceives the situation and its severity or the lack of it based on the issues/areas of life affected by the necessity and to what degree etc.

Therefore, we find that today although the major scholars who are knowledgable of shariah are agreed on the principle of avoiding bigger harm by allowing the lesser harm, they may disagree when it comes to giving Riba in a loan repayment in a certain society for a certain individual - is it permissible temporarily due to need/necessity or not? 

Sheikh Khalid al-Muslih, one of the leading long-term students of the Sheikh and Imam Muhammad ibn Salih al-Utheimeen, said that so long as the scholars do not deny the prinicple but rather agree on it and thereafter if they disagree on its application to a particular situation, then that difference of opinion and judgement of a situation is acceptable room for differences in fiqh.  


This is the very difference of opinion in appraisal of the severity of a need/necessity that we find today among our scholars in the Muslim world.  Out of my own Sheikhs - the scholars whom I studied with - many including Sheikh Khalid al-Muslih - do not commit to saying that the need is strong enough to make such loan repayments permissible or they do not make a comment on situation of a country they have neither visited nor lived in.  Some other of these scholars, based on their awareness and perception of the situation in western countries with Muslim minorities and the contemporary unIslamic economic trends, believe that Riba loan repayments are permissible for SOME very strongly needed items for SOME - but not all - people in Western Muslim minority countries with such socio-economic situation.  Some of them have said that Riba loan repayment of the first home is pardoned in such countries if there is no Islamic alternative available due to the severity of circumstances as they perceived based on their extent of understanding of Shariah.


A very Important point
When these scholars say, "no Islamic alternative available", they mean no alternative that is permissible under normal circumstances.  As for exceptional circumstances, it is actually from the completeness of Islam and its guidance that it allows some haraam within limits for exceptional circumstances because these haram were meant to avoid some harm under normal circumstances whereas in these different circumstances other matters take precedence in the sight of Allah Himself.  This is important to realise that this is an Islamic solution for such circumstances and is part of Allah's wisdom and care for us as revealed to us in Quran and Sunnah examples.  Some people may misunderstand that in such circumstances you cannot follow even the great Islam - we seek refuge in Allah from Ignorance.  Rather, the truth is that in such circumstances, Allah allows the haraam due to its harm being less than the cirumstances at hand that Allah decreed to try people with hardship - as He tries them with ease.


Returning to the above issue:
Both set of these scholars are of Ahlusunnah who follow the Quran and authentic Sunnah.  Both set of these scholar are reputable expert scholars in Fiqh (Islamic jurisprudence).  I've heard these two different opinions from them. 


Advice to me and to you all
Despite all that I've learnt of Fiqh over the last thirteen years or more and with so many scholars including leading scholars of the world, I do not dare to give my opinion (Fatwa!!) to other people on this matter.  Why?  Because great scholars of the past would abstain from saying this is halaal (permissible) or this is haraam (prohibited) in matters less controversial than these out of fear of its consequences having to answer to Allah of their opinions.  So, it is more befitting that I - and you all Muslims - do not give our own opinions on this matter - unless if Allah wills otherwise in different future circumstances.  So, I cannot give you an opinion either way on this issue except to help understand this issue. 

Another advice is that do not ask just any Muslim 'what is your opinion about Riba being permissible for loans or not?'  Only a scholar who is an expert in Allah's law has the right to give an opinion about whether Allah says it is permissible or not.  Some scholars are little compared to others in knoweldge but at least must be a scholar and not just a student or layman with respect to Shariah knowledge.


Scholars behaviour in Riba matter versus Ignorant people's behaviour
While the scholars accept the differences in appraising a situation and applying an agreed upon prinicple to it, we find many religious well-meaning but ignorant brothers and sisters do not accept room for such difference.  As a result they cause enmity and hatred between two sets of Muslims who all agree on the principle but only disagree in a matter where even the scholars allow differences and yet these ignorant yet well meaning people do not.  So, among Muslims today we find the common folk - as opposed to the scholars - are in the following camps:
1. believe Riba is permissible due to need today and whoever does not agree is a backward, closed minded Muslim.
2. believe Riba is not permissible due to need, there is no need/necessity, and those scholars who say it is permissible are not good enough scholars and those who follow them in it are too easy going in religion and compromising religion.
3. believe in one opinion or the other and realise that so long as the prinicple is agreed upon, the application may be differed upon and is a matter of ijtihad where Allah forgives the mistake and the opponent is neither backward nor compromising as they are only basing their view on shariah prinicples. 

You can see that this third type of group is what I recommend you all to be although almost all lay people among Muslims - as opposed to the scholars - are of one or the other of the first two types only.


Which opinion do you follow?
Study the principle, the comments of both sides of scholars, try to decide as best as you can with fear of Allah, sins, His punishment and realising the shortness of this life and the eternal nature of the Hereafter and the duty to avoid all sins, especially the major sins - unless if allowed under circumstances temporarily within limts and due to necessity.  If after that you followed one or the other opinion of the scholars, you will have something to stand upon on the day of Judgement.  If you cannot decide, then follow the best scholar you know of who follows the Quran, authentic Sunnah and the way of the great Muslim scholars and Imams of the past - a scholar who normally does this.


And Allah knows best
ps As for domenic's part, I'll come to it in the next post inshallah.

[Aslam AbuIsmaeel]

Bismillahi-Rahmani-Rahim

The above discussion showed two alternatives to dealing with Riba:

First: Riba is forbidden most severely as a major sin in Islam; a Muslim must avoid taking Riba on a loan as well as giving it on a loan.
Second: It - like many other haraam - is allowed with conditions under conditions of severity and hardship and as soon as the necessity is removed then not allowed as usual.


These two alternatives are from Islam for two different situations that cover all circumstances - of necessity as well as normal circumstances.



There is a third alternative that people these days have come up - in fact the Prophet predicted such things - and this third course of action although promoted by some very wealthy and strong Muslim financial organisations today, it is nevertheless a prohibited course of action in Islam.


Third course of action, the prohibited one: To come up with forms of transactions to buy homes etc - transactions that are in reality Riba but they are clothed in terminology that seeks to give an impression that it is not Riba but something halal (permissible).  This course of action is making haraam seem halaal and distorts Islam and denies the people of the guidance and wisdom of Allah.

Examples of these transactions include one offered presently in Australia and is wrongly called, 'Musharakah' (sharing/company/partnership in purchasing house) - the actual Musharakah is different to what is offered in Australia.  And likewise the other scheme clothed in misleading terms but is worse form of Riba is the one offered in Australia presently and is called 'Sale to Lease'.  These are both Riba as will be shown briefly in the next post, inshallah.  However, a scheme to buy a car is offered in Australia presently by the same Muslim financial agents and this one, based on principle of Murabahah, is perhaps as close to halal as you can get in todays times in this country, and therefore a good candidate to being halal given the Australian law and (therefore is not from this third course of action which clothes haraam as halaal), Allah knows best.



Why is Third course of action resorted to by some today?
Due to Riba being strongly prohibited, and due to people disagreeing about when is the necessity strong enough to allow it with conditions, therefore, some religiously minded people in Muslim community seek to hide behind this third alternative and buy their home by this means while having an excuse for the religious community that they bought the house on a 'halal' scheme whereas in reality it is Riba but clothed in a long winded explanation that seeks to give an impression as though it is halal.  People seeking a religious profile in community resort to this third course of action transactions seeking acceptance and not being rejected by the religious folks whereas this course of action in reality is distorting Islam, making haraam seem halaal and denying the people of benefiting from the wisdom of Allah! 



Why is the Third course of action accepted by some circles among Muslims?

The rich and powerful Muslim and non-Muslim financial organisations that offer such haraam deals employ two strategies that make their haraam product have an air of acceptablity among the masses:

First: they use the tremendous wealth they have to do widespread advertising of this product whereas the scholars who want to expose this haraam do not have the avenues to refute this misinterpretation.  Sometimes those businesses that may oppose these financial organisations stop receiving their advertising support but may be boycotted or even ignored from all references in the Muslim media and events such that the masses either do not realise they exist or the masses feel that the left out ones must be small scholars or not scholars at all and therefore are left out from these big events (organised by these financial organisations or their business allies).

Second: these financial organisations employ people who are not big scholars and perhaps not really scholars at all but merely researchers who reserach on this topic of such a financial transactions with only some religious background and expertise in Fiqh (jurisprudence) but do not have the scholarly expertise and ability.  These Researchers  use  flowery contemporary financial terminology that gives an air of expertise.  No doubt they are experts in contemporary non-Muslim financial terminology but not well grounded scholars in Islam and Fiqh but rather mere researchers and relative novices.  Such Researchers justify for these organisations these haraam financial transactions as halaal.  The organisations in turn promote them as the leading world experts in the field and invite them for their international conferences thereby reinforcing this picture as the leading experts.  As for the real scholars, they selectively ignore them from such conferences and some as I’ve heard even call them ‘scholars of menstruation and ritual purification but not of financial matters’!!  The real experts are ignored for calling these haraam whereas the novice researchers are promoted as the real experts.


Thus the Muslim masses, many among them too preoccupied in materialistic pursuits and not in touch with scholars even in their own city, accept such verdicts from these Researchers via the elaborate advertising of the financial organisations.  Given that many are scared to consider the first two halaal courses, they accept the third one by which they can get their home they feel the need for while maintaining their status quo as ‘religious’.


It is not strange that the third course of action is present today, the Prophet (s) himself predicted this in an authentic hadith as a transaction called 'Einah' a transaction that seeks a way around Riba by excuses, "When you deal with Einah, take to the tails of the cows satisfied with farming and abandon Striving in the path of Allah, Allah will put over you a lowliness that He will not remove from you until you return to your Religion." [Bulugh Maram]


The aim from this has been to show that the haraam course of action, the third one, is widely seen in the advertising and resorted to by many among the masses despite it being haraam whereas the first two courses of actions have been made difficult by people’s ignorance of them even if they are in reality meant to make life easy from the mercy of Allah, the Merciful, the Wise.


I would like to remind everyone though, many of the Muslims involved in this issue on all sides - the financial organisations, the masses and the Scholars - many among them do have very good intentions and perhaps Allah will forgiven all for these good intentions.  Therefore, we should not judge them badly merely on this issue and its confusion to them.  Even the Muslim brothers and sisters in these wealthy financial organisations who push this view with all their power, we believe they are doing so out of good intentions believing this to be a help for the Muslims.  Therefore, we ought not to divide up on such a matter of Ijtihad (albeit a very weak ijtihad basis for the haraam transaction) and leave the judgement to Allah and ask Allah to guide us personally and all of us collectively.


In the next post, I hope to briefly show the nature of the two transactions of the third type above that are currently offered by some financial organisations as haraam whereas in reality they are haraam.

Allah knows best.

[Daniel]

I asked Commonwealth bank to not give me interest and they said it's not possible.
I know a brother in Canberra has it though..

Epic fail, Melbum!

[Aslam AbuIsmaeel]

First, lets just have a quick look at one form of purchasing a car - or a home - that is halal in Islam.  This form was - and probably still is - used by a Muslim financial institution in Australia for purchasing a car.

It is called by some as Murabahah.
The important point is how it is done?
The Financial Institution buys the car from the Car Yard for a certain price.  Once the ownership is acquired, it then sells the same car to you for a price greater than the original price and the amount is to be paid over a period of time.  The amount must be fixed and cannot be changed.  Even if paid back early or the time finishes, the amount cannot be increased or decreased.   This is permissible.  It is not Riba.  As long as the price is fixed at time of contract, it may be more than the original purchase price.  It is not the increase in price at time of contract that makes it haraam/Riba, rather, it is not knowing the eventual price which makes it haraam.

This is based on a hadith of the Prophet (s), wherein he says, "Whoever does two sales in one, for him is the least (price for maximum span of time) or the alternative (i.e not fixing and not knowing the eventual price) is Riba."

For example, see the following fatwa: http://www.islamqa.com/en/ref/110006

This can easily be done for a car purchase and it can also be done for a home purchase - it does not matter if the price increased at time of contract from Institution to the buyer is a high increase, so long as the price is fixed at the time of contract and does not change thereafter.  Also, important is to notice that the ownership of the car/home transfers to buyer with the signing of the contract.   Likewise, any liablility therafter is on the buyer, i.e. the owner.   

If the buyer cannot pay the price later on, the Institution can sell the car/home and take the remainder of the money.

Although this can easily be done for purchasing a home, many Islamic Finances tend to not use this form of contract, unfortunately, because the eventual price may be high and therefore not very as appealing to the purchaser as some of the haraam forms.  As for cars, this is used as the price increase is quite small due to quick repayment period.

[seek^answer]

I asked Commonwealth bank to not give me interest and they said it's not possible.
I know a brother in Canberra has it though..

Epic fail, Melbum!

I don't know about Commonwealth but I do have two bank accounts at two different banks and I asked them not to give me any interest and they've done it for me. Because I do not accept the interest, they do not charge me for any monthly fees and I also have unlimited access at the ATMs, EFTPOS and internet banking

[Aslam AbuIsmaeel]

Assalamu alaikum

Another way to purchase a home that may be easily done in a halaal manner by the large financial organisations is called 'musharakah' i.e. partnership.

However, there is a halaal proper way of doing this which is consistent with Shariah but there is also a haraam way of doing it which is unfortunately how one of the Muslim financial organisations in Australia does it presently.

A Halaal Musharakah:
A person wants to buy the home, he goes to a Muslim Financial Organistion (MFO) and asks them to buy the house together jointly.

They purchase the house, the Muslim pays a percentage (e.g. 20%) while the MFO pays the remaining (80%) of the price of the house.

Over the next decade or two or more, the Muslim buys back the remaining 80% of the share of the house from the MFO.  This buying back of shares must be at the current value of the house at the time of paying the money to buy back those shares - whenever that may be.  So, if the Muslim wants to buy back 5% of the shares after one year, they evaluate the house price then and he pays 5% of the price to MFO and then has 25% of the share of the house.  By the following year, he may want to buy another 5% and they re-evaluate the current house value and the Muslim pays 5% of that to buy shares into the house that now total 30% of the house and the remaining 70% is still owned by the MFO.  The house value is reevaluated periodically as further shares are bought by the Muslim from MFO until in twenty or thirty years time all the house is bought and owned by the Muslim home purchaser.

The Muslim purchaser may be the one renting the house or anyone else - no condition can be placed at time of purchase that the other share holder stay there, although it may be requested only.  If the Muslim purchaser lives there, then he pays the rent of the house - according to the customary market value for THAT HOUSE and not for some average home!  The share of the house that the MFO owns, that rent goes to the MFO and the remaining rent stays with the Muslim purchaser. 

This is a halaal manner of musharakah.


Haraam manner of Musharakh currently in done in Australia
This involves the house shares being bought back by the home purchaser are NOT evaluated periodically to be the current market price of the house, rather the original price of the house is kept as the price by which the remaining shares of the house are bought back by the Muslim house purchaser from the MFO - the same price used to buy shares even 25 years after the original purchase!!  This is not the price then at 25 years!  Rather, in effect, the person is actually repaying the original price as a loan over 25 years or more or less!!  Repaying loan is not haraam, but the problem is a condition is made that the owner live in the house paying the MFO their share of the rent on top of the 'repayments' BUT the rent is not calculated as it is in the market for that house but rather it is claimed to be an 'average rent' for a house in the State in Australia - in reality that is not the average rent then, nor is the average rent ten years on nor twenty years on.  In reality, this is a picture of a loan being repaid over so many years with extra monthly 'interest' added on to it and it keeps adding depending on how long it takes to repay the home.

There are further minor details of this picture that - upon their examination - support its invalidity according to shariah; and this requires sitting with the details of the contract to show these to the reader.

The halaal picture is well possible but the money acquired is not as 'guaranteed' for the MFO while it is much higher for the Muslim family purchasing it and perhaps that is why the MFO does not choose to do it in a clearly halaal manner, and Allah knows best.

[MasoomBoy]

Salaam Alaikum Sheikh,

Hope you're doing great by the grace of almighty allah.

Just wondering is there any Islamic finance available in Australia who adhere to the sharia law completely?
Waiting for you're reply on this.

Jazak allah khair

Brother in Islam

[Truthseeker]

I asked Commonwealth bank to not give me interest and they said it's not possible.
I know a brother in Canberra has it though..

Epic fail, Melbum!

I don't know about Commonwealth but I do have two bank accounts at two different banks and I asked them not to give me any interest and they've done it for me. Because I do not accept the interest, they do not charge me for any monthly fees and I also have unlimited access at the ATMs, EFTPOS and internet banking

Assalamu alaikum dear seek^answer and Daniel,

Masha'allah it is good to hear that you have managed to get an account where they dont give u any interest. Just wondering if u dont mind to give the name of the respective banks and account type.

I have got an account in commonwealth bank which is statement Savings account and it gives me just $0.05 interest per month and charge me $5 for monthly charges, just to let brother daniel know if that helps. I know even 0.05 is interest and it is haraam, but may be good to have as little as possible, May Allah, The Oft forgiving, Most Merciful forgive all of us.

[AbuNuru]

I asked Commonwealth bank to not give me interest and they said it's not possible.

Assalamualikum,

I checked with Commbank today and it IS possible for them to charge you 0% interest. They can even change it for you over the phone so I'd encourage you and others to do so.

The customer service representative may not be aware that it is possible to do so - my one didn't - but they certainly can. Please tell them to reference the following (it seems to be the settings they need to do on the account to set your interest to 0%):

File 393, sub 1 = 0

And that should do the trick inshaAllah. Commbank also has a Master debit card - which works like a credit card except that it accesses the amount you currently have in the account. This is a good alternative to owning a credit card.

wassalam.