The fatal flaws in Sharia Finance.

I will start this page with a very interesting piece that I read recently. 

“Being rich either physically or spiritually represents an attitude about oneself. It is an attitude of pride – how human nature sees itself. It seeks to justify itself. Human nature tends to see itself as right. It is wealthy in it’s own eyes. So much so that it will not listen to correction from Allah (SWT) let alone from another person who has a different opinion to theirs. A mind of inflated self worth cannot be changed against it’s will, yet Allah (SWT) makes it clear that we must repent of our ways and receive the one and only true way of Allah (SWT) which will lead us to His kingdom”.

For me these few lines encapsulate the attitude that I have found across a broad spectrum of belief within the Muslim religion. As I studied the various Sharia laws pertaining to Riba and discussed them within the Muslim community I found the attitude that “I am right and so your arguments are wrong even if you are quoting directly from Qur’an or Hadith” to be very prevalent.
Of course there is another argument that works quite well also “there are none so blind as those who will not see”. This has a lot to do with information that has been passed down by our forefathers and that we are taught is unquestionably correct. The problem here of course is that this is one line of knowledge that the Qur’an specifically warns us against. 

I will never criticise the Qur’an or Hadith but it is my right and the right of every Muslim to criticise Sharia as this is an interpretation of the Qur’an and Hadith by man. If Muslims do not criticise Sharia then those parts that are wrong will never be corrected. We are told that Sharia is correct and that we are not to criticise it but Allah (SWT) advises us to search the Qur’an and do everything possible to find any fault in the Qur’an that we can criticise. Do the writers of Sharia somehow think that they have written words that are more perfect than those of the Qur’an, so perfect that their words should not be questioned? 

All rulings with interest in Sharia should be entirely centred on Riba as this is what is mentioned in the Qur’an and Hadith. I have never seen any reference to Interest in the Qur’an and Hadith. Usury goes a lot further then just interest. Interest is only a small part of the meaning of Riba and the part that is most used today to try to use Sharia Law to prove certain transactions to be approved under Islamic law. 

From Hadith of Sahih Bukhari 

Narrated Az-Zuhri from Malik bin Aus: that the latter said, "Who has change?" Talha said, "I (will have change) when our store-keeper comes from the forest." Narrated 'Umar bin Al-Khattab: Allah's Apostle said, "The bartering of gold for silver is riba, (usury), except if it is from hand to hand and equal in amount, and wheat grain for wheat grain is usury except if it is form hand to hand and equal in amount, and dates for dates is usury except if it is from hand to hand and equal in amount, and barley for barley is usury except if it is from hand to hand and equal in amount." (Sahih Bukhari Book #34, Hadith #344) 

Narrated Abu Said al-Khudri: Once Bilal brought Barni (i.e. a kind of dates) to the Prophet and the Prophet asked him, "From where have you brought these?" Bilal replied, "I had some inferior type of dates and exchanged two Sas of it for one Sa of Barni dates in order to give it to the Prophet; to eat." Thereupon the Prophet said, "Beware! Beware! This is definitely riba (usury)! This is definitely riba (Usury)! Don't do so, but if you want to buy (a superior kind of dates) sell the inferior dates for money and then buy the superior kind of dates with that money."  (Book #38, Hadith #506) 

Narrated 'Abdullah bin Abu Aufa: A man displayed some goods in the market and took a false oath that he had been offered so much for them though he was not offered that amount Then the following Divine Verse was revealed:-- "Verily! Those who purchase a little gain at the cost of Allah's covenant and their oaths . . . Will get painful punishment." (3.77) Ibn Abu Aufa added, "Such person as described above is a treacherous riba-eater (i.e. eater of usury).  (Book #48, Hadith #841) 

From the Qur’an 

Those who eat riba (usury) will not stand (on the Day of Resurrection) except like the standing of a person beaten by Shaitan (Satan) leading him to insanity. That is because they say: "Trading is only like riba (usury)," whereas Allah has permitted trading and forbidden riba (usury). So whosoever receives an admonition from his Lord and stops eating riba (usury) shall not be punished for the past; his case is for Allah (to judge); but whoever returns (to riba (usury)), such are the dwellers of the Fire - they will abide therein.  (Al-Baqara, Chapter #2, Verse #275) 

O you who believe! Eat not riba (usury) doubled and multiplied, but fear Allah that you may be successful.  ( Aal-e-Imran, Chapter #3, Verse #130) 

And you see many of them hurrying for sin and transgression, and eating illegal things (as bribes and riba (usury), etc.). Evil indeed is that which they have been doing.  (Al-Maeda, Chapter #5, Verse #62)
There are many more sections that I could quote here but I will leave it to you to find them. For those who have never read the Qur’an it will be a good exercise and I promise that you will find it very rewarding. You may even start to question some of what you have been told by your forefathers. 

In many cases in Hadith such as wheat for wheat etc. specific cases are mentioned. I have often been told that these versus only refer to those specific cases. I totally disagree with this assertion. There are millions of transactions that can be made and if all possible combinations and permutations where mentioned then there would need to be many more books added just to cover Riba. Compound this by adding all other laws of the Qur’an and Hadith and it is obvious that the task would be impossible. Then it must also be recognised that most of what we have today was not available in the beginning of Islam. By the reasoning of mentioning specific items then cars, computers, planes etc. are not covered so it is possible to exempt these from any previous Islamic rulings. Banks are also not mentioned so it could also be assumed that we need to invent new laws to cover banking transactions. 

To combine the terms “banking” and “Islam” is to combine two totally foreign concepts. These terms can only be combined by using false concepts and slight of hand. This may fool some of the people some of time but it will never fool Allah (SWT). Those who do invent these grand ideas will be the ones who will answer for their deceit. If you want to know your fate then read the Qur’an.
Basic principals of banking are receiving money and then lending that money. To qualify as a bank under banking laws the depositor of the bank must be guaranteed a return on their money (interest) and a then return of the initial sum. To make a profit the bank then charges interest when they loan the money out. This was the initial dilemma that Muslims faced when they tried to open banks in non-Muslim countries. They either conformed to the laws or they did not open a bank.
Think of a meal that contains both lamb and pork (swine) then try to redefine terms until that meal becomes Halal. Call the pork bacon then determine a percentage of this bacon that can be used in the meal before you add too much. This exercise is about as ridiculous as some of the Sharia rulings that I read in bank statements.
There can never be an Islamic bank that is Halal as all banks make money (interest) from the money that they loan to borrowers. It does not matter what term they use for the interest it is still interest. Banks by their very nature have no other way of making a profit other than to charge interest. Without interest a bank does not make a profit and it would be out of business very quickly.
If the laws of Islam forbid interest and banks charge interest how is it possible to marry these totally opposing systems. The simple answer is to use Sharia of course. It really is very straight forward. Get enough Sharia scholars to agree to something that is totally forbidden in the Qur’an and then we suddenly (as if by magic) have an interest system that agrees with the Qur’an.
The trick is to use terms that were used in the time of Mohammed (SAW) such as Musharaka, Mudarba, bai’mu’ajjal, ijarra and so on. The average man in the street would not have a clue what the words mean but they sure sound realistic. The problem is that these terms were never used as banking terms. They were terms used for the trade of goods. The purchase and sale of goods and the financing of trade where there was a profit or loss on the goods traded. Today these terms are used for the trade of money and the profit or loss of those transactions. Where goods are involved the bank is still only a go-between in the transaction supplying the money for the transaction. They supply the money and they make a profit on the money. There are many tricks to cover the money trail from view but all these are still only tricks. If you think for one second that these various tricks actually cover the interest from Allah (SWT) then I think that you either have a very high opinion of yourself or you do not care.
I have written more about this subject and looked at solutions in the section “Interest Free Finance a reality or the impossible dream”.
If you have further interest in this please contact me be email at jalal@aiic.com.au