Dr. Ibrahim Shihata [1937-2001]
Dr. Shihata was a legal scholar and the General Counsel for the World Bank and Secretary-General of the International Center for Settlement of Investment Disputes.
“Riba is prohibited beyond doubt by the two primary sources of Islamic law, the Qur’an and Sunnah. The scope of this prohibition is not defined, however, in either source. A rational reading of these sources suggests that, as an exception to the general rule of freedom of contract, the prohibition should be strictly construed, in light of its underlying rationale and the general Qur’anic proposition to facilitate, not complicate transactions. Prohibited riba may thus cover obvious cases of enrichment without a legitimate cause, both in trade and lending operations, in order to ensure fairness in the conduct of these transactions and to defend weaker parties from undue exploitation and excessive uncertainty. It also covers operations which are meant to be charitable or semi-charitable in nature, such as the typical qards known at the time the prohibition was introduced. This cannot automatically suggest, however, that every possible barter trading in fungible commodities and every financial instrument that has a fixed return is tainted by riba. Yet, it is this broad prohibition that is commonly required at present by most Islamic specialists and is taken for granted as the basis of ‘Islamic banking’.” [Some Observations on the Question of RIBA and the Challenges Facing “Islamic Banking”]
Dr. Syed Nawab Haider Naqvi [b. 1935]
Dr. Naqvi is a leading Pakistani economist with a PhD from Princeton. He has been the Director, Pakistan Institute of Development Economics, Islamabad (1979-1995). He is also the author of Ethics and Economics: An Islamic Synthesis [UK: The Islamic Foundation, 1981]. He has a very cautious position regarding the Riba-interest equation, especially in regard to attempts to abolish interest, while keeping the capitalist system generally intact. He is also unwilling to take a categorical position regarding the prohibition of interest. Thus, he hedges his observations with “if [interest] is recognized as riba.” In an article “Islamic Banking: An Evaluation,” he writes:
The theory of Islamic banking is wedged in between two connected logical statements: (i) that riba is equivalent to all interest-based financial transactions, including bank interest, in modern times; and (ii) that profit-based bankingto be more accurate, a banking system raised on the principle of universal PLS and unsupported by any guarantee about the return on bank deposits or bank advances is superior to the capitalistic interest-based banking. Both these assertions, although (incorrectly) regarded by most Muslim thinkers as absolute truths unconstrained by space and time, do raise difficult theoretical and empirical questions and there are no easy answers to them. As for the first assertion that bank interest is riba, and is, therefore, prohibited, while profit is allowed the source of the difficulty is that interest and profit are not separable in a capitalistic system; indeed, the two are as interlinked as Siamese twins. The dominant view among secular economists is that the average rate of interest is determined, independently of the monetary variables, by the same set of forces which determine the rate of profit on the capital invested in production (Panica, 1991); and that changes in the profit rates have been caused by changes in the interest rates, speculative trading, and productivity (Pindyck, 1988). Thus, separating the twins would require nothing less than a complicated surgical operation on the economic structure. Also, the possibility of a zero interest rate in a world not saturated by a surfeit of capital is flatly denied,7 because it is hard to visualize a situation in which people will have saved enough to bring the net productivity of capital down to zero. This, however, does not mean that we should not do away with bank interest, if it is recognized as riba, but we should be clear in our minds that once interest rate is permanently abolished as a source of income in a capitalist economy, we simply do not know what the outcome of such a step would be.
In the same essay, Naqvi also asserts: “As opposed to the popular conception, risk and uncertainty do not necessarily constitute Islamically legitimate characteristics of interest in the meaning of riba.” Also, echoing those Muslim scholars and experts who believe that exploitation and injustice is the illah or reason for the prohibition of riba, Naqvi writes: “It has been widely noted by Muslim economists that the rationale (‘illat al-hukm) of the prohibition of riba is not just the mathematical formula per se used to compute it; it is rather the alleged adverse consequences of it on the distribution of income and wealth.”
Professor Salim Rashid
University of Illinois, Urbana-Champaign
Prof. Rashid has a PhD in economics from Yale University. Currently, he is a professor of economics at the University of Illinois, Urbana-Champaign. In an unpublished, privately circulated essay “The Value of Time and Risk in Islamic Economics (1983),” he explained his problem with the riba-interest equation and why the denial of “time value of money” from an Islamic viewpoint leads to anomalous situations and would render Islamic economics inefficient from the economic viewpoint. He wrote: “If it were indeed true that Islam does not permit any time-discrimination of economic values, it would also follow that the Islamic system must be economically inefficient. This is not the case.”
Dr. Imad-ad-Deen Ahmad [b. 1948]
He is an American Muslim scholar and the president of the Minaret of Freedom Institute. His views are articulated in an article: “Riba and Interest: Definitions and Implications.”
Dr. Abdul Aziz Sachedina
Dr. Sachedina is a Professor of Religious Studies at the University of Virginia. His views are articulated in an article: “The Issue of Riba in Islamic Faith and Law”.
Dr. Omar Afzal
Dr. Afzal obtained his PhD in Linguistics from Cornell University, an alumni of Aligarh Muslim University, and Alim (Islamic and Arabic Studies) from IHIS Rampur. He is an outstanding linguist with expertise in many languages from Middle East, South Asia, and Europe. He has expertise in Islamic law, Islamic History, Contemporary Islamic movements, Islamic calendar, and Modern Islamic Thought. For twenty-six years he worked at Cornell University. He supervised several research projects leading to PhD and Master degrees. He is a prolific writer, editor of the Message and a member of the Islamic Fiqh Academy. He has also been the Chairman of the Center for Research and Communication, and the Committee for Crescent Observation International.]
In an article, Riba: Interest, Usury or Both, he writes:
“[it] :is an attempt to open for debate the ‘Interest’ – a term as known in modern monetary transactions and the Islamic legalistic viewpoint about it. Modern Islamic banking is largely based on the traditional interpretation of ‘Riba’ which does not distinguish between ‘usury’ and ‘interest’.
There is also no denying the fact that modern financial institutions like banking and insurance must be corrected to reduce fraud and for better service. However, any ‘Islamic’ solution must also be judged by similar standards of ‘justice’ and social responsibility. There are certain assumptions about an Islamic banking system yet to be rigorously tested in real life situations over a longer period of time on a much larger scale before the Muslims may present them as a better alternative.
Banks and banking is a new phenomenon and so is interest, as distinct from usury. In the last few decades it has become an essential part of normal human life. Even those who call interest Riba have bank accounts, write checks, use credit cards, and buy their homes on loans. All Muslim countries including those that are officially Islamic are actively involved with interest-based banking. Ulema should sit down with economists, experts in finance and development and try to find ways of how the intention of the Law-giver (Allah) may be reconciled with the needs of modern economies, and development.”
Dr. M. Raquib uz Zaman
Dr. Zaman has been the Charles A. Dana Professor of Finance and International Business, and Chairman, Department of Business Administration, Ithaca College, New York. He has numerous academic publications in the field of Islamic economics, finance and banking. For the complete list, visit his webpage. Several of his articles are available at the Study Resources Page.
“… there is no prima facie evidence in the Islamic shariah that lends credence to the assertion that all interest is usurious and that monetary policies in an Islamic state be substantially different from the ones in vogue in the rest of the world. It asserts that the so-called Islamic banks are neither Islamic nor banks in the proper commercial banking sense, and that the Islamic fiscal policies are more lofty slogans than actual policy tools to be undertaken by today’s governments. ” [“Monetary and Fiscal Policies of an Islamic State: The Claims Versus The Reality”]
Dr. Hormoz Movassaghi
Dr. Movassaghi is Professor and Associate Dean, School of Business, Ithaca College (New York). He has co-authored with Dr. M. Raquib uz Zaman (mentioned above) a number of research works on Islamic finance and banking.
Dr. Abdullah Saeed
Dr. Saeed is the Sultan of Oman Professor of Arab and Islamic Studies, and Director, Centre for the Study of Contemporary Islam at The University of Melbourne. His book Islamic Banking and Interest: A Study of the Prohibition of Riba and its Contemporary Interpretation is a must reading from a critical perspective.