LOAN and interest: both are interesting~

Islam is the way of life. It provides guideline for all Muslims to be applied in life which comprises all aspect of life. Economics is one of the essential aspects in life and for sure Islam already provides the guideline for it. During Prophet Time, we can see that the management of the Economics system is really systematic, effective and efficient. This is because Rasulullah is the great leader and was guided by the Greatest One. During that time, the Muslims do not have any problem that what so-called economics problems. But why, right now, the common problems that are faced by all countries are Economics problems even though it is Muslims countries. One key factor: they do not follow the true Islamic Economics.

One of the problems that I really interested in is LOAN. For me, loan in conventional economics is very 'interesting'.. Why?? Because it contain interest where everybody seems to be interested in paying the interest. That is why i think conventional loan is 'interesting'. Nowadays, we are implementing he conventional economics systems in our systems, which is why we can see a lot of riba circulating in our system. Riba or Interest is also known as a service charge is totally prohibited in Islam. Allah said in His Book:

Al-Baqarah - The Cow (سورة البقرة) - Revealed in Madinah Verse 275 | (2:275)
الَّذِينَ يَأْكُلُونَ الرِّبَا لَا يَقُومُونَ إِلَّا كَمَا يَقُومُ الَّذِي يَتَخَبَّطُهُ الشَّيْطَانُ مِنَ الْمَسِّ ذَلِكَ بِأَنَّهُمْ قَالُوا إِنَّمَا الْبَيْعُ مِثْلُ الرِّبَا وَأَحَلَّ اللَّهُ الْبَيْعَ وَحَرَّمَ الرِّبَا فَمَنْ جَاءَهُ مَوْعِظَةٌ مِنْ رَبِّهِ فَانْتَهَى فَلَهُ مَا سَلَفَ وَأَمْرُهُ إِلَى اللَّهِ وَمَنْ عَادَ فَأُولَئِكَ أَصْحَابُ النَّارِ هُمْ فِيهَا خَالِدُونَ

Those who consume interest cannot stand [on the Day of Resurrection] except as one stands who is being beaten by Satan into insanity. That is because they say, Trade is [just] like interest. But Allah has permitted trade and has forbidden interest. So whoever has received an admonition from his Lord and desists may have what is past, and his affair rests with Allah . But whoever returns to [dealing in interest or usury] - those are the companions of the Fire; they will abide eternally therein.

Ali-Imran - The Family Of 'Imran (سورة آل عمران) - Revealed in Madinah Verse 130 | (3:130)
يَا أَيُّهَا الَّذِينَ آمَنُوا لَا تَأْكُلُوا الرِّبَا أَضْعَافًا مُضَاعَفَةً وَاتَّقُوا اللَّهَ لَعَلَّكُمْ تُفْلِحُونَ

O you who have believed, do not consume usury, doubled and multiplied, but fear Allah that you may be successful.

From these two verses, it is clearly shown that interest and riba is forbidden in any transaction and if we avoid it, we can gain a great success. No need to be doubt about it as Allah already makes the promise to give the success for those who follow His rule and prioritize the religion in his life. In these verses also, Allah already stated how we should manage the economics of our society which is avoiding interest in any form of activities. If we straightly follow His order, Ins-ya-Allah, all of the problems will be solved.

I give you the example why I said riba or interest will create more economics problem if we still implement it. In income inequality problems, the gap between the rich and the poor can be clearly seen. In the economy, the rich will hold the advantages as they hold the capital (money). So when they give the loan to the poor, they are guaranteed tor received the interest. For the poor, when they make a loan, they have to pay back the principle plus the interest, so this interest will reduce the amount of money that they have and this amount of interest also will increase the amount of money that the rich persons have. The inequality gap increased day by day and the problem will not be solved forever. This situation confirms that in conventional economics, the rich become richer and the poor become poorer.

In the other hand, if Islamic economics is practiced, there is no riba at all and one of the most important things is, Muslims give out loan as a charity not as a trading. If the rich give out the loan or just give sadaqah/zakat to the poor in order to help them, the money externally will decrease and the amount of money of the poor will increase so in the other hand the inequality gap will decrease and lastly the problem will be solved.

This is the one of the way that Allah showed in al-Quran how to manage the economy and the way that should be practiced. Economics and Islam have a very close relationship.

Salam..
I’m having interest to share my opinion regarding this above post. It had been discussed in my class regarding loan and riba interestingly. And the example that wanSabiha showed above was good and beneficial. Basically, when we say about loan, it will definitely points to banks as they are the places to get the ‘legal’ loans in term of worldly rules instead of loan sharks. Although Malaysia is being claimed as one of the Islamic country, but most of the banks are practising loans which contain riba, and I think, it is hard for someone to start a new Islamic bank which follows the guideline from Shariah that prohibits riba because our central bank is go along with conventional economy. It easily going to bankrupt as our central bank does not fully support this Islamic bank. So, in order to establish Islamic economic ( which is avoid riba, gharar and maysir ) in our country, we have to change the leader of the bank, that is BNM. And it requires a large number of students especially Islamic Economic students to start this revolution of bank. Let us show how effective Islamic economic ways compared to this current conventional economic way.
In this cotemporary economic situation, for anyone who want to buy car, house, building, either to borrow for a capital or for educational purpose, all of them will go to the banks. And as far as I know, all the banks in Malaysia ( correct me if I’m wrong because it’s just my knowledge ) are keep practicing interest or riba in their loans. So, the borrowers are in state of confusion as where can they get the money besides the banks. As a result, some of them just receive the loans which contain riba as they think it is permissible because it is emergency ( darurat ) situation. And my question is, is this permissible or not as there is no other place to get the loans? Thanks and salam.