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17. Economics and Finance

Section 1: Acquisition and Disposal of Property

Property may be acquired in three ways: by earning, by inheri­tance, and by gift. Acquisition of property by the individual, whether male or female, is recognized by Islam as one of the basic laws regulating human society:

“For men is the benefit of what they earn. And for women is the benefit of what they earn.” — 4:32

Both sexes have also a right to inheritance of property:

“For men is a share of what the parents and the near relatives leave, and for women a share of what the parents and the near relatives leave…” — 4:7

No limitation is placed upon the property or wealth which an in­dividual may acquire or give away. The Holy Quran speaks even of heaps of gold being in the possession of a man which he may give away to a wom­an as her nuptial gift (mahr) when he enters into marriage with her.1 Islam is thus opposed to ideologies which recognize no individual right of property; but it is at the same time so­cialistic in its tendencies, inasmuch as it tries to bring about a more or less equal distribution of wealth.

Unlawful means of acquiring wealth

All unlawful means of acquiring property are denounced:

“O you who believe, do not swallow up your property among yourselves by false means except that it be trading by your mutual consent.” — 4:29

“And do not swallow up your pro­perty among yourselves by false means, nor seek to gain access thereby to the judges, so that you may swallow up a part of the property of [other] people wrongfully while you know.” — 2:188

The latter verse alludes to bribery. Robbery and theft are spoken of elsewhere as punishable crimes.2 Misappropriation is forbidden:

“Allah commands you to make over trusts to those worthy of them [i.e., to their owners].” — 4:58

Gambling is prohibited as being a false or dishonest means of acquiring property:

“They ask you [O Prophet] about intoxicants and games of chance. Say: In both of these is a great sin and some advantage for people, and their sin is greater than their advantage.” — 2:219

“Intoxicants and games of chance … are only an uncleanness, the devil’s work; so shun it that you may succeed.” — 5:90

Intoxicating liquors and gambling are mentioned together in both places, and one of the reasons for their prohibition is that they are an aid to creating mischief and enmity between members of the same society:

“The devil desires only to create enmity and hatred among you by means of intoxicants and games of chance…” — 5:91

All kinds of lot­teries and card games etc., involving a stake, however small the sum in­volved, fall within the definition of games of chance, and are therefore prohibited by Islam. They not only promote habits of indolence and are thus a negation of honest labour, but also reduce some members of socie­ty to penury while others prosper at their expense. Usury, which is dealt with later on, is also prohibited for the same reason.

The Quran on the exercise of property rights

The Holy Quran gives full rights of disposal of property to its owner, whether male or female, but at the same time it requires the owner to be most careful in spending it. There are many injunctions of a general nature to that effect:

“And the [righteous] servants of the Beneficent [God] are they who … when they spend, are neither extravagant nor miserly, and the just mean is ever between these.” — 25: 63,67

“And do not make your hand to be chained to your neck, nor stretch it forth to its fullest extension, so that [afterwards] you sit down blamed, stripped off.” — 17:29

But it does not content itself with these general directions, and gives society or the state a right to interfere when money is being squandered by its owner:

“And do not make over your property, which Allah has made a means of sup­port for you, to the weak of understanding, and main­tain them out of it, and clothe them and give them a good education.” — 4:5

Here certain owners of property are mentioned who, on account of deficiency or unsoundness in intellect, are unable to manage their own property. The community or the state is enjoined not to give such people control of their property, which is here described as your property, because Allah has made it “a means of support for you”; and the rule is laid down that these owners of property should be maintained out of the profits of the property, the management being clearly in other hands.

Thus wealth, though possessed by individuals, is recognized as a national asset, and a check is placed upon the rights of the individual if money in his posses­sion is being wasted. The Quran requires that persons who, on account of weakness of intellect, mismanage their property and squander their wealth should be deprived of control of their property and maintained out of its pro­fits, the control being handed over to some person who is called a walī or guardian in 2:282.

Restrictions on disposal of property

Hadith lays great stress on preventing wealth from being wasted. Bukhari says the following in the heading of one of his chapters:

“There is no char­ity unless a man has sufficient to give, and whoever spends in charity and he is himself in want or his family is in want or he has a debt to pay, it is more in the fitness of things that the debt should be paid than that he should spend in charity or free a slave or make a gift, and such a gift or charity shall be annulled, for he has no right to waste the wealth of the people; and the Prophet, may peace and the blessings of Allah be upon him, has said, ‘Whoever takes the wealth of the people that he may waste it, Allah will destroy him, unless he is a man well-known for his patience so that he prefers needs of others over his own, though poverty may afflict him’, as Abu Bakr did when he gave all his wealth and likewise the Anṣār [helpers at Madinah] gave preference to the needs of the Muhājirs [emigrants from Makkah to Madinah] over their own.” 3

Here, the individual property of a man is called the wealth of the people, and a man is prohibited from making even charitable gifts when he does not have sufficient to support those dependent on him. According to a hadith, the Holy Prophet is reported to have said:

“Allah hates three things in you: useless talk, and wasting of wealth, and asking or begging frequently.” 4

This hadith, repeated frequently, forms the basis of restrictions which may rightly be laid on owners of property for their benefit. The State is, therefore, entitled to make laws for the benefit of owners of property, plac­ing restrictions on them as to the disposal of that property.

Guardian of minor

A guardian is also appointed to deal with the property of minors. The Quranic injunction on this point is as follows:

“And test the orphans until they reach the age of marriage. Then if you find in them maturity of intellect, make over to them their property, and do not consume it extra­vagantly and hastily against their growing up. And whoever is rich, let him abstain, and whoever is poor let him consume reasonably. And when you make over to them their property, call witnesses in their presence. And Allah is enough as a Reckoner.” — 4:6

A minor is thus not allowed to manage his own property which must be made over to a guardian. If the guardian is rich, he is required to do the work of guardianship honorar­ily, and if he is poor, his wages would be a charge on the property. The age of majority, according to Abu Hanifah, is eighteen years in the case of males and seventeen in the case of females, but accord­ing to Shafi‘i and Ahmad, it is fifteen in both cases.5

Honest dealing in business transactions

Subject to certain restrictions, a property owner, whether a male or a female, has the right to sell or barter it. The Holy Quran lays stress on honest and straight dealing in the very earliest revelation:

“Woe to the cheaters, who, when they take the measure [of their dues] from people, take it fully, but when they measure out to others or weigh out for them, they give less than is due!” — 83:1–3

“And give full measure when you measure out, and weigh with a true balance. This is fair and better in the end.” —17:35

“Give full measure and do not diminish. And weigh with a true balance. And do not wrong people of their dues, nor act corruptly in the earth, mak­ing mischief.” — 26:181–183

Hadith also lays stress on honest dealing, so much so that if there is any defect in a thing it must be pointed out to the intending buyer.6 The Holy Prophet himself is reported to have written to Adda ibn Khalid as follows:

“This is the writing by which Muhammad, the Messenger of Allah, has made a purchase from Adda ibn Khalid, the barter of a Mus­lim with a Muslim, there is no defect in it nor any deception nor an evil.” 7

He is also reported to have said:

“If the two parties speak the truth and make it manifest, their transaction shall be blessed, and if they conceal and tell a lie, the blessing of their transaction shall be obli­terated.” 8

Honesty and bona fides in matters of sale are stressed in a large number of reports in Hadith.

General directions relating to sale transactions

There are many other details that are met with in Hadith. A few of these are briefly noted here, which are of a general nature. Men and women are expressly mentioned as selling to and buying from one another, so that there is not the least sex disqualification in this respect.9 While a transaction is being carried on with someone, another should not intervene, but auction is allowed.10 The withholding of food-stuffs so that they may become expensive is prohibited,11 and so is the inflation of prices in general. Imaginary sales, when there are no goods to deliver, are prohibited;12 nor should one sell what one does not possess.13 The sale of land is not favoured, and it is recommended that a person should not sell his land or house unless he intends to purchase other land or another house with the money.14

Mortgage

Mortgage of property, i.e., giving it as security for debt, is also allowed. The Holy Quran expressly allows the giving or taking of a security, possession of which is taken by the mortgagee (2:283); and though this case is mentioned in connection with a journey, the words have been taken by all commentators as conveying a general permission, and reliable reports in Hadith corroborate this conclusion. It is related that the Holy Prophet himself left his shield as security with a Jew when borrowing some barley from him.15 When a horse was given as a secu­rity, the mortgagee was allowed to use it for riding as a compensation for feeding; similarly a milch-animal’s milk was allowed to the mort­gagee when he fed the animal.16 Hence it is evident that when agricultural land or a house is mortgaged with possession, the mortgagee can derive benefit from it when he pays land revenue or house tax, or spends money on the upkeep of the property.

Bequest

Subject to certain limitations, an owner of property is also allowed to bequeath his property by making a will. This is discussed in the next section entitled Inheritance, under the heading Bequest.

Gift (hibah)

An owner of property has also the right to dispose of his property by gift. The giving and accepting of gifts is recommended very strong­ly, and even the smallest gift is not to be despised.17 A gift is allowed in favour of a son, but it is recommended that similar gifts should be made in favour of other sons.18 The husband can make a gift to his wife, and the wife to her husband or to other people.19 Gifts from, and in favour of, non-Muslims are allowed.20 A gift may also be compensated.21 The jurists allow a gift for a consideration, and also a gift made on the condition that the recipient shall give the donor some determinate thing in return for the gift. The gift transaction is complete when the recipient has accepted it and taken possession of the gift. It is not allowed to a person to revoke the gift when it has been accepted by the recipient.22

While a will is allowed only to the extent of one-third of the property, no such limitation exists on gifts because in this case the owner divests himself of all rights in the property immediately, while in the case of a will, not the owner but the heirs are deprived.

Trusts (waqf)

Subject to certain conditions, an owner of property has a right to dedicate his property to a particular purpose. A trust, like a gift, takes effect immediately, and it differs from both a gift and a will inasmuch as the property which is dedicated re­mains untouched, not being the property of a particular person, and it is only the income drawn from it that is spent on the particular objects specified in the trust deed. Many cases of creating trusts are reported in Hadith. A man created a trust the income from which was to be spent on his poor relatives, and this was done under the Holy Prophet’s direc­tion.23 From this it is evident that a man can create a trust for the benefit of his own relatives. It is made clear in another hadith that a man’s son or his wife falls within the definition of his relatives.24 The man who creates a trust is allowed to draw benefit from it, for he himself may be its manager as well as anybody else, even though this may not be stated in the trust deed.25 Another hadith states that Umar created a trust in accordance with the directions of the Holy Prophet in favour of the poor as well as his rich relatives and guests, and there are other instances on record in which a trust was created for the benefit of the poor as well as near relatives.26 The person who creates the trust may also include himself among its beneficiaries.27

Section 2: Inheritance

Reform introduced by Islam

The reform introduced by Islam into the rules relating to inheri­tance is twofold: it makes the female a co-sharer with the male, and divides the property of the deceased person among the heirs on a democratic basis, instead of handing it all over to the eldest son, as is done by the law of primogeniture. The Arabs had a very strong tradition that he alone could inherit who smites with the spear, and therefore they did not give any portion of inheritance to such of the heirs as were not capable of meet­ing the enemy and fighting in battles.28 Owing to this tradition, not only were all females — daughters, widows and mothers — excluded, but even male minors had no right to inheritance. A woman, in fact, was looked upon as part of the property of the deceased,29 and therefore her right to property by inheritance was out of the question. Even in the Jewish law she had no better posi­tion: “There could have been no question in those days of a widow in­heriting from her husband, since she was regarded as part of the property which went over to the heirs. … Nor could there have been a question about daughters inheriting from their father, since daughters were given in mar­riage either by their father, or by their brothers or other relatives after the father’s death, thus becoming the property of the family into which they married”.30

At a time when a defensive war against the whole of Arabia was being carried on by a handful of Muslims, Islam declared the prevailing law of inheritance in Arabia, which gave the whole of the property to those members of the family who bore arms, to be unjust, and it gave a new law which put widows and orphans on a level of equality with those who fought for the defence of the tribe and the country. When the change was first introduced, some of the Companions thought it very hard and complained to the Holy Prophet, saying that they were required to make over half the property to a daugh­ter who did not ride on horseback or fight with the enemy.31 The general principle of inheritance is first laid down in the Holy Quran in the following words:

“For men is a share of what the parents and the near relatives leave, and for women a share of what the parents and the near relatives leave, whether it is little or much — an appointed share.” — 4:7

Inheritance law as contained in the Quran

The law of inheritance is then stated at length in 4:11–12 and 4:176. It may be noted that, as repeated in 4:11–12, in all cases the payment of bequests and debts takes precedence over the shares of the heirs. The heirs take the remainder, as follows.

In 4:11, children are mentioned first:

“Allah enjoins you concerning your children: for the male is the equal of the portion of two females; but if there are more than two females, two-thirds of what the deceased leaves is theirs, and if there is one, for her is the half.”

In their case, only a broad principle is laid down — the male shall have double the share of the female. Thus, all sons would be equal sharers, and so would all daughters, a son however having double the share of a daugh­ter.

Then is covered the case when daughters are the sole children. If there is only one daugh­ter, she takes half the property; if there are two or more daughters, they take two-thirds of the whole. The residue goes to the nearest male mem­bers, according to a hadith.32 Note that the words in the Quran here literally mean “more than two” but these include two as the other case mentioned is that of only one daughter. Compare 4:176, where two sisters are mentioned but they include more than two.

There is apparently inequality of treatment of the two sexes here. The reason is that man is generally recognized as the bread-winner of the family, and that is the position assigned to him in the Quran. In view of his greater responsibilities, he is entitled to a greater share, and therefore the Quran has assigned to him double the share of the female. Keeping this in view, there is real justice and real equality beneath this apparent inequality.

After children, are mentioned parents and husband or wife:

“And as for his parents, for each of them is the sixth of what he leaves, if he has a child; but if he has no child and [only] his two parents inherit him, for his mother is the third; but if he has brothers, for his mother is the sixth, after [payment of] a bequest he may have bequeathed or a debt. … And yours is half of what your wives leave if they have no child; but if they have a child, your share is a fourth of what they leave after [payment of] any bequest they may have bequeathed or a debt; and theirs is the fourth of what you leave if you have no child, but if you have a child, their share is the eighth of what you leave after [payment of] a bequest you may have bequeathed or a debt. …” — 4:11–12

If children are the only heirs, the whole property will be divided among them as explained earlier. But if there are parents or husband or wife, then evidently it is the residue which is divided among the sons and daughters, because the shares of the others are fixed: one-sixth in the case of each parent and one-fourth or one-eighth in the case of the husband or wife respectively.

In the case where the deceased leaves no children, the shares of the parents and the husband or wife are stated in the above passage. The shares of brothers and sisters of the deceased in this case are specified further on in 4:12 as follows:

“…And if a man or a woman, having no children, leaves pro­perty to be inherited and he [or she] has a brother or a sister, then for each of them is the sixth; but if they are more than that, they shall be sharers in the third after [pay­ment of] a bequest that may have been bequeathed or a debt not injuring [others].” — 4:12

If the deceased leaves neither children nor parents, then after the fixed share of the husband and wife has been taken out, bro­thers and sisters inherit the residual as the children would have done, which is what is mentioned in 4:176.

Briefly, the inheritance law as laid down in the Quran is this:

1. After the payment of debts and execution of the will, if any, the shares of the parents and husband or wife shall be first taken out. (The shares depend on whether or not there are children, and for parents also on whether there are siblings if there are no children.)

2. After that the rest of the property shall go to the children, the division among them being as mentioned above.

3. If there are no children and there are brothers and sisters, one-sixth if there is only one brother or sister, and one-third if there are more than one, shall go to them. (As the mother’s share is specified if there are no children, the father receives the remainder.)

4. If the deceased leaves neither children nor parents, the whole of the property, after the husband’s or the wife’s share has been taken out, shall go to brothers and sisters.

5. If there is a single female, daughter or sister, she shall take one-half of the property, a single brother following the same rule, and if there are two or more daughters or sisters they shall take two-thirds, the residue going to the nearest male relative according to Hadith.

6. If a person entitled to in­heritance is dead, any living offspring of that person shall take his place; if the father or the mother is dead, the grand­father or grandmother, if alive, shall take his or her place.

7. All brothers and sisters, whether uterine or consanguine or full, shall be treated equally; if there are no brothers or sisters, the nearest relatives after them, such as father’s brothers or father’s sisters, shall take their place.

Bequests

The legality of a bequest is clearly admitted in both the verses dealing with the law of inheritance. The property left is to be divided “after payment of a bequest … or a debt” (4:11 and 4:12). The making of a will (waṣiyyah) is specially recommended and the Holy Quran speaks of it as a duty incumbent upon a Muslim when he leaves sufficient property for his heirs:

“It is prescribed for you, when death approaches one of you, if he leaves behind wealth for parents and near relatives, to make a bequest in a kindly manner;33 it is incumbent upon the dutiful.” — 2:180

And the Holy Prophet is reported to have said:

“It is not right for a Muslim, who has property to bequeath, that he should pass two nights without having a written will with him.” 34

There is also men­tion of a bequest in a verse which was decidedly revealed later than 4:11–12:

“O you who believe, call to witness between you, when death draws near to one of you, at the time of making the will, two just persons from among you…” — 5:106

All these verses afford clear proof that a person can make a will with regard to his property.

There are, however, reliable reports in Hadith which place a certain limitation upon the right to make a bequest and, in fact, if no limitations were placed, the injunctions contained in 4:11–12 would be nullified, for there would be no property to be divided among the legal heirs. Sa‘d ibn Abi Waqas, a well-known Companion of the Holy Prophet, reported:

“I fell ill in the year in which Makkah was conquered, being almost on the brink of death when the Prophet paid me a visit. I said to him: O Messenger of Allah! I possess much wealth and my only heir is a single daughter; may I therefore make a will with regard to the whole of my property? The Prophet said: No. I then enquired about two-thirds of it, and he again said: No. I then asked him, if I may give away one-third of my property by will, and he ap­proved of one-third, adding: A bequest of one-third is much, for if you leave your heirs rich, it is better than that you should leave them poor, begging of other people, and whatever you spend to seek the pleasure of Allah you are rewarded for it, even for the morsel of food you put into your wife’s mouth.” 35

Such reports make it clear that the will spoken of on various occasions in the Quran is a charitable bequest, and not a will for the heirs, and that this bequest was to be limit­ed to one-third of the property, so that the heirs might not be deprived of their share of in­heritance, the well-being of the heirs being as good a consideration with the law-giver as charity.

It may also be added that, according to another Hadith report, a bequest is not allowed in favour of an heir: “There is no bequest for an heir”.36 To this are added in some reports the words: “unless the heirs wish it”.37 Thus while generally a will can be made only for charitable objects, and not for heirs, it is permissible to make a will in favour of heirs, if they wish it; so that if they have no objection, any arrangement may be made for the disposal of the property by will. Hence if the heirs agree, a man may either divide the whole property by will, or he may leave the property undivided, fixing the shares of the heirs in the income.

Husband’s bequest for maintenance of widow38

In connection with bequests it is stated in the Holy Quran:

“And those of you who die and leave wives behind, should make a bequest in favour of their wives of main­tenance for a year without turning them out. Then if they themselves go away, there is no blame on you for what they do of lawful deeds con­cerning themselves.” — 2:240

There is nothing to show that this verse is abrogated by any other verse of the Quran. It simply speaks of a bequest on the part of the husband that the widow should be given an additional benefit, a year’s residence and maintenance. The latter portion of the verse plainly says that if the widow of her own accord leaves the house, she is not entitled to any further concession, and there is no blame on the heirs of the deceased husband for what the widow does of lawful deeds, i.e., if she remarries after her waiting period of four months and ten days is over. As regards the share of the wife’s inheritance spoken of in 4:12, the fourth or eighth part of the property of the deceased husband is hers in addition to what she obtains under this verse, and 4:12 plainly says that anything which is to be paid under a will shall have precedence of the division of property into shares under that verse.

Section 3: Debts

Leniency towards debtors recommended

The writing down of debts is an ordinance of the Holy Quran, given in detail in 2:282. That verse also contains the statement:

“…and let him who owes the debt dictate…”

The Quran also teaches that debtors should be dealt with most leniently:

“And if [the debtor] is in difficulty, let there be postpone­ment till [he is in] ease. And that you forgo it as charity is better for you, if only you knew.” — 2:280

These two regulations, i.e., the writing down of debts according to the dic­tation of the debtor in the presence of witnesses and lenient dealing with those in straitened circumstances, are the basis of Isla­mic regulations on debts and are supplemented by a large variety of detailed directions and recommendations contain­ed in Hadith. The concern of the Holy Prophet for debtors is reflected in his sayings on this point, of which only a few are as follows:

“May Allah have mercy on one who is generous when he sells and when he buys and when he demands payment of debt.” 39

“Allah will give shelter to His servant who gives respite to one in financial difficulty or remits to a debtor.” 40

“There is no believer but I am nearest to him in this world and the Hereafter … so any believer who leaves behind him property, his relatives shall in­herit whoever they may be, but if he leaves a debt, or a family for whom there is none to care, I am his guardian (maulā).” 41

“I am nearer to the believers than themselves, so whoever of the be­lievers dies and leaves a debt, its payment is on me, and whoever leaves property, it is for his heirs.” 42

These Hadith reports show that the debts of a debtor who is in fi­nan­cial difficulty and unable to pay must either be remitted or paid by the state.

Insistence laid on payment of debts

While the lender is advised in numerous Hadith reports to be lenient and not to exert undue pressure, and to remit some or even the whole of a debt if the debtor is in financial difficulty, the debtor is also told to repay the debt in a goodly and liberal manner, and the Holy Pro­phet is reported to have said: “Among the best of you are those who are good in payment of debt”.43

The rich, especially, are told not to postpone payment of debt and postpone­ment in their case is called injustice.44 The one who contracts a debt intending not to pay it back is condemned.45 The report has already been quoted which shows that the pay­ment of debt has preference over spending in charity (see page here). In the case of an inheritance, the heirs do not take their shares until all debts have been paid;46 and when there is a will, the debts must be paid before its execution.47

Warning against indebtedness

Though the necessity of contracting debts at times is recognized, and the Holy Prophet himself is reported to have done so on occasions, yet he, at the same time, gave warnings against being in a state of indebtedness. It is related in a hadith that:

“…he [the Holy Prophet] used to pray very frequently: O Allah! I seek refuge from faults and debts. A man said to him, O Messenger of Allah, it is very frequently that you pray against being in debt; and he replied: A person, when he is in debt, speaks and tells lies and makes promises and fails to fulfil them.” 48

According to another hadith, the Holy Prophet often prayed:

“O Allah! I seek Your refuge from anxiety and grief, and from lack of strength and indolence, and from miserliness and cowardice, and from being over­come by debt and the oppression of people.” 49

Usury prohibited

It would be seen from what has been stated above that helping those in distress forms the basic outlook of Islam on human society. The pro­hibition of usury rests on the same basis. Even the earlier revelation at Makkah denounced usury, yet without prohi­bi­ting it:

“And whatever you lay out at usury, so that it may inc­rease through the property of [other] people, it does not inc­rease with Allah; and whatever you give in charity, desiring Allah’s pleasure — these will get manifold.” — 30:39

Prohibi­tion came later, and is contained in the following ver­ses which are among the latest revelations:

“Those who swallow usury (ribā) cannot arise except as he arises whom the devil prostrates by his touch. That is because they say: Trading is only like usury. And Allah has allowed trading and forbidden usury. To whomsoever then the exhortation has come from his Lord, and he refrains, he shall have what has already passed. … Allah will blot out usury, and He causes charity to prosper. And Allah does not love any ungrateful sinner.” — 2:275–276

“O you who believe, keep your duty to Allah and relin­quish what remains due from usury, if you are believers. But if you do not, then be apprised of war from Allah and His Messenger; and if you repent, then you shall have your capital. Wrong not, and you shall not be wronged.” — 2:278–279

To these may be added an earlier revelation:

“O you who believe, do not devour usury, doubling and redoubling, and keep your duty to Allah, that you may be success­ful.” — 3:130

Reasons for prohibition

The prohibition of usury is clearly associated in these Quranic verses with charity, for inasmuch as charity is the broad basis of human sympa­thy, usury annihilates all sympathetic affection. The usurer is compared to one whom the devil has prostrated by his touch, so that he is unable to rise. Such is, in fact, the usurer who would not hesitate to reduce the debtor to the last straits if thereby he might add a penny to his millions. He grows in selfishness until he is divested of all sympathetic feelings. Usury, moreover, promotes habits of idleness, since the usurer, instead of doing any hard work or manual labour, becomes like a parasite living on others.

In the great struggle that is going on between capital and labour, Islam sides with labour, and by its prohibition of usury tries to restore the balance between the two, not allowing capital to enthral labour. It is in reference to the honourable place that Islam gives to labour that the Quran says that “Allah has allowed trading and forbidden usury,” for while trading requires the use of labour and skill, usury does not. To help the distressed one who is in straits is the object of Islam and to reduce him to further straits is the aim of usury, and hence it is that usury is called “war” with Allah and His Messenger.

Hadith on usury

Hadith is equally emphatic against usury. It condemns not only the usurer but also the one who pays the usury,50 because he helps the cause of usury; and, according to one hadith, the witnesses and the scribe in a usurious transaction are equally blamable.51 Certain details are also added, describing the exchange of gold with gold and wheat with wheat, and dates with dates, and barley with barley, as ribā (usury), unless it is a hand to hand tran­saction.52 Another report makes it more clear. Usama reports that the Holy Prophet said: “There is no ribā unless there is postponement in pay­ment”.53 This shows that only those cases were treated as usury in which there was a barter only in name, the transaction being really usurious. Gold was given to a person on condition that he would pay a greater quantity of the same after some time, or likewise with wheat. This is clearly a usurious transaction though it was given the apparent form of a sale.

It may be added that a case in which the debtor, of his own free will, paid to the creditor a certain sum over and above the original debt, was not considered a case of ribā.54 This was a case in which the Holy Prophet himself was the debtor, and when he paid back the debt, he paid some­thing in addition.

Interest

The basis of the prohibition of usury is undoubtedly sympathetic feel­ings towards those in distress, but the word used is ribā (literally, an ‘excess’ or ‘addition’) which means ‘an addition over and above the principal sum lent’;55 and, therefore, though the word is considered by some modern writers to apply only to usurious transactions, it apparently in­cludes all kinds of interest, whether the rate be high or low, and whether the interest is or is not added to the principal sum, after fixed periods. In fact, it would be difficult to discriminate between interest and usury, and indeed all interest has a tendency to assume, ultimately, the form of usury, and becomes oppressive for the debtor, a fact which is borne out by the history of indebtedness in all countries.

It is sometimes argued that the prohibition of interest would be a serious drawback in the carrying on of trade and business trans­actions and also in the execution of impor­tant national projects. It is true that this prohibition, if taken in a broad sense, does not fit in the frame of the modern world conditions, but the high ideal which Islam places before itself is not unworkable, and the great Muslim nation of early days, spread over vast territories, the vanguard of the great nations of the world in the march of civilization, carried the Quranic injunction regarding ribā faithfully into practice. The material Western civilization has, however, given rise to conditions in which usury and interest seem to be unavoidable, and Muslims were told so many centuries before by the Holy Pro­phet Muhammad:

“A time will come over people when not a single person will remain who does not swallow down ribā and if there is anyone who refrains from it, still its vapour (or dust) will overtake him.” 56

Deposits in banks or Government treasuries

Such is the time in which we are living, and until a new civilization is evolved which is based on morality and the sympathy of man for man, some solution has to be sought for the great economic questions which confront the Muslim nations. In the forefront of all these questions is the modern banking system. Is this system in conformity with the Quranic law which prohibits ribā? Usury is undoubtedly universally condemned to­day, though it is still rampant in some places and has demoralized both the lenders and the borrowers, but the banking system with its legaliza­tion of interest is looked upon as a necessary condition of economic life and in the prevailing conditions this seems to be unavoidable. Not only Muslims living under non-Muslim governments cannot avoid it but even Muslim states seem to be driven to the necessity of employing it. Take only the question of trade, which is no longer a national but an international concern, and it will be found that it is entirely dependent on the banking system. Now the banking system, if it had to be evolved anew, could have been based on a co-operative system in which capital and labour should be sharers in profit as well as in loss; but, as it is, the modern banking system favours capitalism and the amassing of wealth instead of its distribution. For whatever its defects, it is there, and the dust of ribā overtakes the one who does not swallow it, as the hadith says.

Bank deposits

The question of deposits in banks, on which interest is payable, seems to be more or less like the question of trade, a necessity of modern world conditions, which cannot be avoided. The bank re­ceives the deposits not as a borrower but as a trustee, where money is safe and may be with­drawn in need. But at the same time it does not allow the money to lie idle, and draws some profit from it, the major portion of which again comes in the shape of interest. Out of this profit, the bank pays a certain amount to the depositors, the rate of which depends generally on the eco­nomic conditions prevailing in the country concerned, or in the world at large. It does not make over the entire profit either to the shareholders or to the depositors, but carries a certain amount to a reserve fund which it can fall back upon in less profitable years, or in case of loss. So far, therefore, as it is a part of the profits earned by the bank, there is nothing objectionable in it, but that profit itself being largely income from interest, the question of ribā comes in indirectly.

To be on the safe side, a Muslim depositor may spend the excess amount which he receives as interest on his deposit for a chari­table object.57 In fact, if the depositor deposits his money with the intent that he would not receive the interest for his personal use, and, on receiving the amount from the bank, he actually makes it over to some charitable institution, he has relin­quished the ribā, as commanded by the Holy Quran.

Co-operative banks

The co-operative banks are more in consonance with the spirit of the teachings of Islam, as the idea underlying them is the amelioration of the lot of the poor who are thus saved from the clutches of the usurious money­ lenders. There is, moreover, this difference between an ordinary bank and a co-operative bank, that the former is generally for the benefit of the rich and the capitalists, and the latter for that of the poor and the manual workers. In the co-operative bank, moreover, the shareholders are also the depo­sitors as well as the borrowers of money, and the interest paid to the bank is, more or less, in the nature of a contribution by which the borrower of money also ultimately benefits by receiving dividends.

Interest on business capital

Interest on the capital with which a business is run differs a little from ordinary debt. It is in fact a case in which capital and labour are sharers. Islam does not prohibit a partnership in which one person supplies the capital and the other labour. But it requires that both capital and labour shall be sharers in profit as well as in loss. The payment of interest at a fixed rate means that capital shall always have a profit, even though the business may be running at a loss. It is true that when the business is profitable, the rate of interest may be much less than the profit earned, but in all such uncertainties the viewpoint of Islam is that neither side should have undue advantage or be made to suffer undue loss. If the business is run at a profit, let capital have its due share of the profit, but if it is being run at a loss, let capital also share in the loss. This method is more advantageous for the general wel­fare of the community than the method of charging interest on capital, which promotes capitalism and is unjust to labour.

Section 4: Work and Labour

Islam places great emphasis on the necessity for hard work and the dig­nity of labour. The principle was laid down in the earliest revelations in unequivocal terms that no one who does not work shall hope to reap any fruit and that the worker should have his full reward:

“… man can have nothing but what he strives for, and his striving will soon be seen. Then he will be rewarded for it with the fullest reward.” — 53:39–41

“So whoever does good deeds and is a believer, there is no rejection of his effort, and We surely write it down for him.” — 21:94

Equal stress is laid in the Quran on faith and work, “those who believe and do good” being the ever-recurring description of the faithful.

The Holy Prophet himself was an indefatigable worker. While he passed half the night, and even two-thirds of it, praying to God, he was doing every kind of work in the day time. No work was too low for him. He would milk his own goats, patch his own clothes and mend his own shoes. In person he would dust his home and assist his wife in her household duties. In person he would do shopping, not only for his own household but also for his neighbours and friends. He worked like a labourer in the construction of the mosque. Again, when a ditch was being dug around Madinah to fortify it against a heavy attack, he was seen at work among the rank and file. He never despised any work, however humble, despite the dignity of his position as Pro­phet, as chief of the army and as ruler.

He thus demonstrated through his personal example that every kind of work dignified man, and that one’s calling, whether high or low, did not constitute the criterion of his status. “No one eats better food than that which he eats out of the work of his own hand”, he is reported to have said.58 In his other sayings he has made clear that every work was honourable in comparison with asking for charity. His Companions followed his example and the most honourable of them did not disdain even the work of a porter.

The relations between a worker and his employer were those of two contracting parties on terms of equality. The Holy Prophet laid down a gener­al law relating to contracts: “Muslims shall be bound by the conditions which they make”.59 The master and the servant were consi­dered two contracting parties, and the master was bound as much by the terms of the contract as the servant. This was made clear by the Holy Prophet:

“Allah says: There are three persons whose adversary in dispute I shall be on the Day of Resurrection — a person who makes a promise in My name and then acts unfaithfully, a person who sells a free person then devours his price, and a person who employs a servant and receives fully the labour due from him, then does not pay his remu­ne­ration.” 60

The employees of the State, its collectors and executive officers and judges, were all included in the category of servants. They were entitled to a remuneration but they could not accept any gift from the public. Umar was once appointed a collector by the Holy Pro­phet, and when offered a remuneration he said that he did not stand in need of it. The Holy Prophet, however, told him to accept it and then give it away in charity if he liked.61 The principle was thus laid down that every employee, every servant, every labourer was entitled to a remuneration.

Trading was one of the most honourable professions and the Holy Prophet had special words of praise for the truthful and hon­est merchant.62 People were taught to be generous in their deal­ings with one another, in buying and selling and demanding their dues.63 Hones­ty was to be the basic principle in all dealings.64

The cultivation of land and planting of trees was encouraged.65 It was also stated by the Holy Prophet that whoever cultivates land which is not the property of anyone has a better title to it.66 Those who had vast tracts of land, which they could not manage to cultivate for themselves, were advised to allow others to cultivate them free of charge: “If one of you gives it [i.e., culti­vable land] as a gift to his brother, it is better for him than that he takes it for a fixed payment.” 67

It was allowed that the owner of the land should give it to others to cultivate for a share of the produce or for a fixed sum.68 The ownership of land by individuals was thus recognized, as also their right to buy or sell it or to have it cultivated for them by others. A warning was at the same time given that a people who give themselves up entirely to agriculture, neglecting other lines of development, could not rise to a position of great glory.69

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Notes to Chapter 17

1. The Quran, 4:20.

2. The Quran, 5:33, 5:38.

3. Bukhari, book 24: ‘Zakāt’, ch. 18, ch. heading.

4. Ibid., ch. 53, h. 1477.

5. Hidayah, v. 2, p. 341 and p. 342.

6. Bukhari, book 34: ‘Sales and Trade’, ch. 19, h. 2079. Musnad of Ahmad ibn Hanbal, v. 3, p. 491.

7. Bukhari, book 34: ‘Sales and Trade’, ch. 19, ch. heading.

8. Ibid., ch. 19, h. 2079.

9. Ibid., ch. 67, h. 2155, h. 2156, and ch. heading.

10. Ibid., ch. 58–59, h. 2139–2141.

11. Muslim, book 22: ‘Musaqah’, ch. 26.

12. Bukhari, book 34: ‘Sales and Trade’, ch. 61, h. 2143.

13. Bukhari, book 34: ‘Sales and Trade’, ch. 54, h. 2131–2133. Musnad of Ahmad ibn Hanbal, v. 2, pp. 189, 190.

14. Musnad of Ahmad ibn Hanbal, v. 1, p. 190; v. 3, p. 467.

15. Bukhari, book 48: ‘Mortgage’, ch. 1, h. 2508, ch. 2, h. 2509, ch. 5, h. 2513.

16. Ibid., ch. 4, h. 2511, h. 2512.

17. Bukhari, book 51: ‘Gifts’, ch. 1, h. 2566.

18. Ibid., chs. 12–13, h. 2586–2587.

19. Ibid., chs. 14­–15, h. 2588–2593.

20. Ibid., chs. 28–29, h. 2615–2620.

21. Ibid., ch. 11, h. 2585.

22. Ibid., ch. 30, h. 2621–2623.

23. Bukhari, book 55: ‘Wills’, ch. 10, heading and h. 2752.

24. Ibid., ch. 11, h. 2753.

25. Ibid., ch. 12, ch. heading.

26. Ibid., ch. 29, h. 2773.

27. Ibid., ch. 33, h. 2778.

28. Ibn Jarir Tabari’s Commentary of the Quran, v. 4, p. 171.

29. See the Quran, 4:19.

30. The Jewish Encyclopaedia, Funk & Wagnells Co., 1904, p. 583.

31. Ibn Jarir Tabari’s Commentary of the Quran, v. 4, p. 171.

32. “Give the fixed portions (farā’iḍ) to those who are entitled to them, and what remains should go to the nearest male” — Bukhari, book 85: ‘Laws of Inheritance’, ch. 7, h. 6735.

33. Generally the construction of these words is supposed to be, “if he leaves behind wealth to make a bequest for parents and near relatives,” the import of the passage thus being that someone who leaves wealth should bequeath it to parents and near relatives. Owing to this interpre­tation the verse is looked upon as being abrogated by 4:11­­–12. But as already shown, both these verses expressly speak of the bequest and require the property to be divided only after payment of bequest or debt. The interpretation I have adopted makes it consis­tent with the other verses of the Quran.

34. Bukhari, book 55: ‘Wills’, ch. 1, h. 2738.

35. Bukhari, book 85: ‘Laws of Inheritance’, ch. 6, h. 6733; Muslim, book 25: ‘Wills’, ch. 1, h. 1628a (DS: h. 4209); Tirmidhi, book 30: ‘Wills’, ch. 1, h. 2116 (DS: book 28). According to another version, Sa‘d told the Holy Prophet: “I have bequeathed the whole of my property to be spent in the way of Allah”. Being asked what he had left for his children, he said: “They are in sufficiently good circumstances”. The Holy Prophet advised him to bequeathe one-tenth of his property, but he insisted on leaving still less for his heirs. So the Holy Prophet finally said: “Make a will of one-third of property and one-third is much”. See Mishkat, book 12: ‘Trading’, ch. 20, sec. 2, h. 2940 (v. 2, p. 68).

36. Abu Dawud, book 18: ‘Wills’, ch. 6, h. 2870 (DS: book 17). Tirmidhi, book 30: ‘Wills’, ch. 5, h. 2120, 2121 (DS: book 28). Ibn Majah, book 22: ‘Wills’, h. 2713, 2714 (DS: ch. 6).

37. Mishkat, book 12: ‘Trading’, ch. 20, sec. 2, h. 2941 (v. 2, p. 68).

38. Editor’s note: For completion of the subject of bequests, this has been added from the footnote to 2:240 in Maulana Muhammad Ali’s English translation and commentary of the Holy Quran.

39. Bukhari, book 34: ‘Sales and Trade’, ch. 16, h. 2076.

40. Musnad of Ahmad ibn Hanbal, v. 1, p. 73.

41. Bukhari, book 65: ‘Commentary on the Quran’, h. 4781 (under Surah 33, v. 6).

42. Bukhari, book 69: ‘Supporting the Family’, ch. 15, h. 5371.

43. Bukhari, book 40: ‘Wakālat’, chs. 5–6, h. 2305, h. 2306.

44. Bukhari, book 38: ‘Transferring Debt’, chs. 1–2, h. 2287–2288.

45. Musnad of Ahmad ibn Hanbal, v. 2, p. 417.

46. Ibid., v. 4, p. 136.

47. Ibid., v. 1, p. 79.

48. Bukhari, book 43: ‘Loans’, ch. 10, h. 2397.

49. Bukhari, book 56: ‘Jihād’, ch. 74, h. 2893.

50. Bukhari, book 34: ‘Sales and Trade’, ch. 25, h. 2086.

51. Ibid., ch. 24, ch. heading.

52. Ibid., ch. 54, h. 2134.

53. Ibid., ch. 79, h. 2178–2179.

54. Abu Dawud, book 23: ‘Commercial Transactions’ (Buyū‘), ch. 11, h. 3347 (DS: book 22).

55. Tāj al-‘Arūs and Lane’s Lexicon.

56. Abu Dawud, book 23: ‘Commercial Transactions’ (Buyū‘), ch. 3, h. 3331 (DS: book 22).

57. It was the founder of the Ahmadiyya movement, Hazrat Mirza Ghulam Ahmad, who first suggested this course. On account of his great anxiety for the propagation of Islam, he directed that the interest on bank deposits should be spent for the propagation of Islam. He particularly laid stress on the point that insistence on receiving the ribā was called a “war with Allah and His Messenger” (2:279), and that therefore the money so received should be spent on the struggle which was being carried on for the defence and propagation of Islam.

58. Bukhari, book 34: ‘Sales and Trade’, ch. 15, h. 2072.

59. Bukhari, book 37: ‘Hiring (or Employment)’, ch. 14, ch. heading.

60. Bukhari, book 34: ‘Sales and Trade’, ch. 106, h. 2227.

61. Bukhari, book 93: ‘Judgments’, ch. 17, h. 7163.

62. Tirmidhi, book 14: ‘Business’ (Buyū‘), ch. 4, h. 1209 (DS: book 12).

63. Bukhari, book 34: ‘Sales and Trade’, ch. 16, h. 2076.

64. Ibid., ch. 19, h. 2079.

65. Bukhari, book 41: ‘Agriculture’, ch. 1, h. 2320.

66. Ibid.,ch. 15, h. 2335.

67. Mishkat, book 12: ‘Trading’, ch. 13, sec. 1, h. 2846 (v. 2, p. 48).

68. Bukhari, book 41: ‘Agriculture’, ch. 8, h. 2328, ch. 11, h. 2331, and ch. 19, h. 2346–2347.

69. Ibid., ch. 2, h. 2321.