Home
Quran , Riba, Fiat Currency and Islamic Banking – قرآن ربا اور کاغذی کرنسی

Quran , Riba, Fiat Currency and Islamic Banking – قرآن ربا اور کاغذی کرنسی

˹Quran˺ is ˹true˺ guidance. And those who deny their Lord’s revelations will suffer the ˹worst˺ torment of agonizing pain” (Quran;45:11)

Riba is an Arabic word that means “to increase” or “to exceed” and is commonly used in reference to unequal exchanges or charges and fees for borrowing. Interest is deemed riba, or an unjust, exploitative gain, and such practice is forbidden under Islamic Sharia law. Riba refers to the concept of usury or interest. It is the practice of gaining profit or advantage through lending money or other goods at an excessively high rate of interest. According to Islamic principles, Riba is considered a major sin and is strictly prohibited in all forms.  The simultaneous exchange of goods of unequal quantities or qualities, exchanging dates of inferior quality with superior quality  is not permissible as it is considered Riba. Similarly, selling a commodity at a higher price than its market value or exploiting someone’s financial situation by charging interest are all forms of Riba and are prohibited in Islam, to ensure fairness and justice in all economic transactions, and to prevent exploitation of the vulnerable.

Riba Fiat Currency Pdf – 4 page Brief by Brig Aftab Khan r

There is a grave misunderstanding in defining Riba in this era of fiat (paper) currency monetary system in which loss of value of capital due to inflationary and other tendencies  is a common phenomena among poor, corrupt and mismanaged countries. Any compensation to this loss, calling it Riba or profit is unfair and unjust.  In this regards, the unambiguous commands of Allah (Quran; 2:279, 6:152, 4:135),  have been blatantly  transgressed, which must immediately  be obeyed before the wrath of Allah falls. Neither special expertise, religious background nor PhD is required to comprehend this simple issue, just commonsense is sufficient. Allah says:

Indeed the worst kind of all beasts in the sight of Allah are the people that are deaf and dumb, and do not understand. (Quran 8:22)

The Islamic Banking is a good step and with the passage of time it will improve. The main thrust of this analytical study is on the so called profit/ interest paid by National Saving Schemes, which is incorrectly considered to be Riba due to lack of understanding or mis-understanig of ‘experts’. However the conclusions of this study can also be applied to the banking  and financial sectors after due deliberations. It will be a revolutionary step to recover the ailing economy and earn the pleasure of Allah through His obedience.

Quran & Sunnah Based Solutions for Circular Debt 

We need to address an urgent national issue: a growing circular debt of 5 trillion rupees affecting 240 million people through ever increasing energy rates. Failing to address this issue will burden future generations, and we cannot afford to ignore it. The solution is provided by the Quran and Sunnah.  The 71% Capacity Charges is Riba al-Buyu (Usury in trade or exchange) & Gharar, making it Haraam, hence be abolished immediately; details @ https://salaamone.com/riba-ipp

Paper Currency Value 

Allah says:

 وَإِن تُبْتُمْ فَلَكُمْ رُءُوسُ أَمْوَالِكُمْ لَا تَظْلِمُونَ وَلَا تُظْلَمُونَ (البقرہ ٢٧٩)

“.. But if you repent, you shall have your principal original  capital (رُءُوسُ أَمْوَالِكُمْ). Oppress none and no one will oppress you (Quran;2:279- Translation)

The person who repents and stops taking usury/ riba/ interest, then he  has the right to get his principal original  capital. By not taking Riba/ usury he is not oppressing the other, he is also not to be oppressed by any deduction in his original principal original  capital.

What is principal original  capital? (رأس المال)

Principal original capital refers to the initial amount of wealth (رأس المال)  that an individual or organization invests in a business or project. The amount deposited for investment in a bank or institution without any deduction or interest. 

It is very important to understand the principal original  capital? (رأس المال) value or worth in paper currency context. Like a Kg is not just weight unit in any country, but the standard weight defined by International System of Units (SI).

If a person deposits ten coins, weighing 100 grams 24 karats  gold coins, is it the Original  Capital? (رأس المال). After some years, if the bank returns the same numbers, ten coins, weighing 100 grams but poor quality, 18 karats gold coins, can it be called Original  Capital? (رأس المال)? 

The one who says ‘yes’, is devoid of commonsone, needs to visit a mental doctor urgently. 

And those who disagree and contemplate; The ten coins of 100 grams of “18 karats gold coins” are of inferior quality, the Original  Capital? (رأس المال) comprised 100 grams “24 karats  gold coins”, calling 18 karat equal to 24 karat and saying that since the number of coins being returned is ten,  hence it is equal to  Original  Capital (رأس المال), is cheating, plundering , fraud and injustice, which is similarly being practiced with paper currency, being exposed here. It must be remembered that even exchange of dates of inferior quality with superior quality is not permissible being Riba.

The Quranic principle of equality (in all respects i.e. numbers, quality and value) of Original  Capital (رأس المال) with the capital being returned is to be ensured. Some methodology has to be found to ensure that the depositor does not suffer any loss as it will be unjust and against command of Allah.

In the context of paper currency this cheating and fraud is covered up, concealed  by so-called Islamic scholars under the above analogy. The paper currency notes have some value written on them by the State Bank which keeps depreciating with the passage of time in 3rd world countries due to corrupt rulers, bad governance and poor monetary policy.  The actual value or worth of note of Rupee can be found in relation to the standard international unit, SDR or Islamic Dinar by Islamic Development bank, which should be used at the time of deposit and return of   Original  Capital? (رأس المال) (details later) and not just numbers printed on currency notes which has not been done unfortunately. It is blatant violation of Command of Allah, that :

“.. But if you repent, you shall have your principal original  capital (رُءُوسُ أَمْوَالِكُمْ). Oppress none and no one will oppress you (Quran;2:279- Translation)

Not only the “principal original  capital (رُءُوسُ أَمْوَالِكُمْ)” has been decreased but oppression (zulm) is also being done with the depositor. 

Determining the Value of  Original  Capital? (رأس المال)

Someone may become a laughing stock by saying that a standard trouser (pant) can be made with 1 kg cloth. Typically, for a standard adult-sized trouser, about 2 meters of fabric is required, assuming a standard width of 1.5 meters. Weight measuring units are not used for length measurement or vice versa. The units of measurement have to be appropriate to the item.  

It may be kept in mind that when gold and silver coins were used as currency, the weight and purity of the coin would determine its value or worth. Though the paper currency is generally measured in numbers but its “real worth or value” can only be measured in relation with the prevalent international standard currency measurement units, the number or weight will always give inaccurate results, though counting notes in  numbers is the common practice. 

The value of paper currency is determined by the monetary authority that issues it, typically the state Bank or a government agency. The value of paper currency is not tied to the weight or value of a precious metal like gold or silver, but rather to a complex set of economic factors such as inflation, interest rates, and overall economic performance. Central banks and government agencies use various mechanisms to control the value of paper currency, such as setting interest rates, adjusting the money supply, and engaging in currency intervention in international markets. The value of paper currency can also be affected by other factors, such as political stability, international trade, and the overall demand for a particular currency. In general, the value of a currency is measured relative to other currencies in the global market, and fluctuations in exchange rates can have significant impacts on international trade, investment, and economic growth. 

Although it is a common practice in day-to-day business  within a country to count notes in numbers. Profit (Riba, Usury) on depositing or lending money in a bank or financial institution is strictly prohibited in Islam. However, in the investment transaction, not in the immediate short term, but in the long term, counting currency notes only to determine the value will not be fair because the purchasing power of currency might have changed.

The paper note is a useless piece of paper. Paper has no value (the gold dinar has its own value) The printed value on ‘note’ describes its value, which fluctuates, depreciates due to inflation, overprinting and other factors

One can’t determine the exact or true weight of an item with measure instrument  which is changing weight, i.e if authorities check measuring weights in shops and find that on the weight it is written 5 Kg (5000 grams),  but actually it weighs 4995 grams, less by 5 grams, it is called fraud, the shopkeeper will be arrested and punished by court for fraud, cheating. Similarly if a currency note of Rs.5000 was deposited in the bank a year earlier, and is returned as a currency note on which Rs.5000 is written but its worth or value (purchasing power) is Rs.4995, is it not cheating , fraud like above example?

Riba (increase in original value) is  not allowed, as Allah has prevented any increase or decrease in the original capital of depositor/ investor:  “you shall have your capital; neither shall you make (the debtor) suffer loss, nor shall you be made to suffer loss”. (Quran 2;279).  Original value of the capital has been promised to be kept safe, therefore, the real value of the “currency note” will be determined with reference to some standard unit so that there is no reduction in the value of the “currency note”, no loss.

Islamic Dinar

IDB (Islamic Development Bank) uses its Islamic Dinar (Islamic Development Bank) which is equal to 1 SDR (Special Drawing Right) by the IMF in its transactions. Previously Gold and US Dollar was used but now SDR is a stable monetary unit, in  paper / fiat currency in the present world monetary system. The Special Drawing Right (SDR) was created by the International Monetary Fund (IMF) in 1969 as a supplementary international reserve asset. The SDR was introduced in response to the instability of the Bretton Woods system, which had used gold and the US dollar as international reserve currencies. The value of paper currency keeps fluctuating due to inflation, excessive printing and other economic variables. The Islamic Dinar is equal to Special Drawing Right (SDR), which is a weighted average of several major currencies. As of 2021, the composition of the SDR basket is as follows:

  1. U.S. Dollar (USD) – 41.73%
  2. Euro (EUR) – 30.93%
  3. Chinese Yuan (CNY) – 10.92%
  4. Japanese Yen (JPY) – 8.33%
  5. British Pound Sterling (GBP) – 8.09%

The weights of these currencies in the basket are reviewed every five years by the International Monetary Fund (IMF) to ensure they reflect the relative importance of the currencies in the world’s trading and financial systems. The current SDR basket was last reviewed in 2020 and will remain in place until the next review in 2025.

An Illustration 

Here we just take a period of 15 years (2008-2023) 

  1. August 2008:  1 SDR =84.26 
  2. PKR OR 1 Pk Rs.= 0.011860275 SDR
  3. April  2023,  1 SDR (Special Drawing Right) =  377.98 PKR  OR 
  4. Total depreciation of Pak Rs in 15 years=377.98-84.26=293.72  =  347.18%
  5. Annual average Depreciation in relation with Islamic Dinar (SDR)= 23%

NSC Pension Account/ Bahbood Certificates Returns fluctuated between 11.04% to 16.80%,9,  10, 11, 12, 13 ,  just once reaching a peak of 16.80% (Dec 2008 to July 2009). Hence roughly on the average, the returns have been around 12%, which is about half (50%) of Pk Rs, annual average Depreciation of 23%. The security of the value of deposit is guaranteed by Allah (Quran 2:279). Any deviation to the Command of Allah is disobedience.

How can it be called Riba or Interest or Profit? 

The depositor is at a net loss of about 11% per annum (23-12=11) in real terms, the average 12% paid by NSC is partial compensation of just 50% indexation of loss / depreciation of  value of Pk Rs since 2008. 

If the NSC account / investment/ deposit is accounted as Islamic Dinar (equivalent of SDR). then in terms of Pk Rupee, 23% per year is paid / added to Pk Rs value then it will be at par with Islamic Dinar. Anything more than 23% is Riba/ interest/ Profit etc, which has never happened in the banking history of Pakistan.

ALLAH’s promise will be  fulfilled:

 Allah says:

 “you do no wrong  (لَا تَظْلِمُونَ وَلَا تُظْلَمُون) (by taking usury), nor are you wronged (by reducing value of your principal)”(Quran 2:279). 

O you who believe! Stand out firmly for justice (Quran 4:135)

Maintain equality in your dealings by the means of measurement and balance. (Quran;6:152)

“He bestows wisdom upon anyone He wills, and he who is given wisdom is in fact given great wealth, but only those who have common sense learn lessons from these things. (Quran 2:269)

“˹Quran˺ is ˹true˺ guidance. And those who deny their Lord’s revelations will suffer the ˹worst˺ torment of agonizing pain” (Quran;45:11)

Read More:

  1. https://SalaamOne.com/Riba
  2. https://bit.ly/QuranOnRiba  اردو خلاصہ

“Your wealth and your children are but a trial. It is Allah with Whom is the greatest reward.”(Qur’an;64:15)

Quran , Riba & Fiat Currency

Scam of the Century Unveiled

By Brig(r) Aftab Khan Abdallah

eBook (Full+Eng & Urdu Summaries): https://bit.ly/QuranOnRiba-pdf

   https://bit.ly/QuranOnRiba اردو خلاصہ

https://bit.ly/RibaBrief 

https://bit.ly/Riba-Research

أَعُوْذُ بِاللّٰهِ مِنَ الشَّيْطٰانِ الرَّجِيْمِ o بِسْمِ ٱللَّٰهِ ٱلرَّحْمَٰنِ ٱلرَّحِيم

..وَإِن تُبْتُمْ فَلَكُمْ رُءُوسُ أَمْوَالِكُمْ لَا تَظْلِمُونَ وَلَا تُظْلَمُونَ‎﴿٢٧٩﴾

… if you desist (from taking Riba/ usury),  repent, then you shall have your capital; neither shall you make (the debtor) suffer loss ( by asking for more) nor shall you be made to suffer loss (through decrease in value of your capital)”(Quran 2;279)

Updated 22 December 2022 \ 1345    

Introduction

To resolve any issue, first the prevalent environments have to be well understood, then the Quranic injunctions should be applied intelligently. Fiat money is a recent phenomenon. Fiat is government-issued currency that is not backed by a physical commodity, such as gold or silver, but rather by the government that issued it. The value of fiat money is derived from the relationship between supply and demand and the stability of the issuing government, rather than the worth of a commodity backing it. Most modern paper currencies are fiat currencies, including the U.S. dollar, the euro, and other major global currencies. One danger of fiat money is that governments can print too much of it, resulting in hyperinflation.[1]

The Qur’an provides eternal guidance for every matter[2], it requires full application of the Qur’anic rulings on a given issue – partial, incomplete application of the rulings is just mockery.

Presenting incomplete Qur’anic injunctions is woefully misleading, deliberately omitting information is tantamount to lying، a great sin. There is a famous saying that; a half truth is often a full lie. Allah says:

O People of the Book!  Why do you confuse the truth with falsehood and conceal the truth while you know [it]? (3:71)

“So do you believe in part of the Scripture and disbelieve in part? Then what is the recompense for those who do that among you except disgrace in worldly life; and on the Day of Resurrection they will be sent back to the severest of punishment. And Allah is not unaware of what you do. (Qur’an 2:85).

Let’s take an example:

O people who have believed ( یٰۤاَیُّہَا الَّذِیۡنَ اٰمَنُوۡا )  do not approach the prayer  (لَاتَقۡرَبُوا الصَّلٰوۃَ ) while you are drunk  (وَاَنۡتُمۡ سُکٰرٰی )[Quran:4:43][3]

In this verse IF the last part (وَاَنۡتُمۡ سُکٰرٰی) “while you are drunk” is not presented, it will read:

“O people who have believed (یٰۤاَیُّہَا الَّذِیۡنَ اٰمَنُوۡا) do not approach the prayer ( لَاتَقۡرَبُوا الصَّلٰوۃَ).”

This way the whole meanings have changed, Salah (prayer), an important pillar of Islam has been negated through hiding, ignoring, twisting part of verse.  If the whole truth is not told, then people can be  as if you were lying to them out rightly.

Though not exactly but somewhat similar situation was noticed, hence:  “Scam of the Century is Unveiled”.

Purpose

The purpose of this article is to examine partial compliance of the commands of Allah on  Riba (usury), and suggest possible options for full  implementation of divine commandments on this subject.

Full implementation of  the commands of Allah for Riba free economy is the the legal, ethical and religious responsibility of the Federal Shariat Court (FSC), State Bank of Pakistan(SBP)[4] and related institutions.

FSC Judgment on Islamic Banking

The Prohibition of Riba in the Qur’an is beyond any doubt.  FSC examined the Riba law  in the light of the Qur’an and the Sunnah, it  ruled in 1999 on the abolition of Riba in the banking system. An appeal was made and on April 28, 2022, an order was issued to declare Riba is haram and to eliminate it through Islamic banking – this has been well appreciated by everyone.[5] 

The Problem

Most people may not be aware that, while banning Riba, in fulfillment of the  command of Allah, the judgment ignored the other half of the same verse of the Quran (2:279). It is surprising that the scholars, intellectuals and legal experts who have been following this case with enthusiasm for seventy-five years have ignored half the verse of Quran (2:279). In any case, human beings are prone to mistakes and Allah is kind to grant pardon and forgiveness on  repentance (tawba) and correction of their error[6]. However insisting on error is disastrous:

“.. because they disliked what Allah revealed, so He rendered their deeds worthless.”(Qur’an 47:9)[7]

Quran on Prohibition of Riba & Obedient Servants  

Following two frequently quoted Quranic verses tell the whole truth about prohibition of Riba (usury) and its implication for the obedient servants, though there are also other verses on Riba[8]. Both aspects are equally important and both have to be implemented in later and spirit, which is the objective of this article:

يَا أَيُّهَا الَّذِينَ آمَنُوا اتَّقُوا اللَّهَ وَذَرُوا مَا بَقِيَ مِنَ الرِّبَا إِن كُنتُم مُّؤْمِنِينَ ‎﴿٢٧٨﴾‏ فَإِن لَّمْ تَفْعَلُوا فَأْذَنُوا بِحَرْبٍ مِّنَ اللَّهِ وَرَسُولِهِ ۖ وَإِن تُبْتُمْ فَلَكُمْ رُءُوسُ أَمْوَالِكُمْ لَا تَظْلِمُونَ وَلَا تُظْلَمُونَ ‎﴿٢٧٩﴾

“O you who believe! Be careful of (your duty to) Allah and relinquish what remains (due) from Riba (usury), if you are believers. (2:278) But if you do (it) not, then be apprised of war from Allah and His Apostle; and if you desist,  repent, then you shall have your capital; neither shall you make (the debtor) suffer loss ( by asking for more) nor shall you be made to suffer loss (through decrease in value of your capital)”(Quran 2;279)

The Safety and Security of  value of “Principal Capital”(اموال) is not an interpretation but an unambiguous Command of Allah, which cannot be ignored or undermined through  interpretations, if done, it would be distortion (Tehreef) in meanings of words of Allah, concealing truth (کتمان حق) is a major sin (گناہ کبیرہ):

“Why do you mix truth with falsehood and knowingly hide the truth?”(Quran 3:71).

Allah said, … “And you shall not be dealt with unjustly” meaning, your original capital will not diminish. Rather, you will receive only what you lent without increase or decrease.  The Messengerﷺ of of Allah during the Farewell Hajj said; “Verily, every case of Riba from the Jahiliyyah (days of ignorance) is completely annulled. You will only take back your capital, without increase or decrease (hence decrease in value of money due to inflation must be compensated)  [Extract (Tafseer 2:278)- ibn Kathir][9]

Federal Shariat Court (FSC) &  Riba[10] 

Loss in value of Principal (devaluation) due to inflation, was considered as an issue not from religious but general point of view by Honorable Mufti Taqi Usmani Sahib in the 1999 Sharia Court Appellate Judgment[11]. Many options were also given, but then the issue was sidelined, that, more research was needed on this aspect. Whether any research, study was conducted by him or anyone else during the last twenty two (22) years , only Allah knows.

The decision of the Federal Shariat Court of (FSC ) on Riba ban of 28th April 2022 is getting a lot of attention, it is a landmark decision for Islamic Banking. However the FSC has dismissed the issue related to inflation by stating that; indexation & inflation is not within their jurisdiction. The decision did not even mention the judgment of Mufti Taqi Usmani in 1999 and their recommendations for further research, hence this issue was closed (forever?).

Could it be due to the mistake (oversight), ignorance of scholars, intellectuals, economic experts, legal experts and media, or the conspiracy inspired by Satan? (Allah knows best), but a positive  attitude  requires that this lapse  be treated as a great blunder. Every effort should be made to redress it by implementing the Commandment of Allah (لَا تَظْلِمُونَ وَلَا تُظْلَمُون) “you do no wrong (by taking usury), nor are you wronged (by reducing value of your principal)”.

It appears that our religious and legal scholarship dealing with this most important and sensitive issue is not aware of divine commandment stipulated in Quran 2:279. Had it been known there is no reason to sideline this important aspect.

Remember that believing in the Qur’an, reciting, understanding, acting on it and conveying its message to others is the responsibility of all Muslims: “And We have made the Qur’an easy to understand; is there anyone who ponders?” (Qur’an 54: 17)[12] 

When the majority blindly follow the scholars, understand the Quran only through the eyes of others, then such blunders take place.

Defiance and War with Allah & Messenger ﷺ

Compensation for decrease in value of Principal Capital of depositors due to inflation or any factor in Not Riba, according to Quran 2:279[13]. The people who consider it Riba , should know that defiance of commands of Allah & Messenger ﷺ  amounts to be at war: “ .. they disliked what Allah revealed, so He rendered  their deeds worthless.(Quran 47:9)[14]

However the Islamic Banking  is much wider in scope which must be fully supported and encouraged to apply Islamic injunctions in trade and all spheres of economy.[15] 

Pakistan inflation rates 1960-2020[16]

It’s interesting data, the inflation rates have been fluctuating between -0.52% in 1960 to 26.66% in 1974, 9.5% in 2021 and 26% in 2022.[17] It proves that it is possible to bring inflation and interest rates to Zero like many developed economies.[18] 

The rate interest data from 1956 to 2022 shows that it has been around 3.6% (1956) to 20% (1996), 14% in 2009, 8% in 2016, 13% in 2019, 8% in 2020 and 14% in 2022 (this data (taken from following  charts are subject to slight error)[19].  The discount rate data[20]  shows that it reached an all-time high of 20.000 % pa in 1996 and a record low of 6.250 % pa in 2017[21]. One can note its direct relationship with inflation in the above- chart.

A Parable:

Suppose that the Bank/National Savings Center (NSC/government/State Bank) takes one hundred (100) grams of pure gold from Abdullah (depositor) and adds one gram of copper to it (inflation), so it becomes 101 grams of gold. They return 0.5 grams of this impure gold to Abdullah as profit and keeps the remaining 0.5 grams [Rate of 1 gram of 24 karat gold on 6 December 22 was Rs.12809]

One Molna Sahib says that 0.5 grams is interest/riba, it is haram – the other says No, it is profit – the third Sahab thinks it is business!

Abdullah says:

It is not “riba” (usury, interest) nor profit, but injustice, oppression, Allah says: (لَا تَظْلِمُونَ وَلَا تُظْلَمُون) “you do no wrong (by taking usury), nor are you wronged (by reducing value of your principal)”(Quran 2:279)[22]. Hence it is just partial compensation for inflation. Let’s see how?

Adding impurity to gold or excessive money printing of currency notes is the same as it results in reduction in their original value – for example, 100 grams of gold is devalued due to addition of any other metal in the “original capital (gold)”.  Apparently it is hundred grams of gold but it is not the real pure gold. It is impure gold mixed with impurity, making it of gold of lower value:

1Gm Gold Rates for different quality:  Rs.10700 (24K), Rs.9808(22K), Rs.9363(21K), Rs.8025(18K)[23] [Karat is measurement of purity of gold]

According to the Qur’an,  whoever repents (refrain) from riba, his principal capital belongs to him. He should not oppress anyone (by taking usury), then he will also not be oppressed (his principal capital  should not be reduced to  cause him loss)  (Qur’an 2:279).

In this example, the 100 grams of gold that was returned by mixing 1 gram of copper in the original material is impure, if it is sold, it will get a lower price in the market, as shown in the above price chart. The Bank gave 0.5 grams (impure gold) as a profit out of depositor’s  gold, and  also kept 0.5 grams of gold – thus unjustly depriving Abdullah of some wealth from his own principal. The principal to be returned (100 gms is impure) which apparently looks like principal capital in weight but not in quality or value. Moreover the 0.5 gram that the government/state/bank took for themselves is also reducing Abdullah’s original capital – it is completely against the promise of Allah (لَا تَظْلِمُونَ وَلَا تُظْلَمُون).

This parable can be easily applied with the paper currency, the impurity is the excessive printing of currency which decreases the value of the original capital through inflation. If inflation is 26% (Nov 22), profit rate 14%, yet the despostor is at a loss of 12% (26-14=12%). How this 14% is called riba/ usury/ interest/ profit?

People like “Double Shah[24]“(master of a Ponzi scheme scam) are infamous for financial fraud who befool the people by giving them “Profits” from their own principal, such practice does not abhor well with the State.

Calling the money given to the depositor from his own original principal capital as usury/riba, the war against Allah and Messengerﷺ, a great sin, hellfire, impose fatwas declaring the employment and salary of bankers and financial institutions as Haraam is unfair and unjust (zulm). Moreover, to compensate for the loss of capital value (paper money due to inflation, excessive printing of currency) calling it profit/ income and levying  15% to 30% withholding tax, plus income tax is nothing but cruelty? Zakat is an obligation that purifies wealth.

Allah’s guidance and commands are eternal, applicable until the Day of Judgment, it is applicable to all kinds of currency, gold & silver. It lays down rules for borrowing and lending on paper, fiat, dollar, rupee, digital or whatever the future holds. The basic philosophy is:

(i) Guarantee of original capital (ii) Do not take excess money (riba) from borrower (iii) Do not reduce the value of original capital of lender/ depositor (iv) Whosoever does not follow these principles is a tyrant – and the tyrant is the one who fights against Allah and the Messenger of Allah ﷺ:

“O you who believe! Be careful of (your duty to) Allah and relinquish what remains (due) from Riba (usury), if you are believers. (2:278) But if you do (it) not, then be apprised of war from Allah and His Apostle; and if you desist,  repent, then you shall have your capital; neither shall you make (the debtor) suffer loss ( by asking for more) nor shall you be made to suffer loss (through decrease in value of your capital)”(Quran 2;279)

Where will the people (Abdullah) go?

Can such a law be said to be Islamic, which forbids adulteration and under weighing  only for the people but not for the government?

Indexation

Indexation is a recognized and prevalent method by which the depreciation of the original currency due to inflation is removed and the original value of the capital deposit currency is established. Neither the depositor / lender gets more nor his principal capital value is reduced, not less, not more, this is justice, this is the requirement of Quran and Sharia – Islamic Development Bank’s Islamic Dinar[25] an example.

Gold & Inflation Effects on Rs

Take the example of Rs versus US$ and Rs versus gold to understand the increase in their value during the last 75 years. In 1947 Rs 3.31 (Principal) equals to = 1 US $,  or 0.6770982456 grams of gold. First consider the Gold as a peg for  indexation to counter the negative effects of inflation on the Principle which Alalh has ordered to be preserved in its value. Gold has been used as a currency for centuries. The gold per tola or 11.66 grams price was Rs57 in 1947. In August 2020, per tola price of gold was Rs122,800, which signifies great change from Rs.57. The per tola gold price has thus recorded an average increase of 2871 % since 1947.[26] In 1947 with Rs 3.31 (1 US $) one could buy 0.6770982456 grams of gold. In 2022 the gold rate was Rs. 9808  per gram hence the price of 0.6770982456 grams gold (equivalent to 1$/ Rs.3.31) is Rs.6640.97 or say Rs.6641, or One Rs in 1947 should be equal Rs.2006 if we peg it with gold.

It is imperative to note that in 1947, beef was sold at  half a rupee per kg (units converted), mutton was priced at Rs1.25 per kg, milk was available at 40 to 50 paisa per liter, wheat flour was priced at Rs4 to 5 per maund (40kg), bread was worth at one anna (six paisa), and desi ghee was sold at Rs2.50 to 3 per kg.

Variations in value of Rs with US$ & Gold

Increase in Value 1947-2022[27]

In 1947 Rs 3.31 (Principal) equals to = 1 US $,  or 0.6770982456 grams of gold. A rough calculation[28] reveals that; on Compound Interest @10.139%, the total amount after  75 years will be around Rs. 6641. In other case if the compound Interest @7.52% total amount after 75 years will be around Rs.229 (present rate of 1 US $=Rs. 229, then Rs.3.31=1$=Rs229). It may be noted that the actual value of Rs.3.31 after 75 years is almost zero! Our scholars think this is a fair, Riba free solution in line with Quran 2:279. [this is based on their general verdicts and opinions]

 “… if you desist (from taking Riba/ usury),  repent, then you shall have your capital; neither shall you make (the debtor) suffer loss ( by asking for more) nor shall you be made to suffer loss (through decrease in value of your capital)”(Quran 2;279)

“Indeed the worst kind of all beasts in the sight of Allah are the people that are deaf and dumb, and do not understand” (Quran 8:22)

Great philosopher, scholar and national poet Dr. Muhammad Iqbal said a century ago:

ز مَن بر صُوفی و مُلاّ سلامے:  کہ پیغامِ خُدا گُفتَند ما را  – ولے تاویلِ شاں در حیرت اَنداخت: خُدا و جبرئیلؑ و مصطفیؐ را

Translation: My Salaam to Sufi and Mullas for conveying the message of Allah to us. But the interpretations they made of those Commands, bewilders Allah, Gabriel & Muhammadﷺ” (Iqbal)

However the Islamic Development Bank has a different opinion, it has pegged its “Islamic Dinar” with the SDR of IMF which is pegged with the basket of five most strong currencies of the world. (Details to follow).

“He bestows wisdom upon anyone He wills, and he who is given wisdom is in fact given great wealth, but only those who have common sense learn lessons from these things. (Quran 2:269)[29]

The above examples are just for explanation and understanding, the inflation and returns rates keep changing so every person can calculate for himself for understanding. The monetary and financial experts and bankers have to work out the methodology then some software can be developed for ease of calculations. Allah’s Commands are very clear and elaborate, which must be implemented in letter and spirit.

Twenty Modern Scholars Ignore Inflation

Consulting exegesis (tafseers) of twenty (20) famous commentators of the century, one is astonished to find that not even one scholar mentions inflation or fiat currency[30]. Maybe they don’t know or this is not an issue for them.

Ibn Kathir (may Allah bless him) (1300–1373 C.E) centuries ago mentioned that the Messengerﷺ of Allah while delivering his farewell Hajj Sermon announced the abolition of Riba and to ensure safe return of the principal capital without any loss to those who do not take Riba (usury)[31].  The other commentators hastily repeated, but did not interpret this order to implement in the current era of fiat currency and inflation. What is the benefit of such knowledge? There is a lot of noise and slogans in the media: “abolish riba”, it has become more of a political slogan than a religious one – whereas  the Quran is clearly ordering the full return of the original wealth and calling “decrease in its value” as oppression but no one talks about it?  

“Do they not ponder over the Qur’an? Or are their hearts locked” (Qur’an 47:24)

Contemporary Jurists Justify indexation

A section of scholars including Rafiq al-Masri[32], Sultan Abu Ali, MA Manan, Ziauddin Ahmad, Umar Zubair and Gul Muhammad consider indexation to be permissible. They do not see anything in it that contradicts the Sharia laws, rather, they declare it to be in accordance with the principles of justice described in the Qur’an and Sunnah. While Mufti Taqi Usmani and some others differ, Usmani Sahib recommended further studies and research in his FSC judgment of 1999 (outcome of this research if conducted is not known). In Egypt, Grand Mufti Muhammad Abduh[33] fatwa in 1900 up to the year 2002, successive Muftis have declared interest “prohibited, permissible, and prohibited and then permissible again”[34],[35]. Volume 1 of Investment Laws in Muslim Countries Handbook, states “an interest rate that did not exceed the rate of inflation was not Riba according to classical Islamic jurists.“[36] Suggestions to solve the problem include indexing loans or denominating loans “in terms of a commodity” such as gold, and doing further research to find an answer.[37] 

Islamic Dinar

There are already existing arrangements, which can be considered for a possible solution for a Riba free economy. The Islamic Dinar of IDB (Islamic Development Banks) is considered as the IDB’s accounting unit. It is equivalent in value to one Special Drawing Right (SDR) of the International Monetary Fund (IMF)[38]. Initially it was also equivalent to one U.S. dollar. After the collapse of the Bretton Woods system, the SDR was redefined as a basket of currencies. The SDR basket is reviewed every five years, or earlier if warranted, to ensure that the basket reflects the relative importance of currencies in the world’s trading and financial systems. These currency amounts remain fixed over the five-year SDR valuation period but the actual weights of currencies in the basket fluctuate as cross-exchange rates among the basket currencies move. The value of the SDR is determined daily based on market exchange rates.  

1 Islamic Dinar =  1SDR =1.32993 $US=Rs.299.1544 [Rates as on: 16 December 2022][39],[40]

It provides ready-made solutions already adopted by Islamic Development Bank and other International institutions. Many decades have passed and we stand in dilemma, the scholars neither provide a solution nor adopt an existing one.

Conclusions

Following conclusions can be drawn from above discussion:

  • Fiat currency is the new issue of the present era, which is used by corrupt and inefficient governments to create more money by excessive currency printing which is one of the causes of inflation, it decreases the value of principal deposits / savings.
  • The famous scholars of subcontinent Indo-Pak have no idea about the prevalent monetary system based on fiat, paper currency. Hence it is futile to expect a solution from them. Mufti Taqi Usmani Sahib, understands the decrease in value of principal capital through inflation and its compensation through indexation. However he seems reluctant to take initiative.
  • Allah forbids Riba but also commands to protect the value of original principal capital. The monetary system generated interest rates vary with inflation, which partially compensate for the loss of Principal Capital value as guaranteed by Allah. How does it become Riba? Such mis-interpretation is injustice (zulm). (see Quran; (2:279, 18:27, 28, 55:9,11:85, 2:188);45:7-8, 38:29, 2:159, 49:6, 62:5, 8:22, & 2:18, 16:76)
  • There are 26 countries with Zero Interest rates[41], in March 2021[42], 29 countries with less interest rate,[43] some countries have a negative interest rate. The 5 Countries With the Lowest Interest Rates are Switzerland , . Denmark,  Japan,  Sweden, . Spain[44]. The 20 countries with the lowest inflation rate in 2020.[45],[46]
  • The Government of Pakistan should control or eliminate inflation, end corruption, and improve financial/ monetary management. Many countries, as mentioned, have controlled inflation and kept inflation and interest rate near zero. Pakistan also had a negative inflation rate -0.52 in 1960. It is still possible now.
  • The government should spend according to some and the system, increase the revenue, generate wealth, and implement the correct financial policies. However the rulers do not do this, rather print excessive currency notes, just like adding water to the milk. When inflation increases and the value of currency notes decreases – this is a robbery on the public’s pocket. The poor become poorer and keep working harder to fill the bellies of corrupts.
  • There has to be compensation for the loss due to inflation, we take gold or $ or mixed basket of gold, stable currencies, market commodity prices, rate of inflation, or whatever it should be left to experts to find the solution which is in line with the Commandment of Allah, so that (لَا تَظْلِمُونَ وَلَا تُظْلَمُون) “you do no wrong (by taking usury), nor are you wronged (by reducing value of your principal)”.
  • The other method is partial or full indexation like every year salaries, pensions are partially indexed.
  • It is absurd to ask people to open a $ account and trade in $ or use gold bricks. The wealth must remain in circulation like blood in the body, lest it become stagnant. State must do its job, citizens should not be trading in multiple currencies and precious metals privately creating unresolvable disputes, claims with no legal coverage.  
  • Hence if banks or NSC centers pay some %, which is equal to the loss in principal value due to inflation then it’s not Riba, but if average return is more than loss, then its Riba. [May be given in charity]. This is neither a fatwa nor legal ruling, but just a rational opinion based upon above mentioned data. Though some may agree and some may not.
  • Judging something halal or haram just by its appearance cannot be conclusive – if a person is drinking something in a glass, it cannot be decided just on the color of the drink alone that there is wine in the glass without investigation – similarly in the current monetary system in which apparently “Profit” is paid to the depositor but it is “not profit”, it’s compensation of the loss of actual value of principal capital due to inflation.  It is a big blunder to issue fatwas of halal and haram just on apparent look, without thorough investigation and research.
  • It is clear that calling the current system “riba” is not appropriate, especially for the depositors of banks and national savings schemes. It is  part of “Compensation” (Indexation) to the reduction in the value of depositor’s “real money” due to inflation – Inflation in November 2022 is 26% and returns 14% so the depositor  is still at a loss 12% which is going to the government or banks or both but in any case not to the depositor. In fact, what the depositor is receiving in the name of profit is his original money, thus reducing the value of his original principal capital (this point needs pondering to understand).  Allah’s order Quran (2:279) which was ignored. Moreover, calling this partial compensation as profit or income, charging withholding tax (15% to 30%) and then taxing the income is injustice/ zulm.  Zakat is obligatory which purifies wealth.
  • Declaring salaries of bank employees as Haraam is also not in line. The Molanas have mostly read about gold and silver coins in Islamic history, they are not familiar with paper currency (fiat concept), nor are they aware of the negative effect of inflation on principal. While the Quran commands that the value of the Principal should not be decreased (this decrease could be due to any reason, theft, adulteration, blending, inflation) .  It’s cruel, Zulm, which  must be eliminated – but they are stingy in using the intellect.
  • “Indeed, the worst of living creatures in the sight of Allah are the deaf and dumb who do not use reason” (Quran 8:22)[47]
  • In hindsight the government, judiciary and Mulla seems to be in agreement with each other (hopefully not).  It’s up to the judiciary and the experts to figure out how to compensate the depositors so that Commands of Allah  (2:279) are fulfilled completely.
  • Allah has commanded: “—  So fulfill the measure and weight and do not deprive people of their due and cause not corruption upon the earth after its reformation. That is better for you, if you should be believers.(Qur’an: 7:85)[48]
  • Those who are acting against the commands of Allah and ignoring the verses of the Qur’an should take care of themselves and worry about war with Alah and Messengerﷺ for defiance.
  • It is very important to encourage and promote Islamic banking which is a comprehensive program to completely eliminate riba in all sectors. The profit earned by banks through more preferable participatory modes of musharaka, mudaraba and ijara would provide halaal income to the depositors.

Commands of Allah must be implemented in letter and spirit: 

“So do you believe in part of the Scripture and disbelieve in part? What then is the re ward of such among you as do this but disgrace in the life of this world, and on the day of resurrection they shall be sent back to the most grievous chastisement, and Allah is not at all heedless of what you do.” (Qur’an 2:85)[49]

“O you who believe! Be careful of (your duty to) Allah and relinquish what remains (due) from Riba (usury), if you are believers. (278) But if you do (it) not, then be apprised of war from Allah and His Apostle; and if you desist, repent, then you shall have your capital; neither shall you make (the debtor) suffer loss (by asking for more) nor shall you be made to suffer loss (through decrease in value of your capital)”(Quran 2;279)

Insisting on the full implementation of the Qur’anic injunction (2:279) in strange times seems to be a futile endeavor but we are commanded: “… enjoin on each other truth, and enjoin on each other patience.” (Quran:103:3)[50].

It is hoped that this effort will act as a wakeup call for the Islamic jurists, SBP, bankers, politicians, intellectuals, financial expert and the government to fully implement the commands of Allah, in the true spirit of (لَا تَظْلِمُونَ وَلَا تُظْلَمُون).

Read as <Google Doc>

Endnotes / References

☆ https://bit.ly/QuranAurRibaUrdu-pdf [قرآن اور ربا ]
☆ Keep reading below …….

 

Scam 2

 Revision of Hadiths Collection

According to the Golden Rules of Hadith Knowledge

Following “Rules of Hadith Knowledge”علم الحديث کے سات سنہری اصول -علم الحديث سبع( قواعد ذهبية ) have been drawn for the the Commandments , sayings of the Messenger of Allah ﷺ and Quran.

  • Rule #1. The Qur’an abrogates the Hadith, the Hadith cannot abrogate the Qur’an verses.
  • Rule #2. Hadith must “conform to the Qur’an and Sunnah”.
  • Principle #3  Hadith must be compatible with intellect and understanding
  • Principle #4: Differentiate between Hadith Qudsi and Hadith of Prophet ﷺ
  • Rule #5: The Chain of narrators and their credentials
  • Rule #6: There is Only One Book, The Book of Allah (Quran)
  • Principle #7: Memorization and Recitation of Hadith

Obedience to the Messenger of Allah ﷺ is like obedience to Allah,  the punishment for disobedience is hell

Muhadditheen and scholars are requested to play their role in completing this noble  work of “Re-Compilation of Hadiths Collections” according to above mentioned Seven Rules.

They can undertake this noble task individually or make teams. Resultantly only authentic Hadiths will be promoted, weak, controversial, concocted, superfluous Hadiths will get rejected. It may take years or centuries, the beginning must be made by taking the first step. Jazak Allah

Golden Rules for Hadith: 

AAK Hadith Collection

Related Posts