In the name of Allah the beneficent, the
most merciful. Like to welcome you dear
viewers to our program contemporary
issues. In this segment of our program,
we are shifting now to the area of
economics. Economics
um a field which
Islam addresses. There are laws within
Islam which govern human economics, how
their economic dealings should function.
When we look into Islamic uh legal
requirements of business deals, etc.,
etc., sale, purchase, these type of
things,
trade, we find that one of the basic
principles is that it should be free
from deception.
anything which involves deception where
you're deceiving the buyer of really
what you're selling. You know, he thinks
he's buying one thing, you're in fact
selling something else. You know,
however, this may come in all the
different forms from Islamic
perspective, all of that is
forbidden. The other basic principle we
can see there is that the the issues of
interest where business dealings involve
interest, this is not another area where
things again are strictly forbidden. So
what we know today as modern mortgages,
people buying home with bank loans and
you have to pay back the bank over this
period of time and this kind of thing or
taking out loans for cars or a variety
of other purposes where you end up
paying back the money plus an additional
amount. This has been forbidden in Islam
and really it is not something new in
that you can find even in the um
uh old testament in ancient uh beliefs
of of the followers of Moses and others
that interest is forbidden. We find in
Deuteronomy 23:E
19, "Thou shalt not lend upon interest
to your brother, interest on money,
interest on victuals, that's food or
provisions, interest on anything that is
lent for
interest is a basic prohibition.
However, and and this has been
understood. However, this uh prohibition
for the Jews, they there was a
modification there. In verse 20, it goes
on to say, "And to a foreigner, you may
lend upon interest, but to your brother,
you shall not lend upon interest." So,
interest became for Jews forbidden to
take from themselves, from each other,
but it was okay to take it from the
Gentiles, the others, right? And uh the
the prohibition of interest actually
existed in the Christian world you know
right up until the middle ages you know
the uh 13th 14th century otherwise prior
to that it was banned. We find you know
Shakespeare writing about the merchant
of
Venice the pound of flesh individual
lending an interest in seeking a pound
of flesh in in return for those who
couldn't pay it. you know this idea this
was the evil Jew this is what he was how
he's functioning taking people's flesh
even you know it's uh so it was opposed
thoroughly in western society but
eventually though the people were able
to influence
uh the the uh religious
beliefs the economic segment was able to
influence it under the Jewish influence
to a certain to the degree that they
introduced it eventually interest on a
low scale and eventually it spread
spread spread until it became the
foundation of western economics.
Interestings became that
foundation.
However, in the 70s, of course, Islam
pro totally prohibits interest. Allah
makes no uncertain terms about its
prohibition. Even talking about the fact
that people will compare it to trade,
right? you know that they will say that
trade is just like interest. Interest is
just like trade. Really no difference.
You know um you lend somebody your
property, they pay a fee for it. You
lend somebody your money, they pay a fee
for it. It's just the same. But the
trade in money Allah says is devoid of
any good. It's cursed.
Whereas proper trade is blessed by
Allah. So dealing interest is forbidden
for Muslims and Muslims have functioned
economically over the centuries without
dealing with it. However, once the
Muslim world became uh conquered by
Western civilization mainly out of
Europe, England, France, Germany etc.
conquered various Muslim lands, Holland,
Indonesia.
uh then they introduced with with their
conquest
interestbased governmental um
systems and the banks were introduced
into the countries and interest and the
belief and the practice of it
spread with the revival of Islam in this
century.
We find that the proposals for Islamic
banks the alternative you know uh came
up especially in the early 70s uh they
you know the concepts were being
proposed you know cuz things had been
worked out the plans for it had been
identified you know king fel's uh son or
brother Muhammad al fisel uh working on
it when this the idea was first broached
in the West uh the western economists
etc. they scoffed at the idea this is
ludicrous the idea of banking without
interest. What what kind of bank is
this? It cannot possibly work. Though in
their own books and their own theories
they will tell you that the lower the
interest rates the healthier the economy
the better the economy is. The higher it
is the weaker the economy. This is well
known. But the idea of zero interest,
you know, you see it getting lower and
lower and lower. It gets this economy
gets better and better and better. But
the idea of zero interest, no, this
could not be dealt with. They don't want
to deal with it. That idea was
forbidden. Why? Because the elements
that control the banking systems of the
west, they would be put out if they
shifted to interest without banking
without interest.
So they, you know, keep that concept in
there strong and they continue to teach
it absolute necessity whereby people can
just live. No effort on their part.
People take their money, they have to
pay back more money, you know, no effort
involved here.
Well, what we find
today, you know, after some 30 years
have
passed that the majority of the major
banks of the west now carry Islamic
portfolios. They offer business in
without interest. Banking without
interest. They're offering it now. Bank,
all the various big banks, Bank of
London, etc., they're all offering it
now. Why is it just to capture Muslim
money? Because they don't want to lose
their clients? No. Because a bank is not
going to do
that just to maintain its reputation?
No. Because it's not going to involve
itself in what it sees as clear
financial loss. The only reason why
they're getting involved in it is
because they have seen its successes.
The Islamic banking has reached a
massive state of success.
This is what was thought
impossible has actually been uh
implemented. Today you have more than
200 Islamic financial institutions
worldwide
managing funds of over 150 billion
US you know and even with its strict
codes Islamic banking is growing at a
fast rate of some 15% annually over the
last 10 years in recent years Iran Sudan
Pakistan you know and others have banned
traditional commercial banking you know
based an interest and adopted Islamic
models. Of course, Pakistan is in not
complete as it has been in Iran and
Sudan etc. But you know more and more
countries are broaching this idea.
Malaysia is experimenting with it also.
Islamic banking is developing there
quite strongly and we find Muslim uh
wherever we go uh looking into this
calling for this as an alternative to
the
um the other banking uh is interestbased
banking institutions. So uh how does the
Islamic bank function? Well, you know,
there are different uh means by which
the bank maintains its money. One of
those means they refer to as murabaha.
You need to buy something, the bank goes
and buys it for you and sells it for
you. Sells it to you at a higher price,
buying commodities and selling them,
right? Based on
demand. Uh secondly you have what is
known as musharaka where uh two
financers their partners they come in
they put their time effort money
together and they share the
uh the
profits proportionately. Then we have
what is known as
mudaba where again two parties come
together but one is bringing all the
money the other one's making all the
effort and they share proportionately
again the
um uh the profits but in all of these
cases they also share the losses. This
is the point which makes them different
that if there are losses they all share
in the losses. In the case where it is a
matter of one person providing money no
effort and the other one just providing
the
effort obviously the financial loss will
be borne by the one who put in the money
whereas the one who put in the effort of
course it will be the loss of the value
of their efforts but where there are
equal partners or similar partners
sharing then they both are going to
share in the financial losses and you'll
see when a person invests in a financial
Islamic institution their profits are
not fixed fixed. They cannot be given
fixed amounts. Every year you'll get
this much you know uh returns on your
money. know this may vary from month to
month you know half year to half year
annually it will vary and as such the
profits um cannot be fixed and the
difference between Islamic
banking and western banking is that it's
about credit you know what is your your
your credit if you have money you have
um reputation you have contacts whatever
you can get loans and you pay these
loans back what this is all the bank is
interested in you pay the loan back. It
doesn't matter what you're going to do
with this money. If you're going to
build something corruptive which is
going to hurt the society or you want to
squander it, whatever, as long as you
pay that money back, that's what's most
important to the bank. And through these
mortgages systems and, you know, this uh
uh systems, interestbased systems, you
find that people, you know, run into
financial loss. They're encouraged to
live on a credit system. You know,
whether it's the the banking cards and
things like this. you buy more than you
have the money to pay and then you end
up paying up with interest and this type
of thing. Eventually much of this
becomes a a dead weight on the backs of
the people, you know, and they find
themselves in financial crisis. The bank
steps in, repossesses their car, their
homes, they're kicked out in the
streets. So that you find in America, as
they estimated way back in the early
'90s, that there are over 2 and a half
million Americans living in the
streets. They have no homes, no place to
go. They live in the streets. This is
something normally we associate with the
very poor countries of the third world.
You know the black hole of Kolkata. You
know the British used to write about it.
You know Kolkata you know people are
living there and just dying in the
streets. Well it's happening in America.
People tend to associate America with
you know ultimate success and riches the
skyscrapers glittering buildings and
that but nobody bothers to look at the
bottom. You know at the night when time
comes people are leaving their work and
going to sleep. You see all these people
coming up putting their pieces of
cardboard on the ground and sleeping
right there. Winter chill catches them.
Sometimes they freeze to death. They're
in the streets, you
know. So you have some 2 and a half
million Americans living in the streets.
Most of them you'll find when they gone
into looked into the circumstances. What
happened to them? How did they end up in
the streets? It was due to
interestbased problems. either they
couldn't make their bank loans or they
had some kind of medical problems which
causes their money to be gone. They
can't make the payments anymore. So,
their stuff is repossessed and they're
out on the streets living in the streets
themselves, men, their wives, their
children, these kind of things
happening. Terrible situation. It's
unimaginable. the richest country on the
earth, you know, having this kind of
situation where they don't have homes,
they cannot provide homes, they cannot
deal with the situation of their
homeless. This is something which shows
a kind of a heartlessness in that
system. Though people like to talk about
mercy and love and all these different
things, the interest system is a very
harsh system. It doesn't take into
account the contingencies of life. A man
borrows money for his farm. His
intention is to grow products which
people are going to benefit from from
his profits. He will pay you back. But
now something happens. A natural
phenomena, you know, some disaster,
natural disaster comes and destroys all
his crops. And you're still going to ask
him for that money back with interest
regardless. I don't I don't care. I
don't want to hear your problems. Just
pay us our money. If you can't pay it,
then we're going to come in and take
your farm. Get out of that farm. we'll
sell it and get our money back. This is
the interestbased heartless
interestbased system. Whereas Islam is
based more on sharing our uh
difficulties and then sharing our
profits, sharing our successes, you
know, or you have what is known
as, you know, the goodly loan, which is
an interest free loan. People lend and
you pay back what you have borrowed.
There are also the instruments of where
the bank is and this is sort of being
developed now purchases something and
leases it to somebody who wants to own
it. They pay rent or whatever over a
period of time and then eventually it
can come into their possession. But in
any case what we're talking about in the
end is an alternative to the
interestbased system that there can be
found a variety of alternatives. Islamic
bank banking is the most popular one
present today and we said it is
expanding rapidly.
and something which the west as we said
in its initial uh contact rejected
scoffed at but today in Harvard
University in the United States you know
one of the top universities in the
United States they have a chair of
Islamic banking they're teaching Islamic
banking there Islamic finance their
professors western professors who are
specialists in it teaching you know
western students etc because it is a
part and parcel of the future Islamic
Economics is a part of the future and
this shows the relevance again that
we've spoken before of Islam to all
aspects of our lives. We're not left in
the lurch, left on our own modern
circumstances develop. What do we do?
How do we handle it? Can we handle it?
No. Islam provides guidance in all of
these various fields uh fields of of
learning all these various contingencies
of life, different new developments
taking place. Islam does provide
guidance in dealing with these things.
So from looking at that you know we can
see the the greatness of Islam that it
is not limited you know in the sense of
human beings life you know it's uh its
ideas or whatever are not uh suitable
for contemporary life because you know
often times this is the issue that
people raise how can a system which was
developed 1,400 years ago be of
relevance today how you know when they
look at the other systems they're
totally irrelevant they don't cover they
cannot handle with modern developments
however Islam being the religion of
God providing guidance for human life in
general and then all of the knowledge of
modern science being ultimately from God
by accident people discover this or the
other but in fact it's really from
God these things don't necessarily clash
at
all Though from the Islamic perspective,
there are ways and means of dealing with
anything which happens in this life.
Islamic banking is only one example of
such
things. With that, dear viewers, we'd
like to thank you for being with us in
this segment of our
program which in which we have looked at
basically Islamic banking, banking
without interest. We looked at some of
the issues of interest and the harms
that it has produced in society and we
looked at the alternative which Islam
offers that of interestf free banking
which is user friendly as we say today
you know it does take into account the
needs of human beings tries to solve
them resolve their problems help them as
opposed to milk them to squeeze them to
take their blood their sweat and their
tears to just gobble it up which is what
the interest system does. Islam provides
Islamic economics which we said is
opposed to any form of deception. At the
same time it provides a system by which
people can get access to capital and
when they get that access they will be
accessing what is good because if a
person comes to the bank and says listen
I got this plan to build something which
is against Islam the bank will say no or
they plan to build something which is
useless. it's not going to produce
anything good. They'll say no, you know,
or this is not effectively planned out.
They'll say, listen, we need some
planning. Let's get some planners, you
know, to help you with this project. So,
and so it's a good idea in general, but
you just haven't planned it properly.
So, they care whether the people will
succeed or not. So, they will share it
with them from that perspective. And in
that way, the bank and the society are
directly linked. It's not like the banks
staying on one end just trying to milk
the society of everything it has. So
Islam is the
answer. That's the bottom line. Islam
has the
answer. So dear viewers, I hope that
this this brief reflection on the issue
of banking in
Islam interest systems etc. you know is
of some enlightenment to you. And I hope
that inshallah you'll continue to follow
our programs as we look at some of the
other contemporary issues facing the
Muslim world today. With that, dear
viewers, I now bid you farewell with the
Islamic
greeting. And may Allah's peace and
blessings be on each and every one of
youamlaykum.