What's so bad about Interest?
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) in memory of this http//free-minds.org/forum/index.php?topic=14716.0
Layth posted this story a good while back.
I Want the Earth Plus 5%
http//www.gold-eagle.com/editorials_99/hannigan092099.htmlChildren used to, when asked, "What do you want to be when you grow up?" say certain occupations like, "I want to be a fireman" etc.. etc... today studies have found most children answer the question with "I want to be rich!"
Generation Me.
http//www.generationme.org/Born to Buy
http//www.amazon.com/Born-Buy-Commercialized-Consumer-Culture/dp/068487055Xetc...
uhhh...what are you trying to say?
I would appreciate it if you would just say what you have to say.
If I'm wrong, I would honestly be very grateful if you point out my mistake and explain your point of view to me.
So yeah, what's your point? -
Banks do not make money from giving out loans. They make money by invetsing that money with other banks or institutions. They invets in bonds, real estate, currencies and commodities. Banks don't always make money. Many here are looking at it fro a laymna's point of view. In fact only 15% of bank deposits are available with a bank at any one time, the rest is invested. Just as bank make interest, banks also pay interest to depositors and provide various services to clients. The trick for banks is to make use of the deposits by inversting on them and making more money than the interests they pay these depositors. Plus banks must operate in regards to the over all economy and currency rates. its not as simple as many here think. When the intersts rates fall down, people would not deposit their moneys with banks but would rather invest it elsewhere. When it goes up they would rather deposit their money than invest it. Currency rates also plays a big role. Banks also have to compete with many other servises like bonds and deposits and reas estate. The money supply by the federal banks also affects banks as people would choose to invets with goverment bonds. So banks operate according to market forces and are never guaranteed profits.
Banks inverstments carries lots of risks for banks such as market fluctauations and foreign exchange rate fluctuations and also political turmoils. Banking is a business like any other.
Riba is about individulas who lend people money from their own sources and then demand interests from them. They are not using people's money and paying them interests also. Its a one way street. Its rich people getting richer.
When you deposit 100 dollars with a bank they will pay you, lets say, 110 dollars in one year time. However they will take that 100 dollars and either lend it to a business man who has to pay them more than 10 dollars a year or else they would be making a loss. If the business man does not want to take a loan they will have to invest that money somewhere and make more than 10 dollars on that 100 dollars. The business man might feel the economy is doing bad so why should i take a loan and start a business when i can just put my 100 dollars with the bank and make 10 dollars a year. So banks have to balance those tow forces becuae either way they have to pay you your 10 dollars. Banks also have to provide services like credit cards and mortgage payments that carries risks of default.
Riba is when you
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I would appreciate it if you would just say what you have to say.
If I'm wrong, I would honestly be very grateful if you point out my mistake and explain your point of view to me.
So yeah, what's your point?Thank you for asking, I'll do my best insha_Allah...
Making an agreement which obliges you to pay interest is no different than any other agreement or contract. Two people can agree on whatever they want, as long as they both agree, it's fair.
This thought process is not entirely true. People do not agree to this but rather have very little choice in it. As an example, the price of housing has made it so the greater amount of the population have to get a loan to be able to afford a house. In order to get the loan, then they have to agree with the terms of the loan. Very little choice is given in practice. To further the example, when one looks at their amortization schedule, I'm sure if given the choice, most would choose some other type of schedule. Not even taking into account such loans as "interest only" loans etc... even on most conventional loans the amotization schedule has you paying the greater amount of interest first. So in short if your mortgage is $10 per month... $9.50 of that goes towards paying off the interest while $.50 is going to towards the actual amount you borrowed.
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That story is a very good piece, sums up my thoughts on usury.
Usury is forbidden, no additional details are given, period.I agree and still thank Layth for posting that story! That story was a great primer for me to start to understand more about the money system. I thought the way it was written made it easy to understand for economics novices like myself. From that I started to look into it and the idea of central banks etc etc. I feel that it also helps in understanding much of the "why" questions in our global news aswell.
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Thank you for asking, I'll do my best insha_Allah...
This thought process is not entirely true. People do not agree to this but rather have very little choice in it. As an example, the price of housing has made it so the greater amount of the population have to get a loan to be able to afford a house. In order to get the loan, then they have to agree with the terms of the loan. Very little choice is given in practice. To further the example, when one looks at their amortization schedule, I'm sure if given the choice, most would choose some other type of schedule. Not even taking into account such loans as "interest only" loans etc... even on most conventional loans the amotization schedule has you paying the greater amount of interest first. So in short if your mortgage is $10 per month... $9.50 of that goes towards paying off the interest while $.50 is going to towards the actual amount you borrowed.Yes, I agree with you that our system is corrupt.
What the banks are doing is wrong because people don't have any choice, and they're exploiting that.
I think that you can make as much money as you want as long as those you are taking money from are capable of giving it to you, we shouldn't take advantage of people's ignorance or stupidity or poverty.
But what if the circumstances are not similar to your example?
Like if my friend comes to me and says, "I want to buy a new TV and I need to borrow $500."
I say, "okay, I'll lend you the money, and you can pay me back for the favor by giving me 10% interest."
He says, "Alright, I agree."Here, both sides know the terms and conditions and they both agree, and my friend can avoid buying the TV if he wants.
Is there something wrong with what I did here? -
Yes, I agree with you that our system is corrupt.
What the banks are doing is wrong because people don't have any choice, and they're exploiting that.
I think that you can make as much money as you want as long as those you are taking money from are capable of giving it to you, we shouldn't take advantage of people's ignorance or stupidity or poverty.
But what if the circumstances are not similar to your example?
Like if my friend comes to me and says, "I want to buy a new TV and I need to borrow $500."
I say, "okay, I'll lend you the money, and you can pay me back for the favor by giving me 10% interest."
He says, "Alright, I agree."Here, both sides know the terms and conditions and they both agree, and my friend can avoid buying the TV if he wants.
Is there something wrong with what I did here?The natural course of events doesn't have to include a TV, but people have to buy houses, transport, etc, for society to get anywhere.
You have to differentiate between rent and interest here. When renting a physical object such as a car, the car can be returned at any time, when you decide you don't need to pay for that service any longer. When taking out a loan, you cannot just return the original sum and say "here is the money I rented, thanks", you will either be charged a horrendous amount or just denied. Also, with rent, the object is always there, with money, you are expected to spend it, meaning it has to disappear and reappear + 5% )
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The posts by burhan and M_Mehdi very well shows what's so bad about interest (please follow those links).
You can see living examples in poor people and countries who are getting deeper and deeper in Debt caused by the interest.
I see in the news that even businessmen commit suicide because of the ever deepening debt caused by the interest.
Here's a living example (Jamaica) of what's so bad about interest
http//video.google.com/videoplay?docid=-5277094596195828118&q=jamaica+duration%3Along&total=173&start=0&num=10&so=0&type=search&plindex=0
The Quran shows truly that profit and interest is not the same
2275 Those who consume usury do not rise except as one being influenced by the devil's touch. That is because they have said "Trade is the same as usury." While God has made trade lawful, and He has forbidden usury. Whoever has received understanding from His Lord and ceases, then he will be forgiven for what was before this and his case will be with God. But whoever returns, then they are the people of the Fire, in it they will abide eternally.It shows the attribute of interest
3130 O you who believe, do not consume usury, compounding over and over; and revere God that you may succeed.That's why
3039 And any usury you have taken to grow from the people's money, it will not grow with God. And any contribution that you have placed seeking His presence, then those will be multiplied.Let's consider these two business
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When you invest in another trade/business (for profit) you might
-Get profit (don't know how much, don't know when)
-No profit
-Loose your investment -
When you loan for another trade/business or even people/countries
-You must get "your profit"/"interest" at fixed rate no matter what happens.
To me, number 2 is not fair business.
The question about mutual agreement is not the point here, two people agreeing to do a bad/unfair thing doesn't make it right. For example, two people agree to make adultery. A person agrees to be eaten and slaughtered by another person (in Germany, long ago) doesn't make it right.
Therefore, to me, interest is like a fixed profit. If the business/person encountered loss or can't really pay the interest then it will get deeper "compounding over and over" and he must be desperate to cover it all up - no matter what happens next. The deeper it gets, the deeper it enslaves.
May God Guide.
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I do not totally agree here. Insurance is for when the borrower loses their job or be sick (loses means of getting money), and it is voluntary. Yet, without insurance there are other ways the bank writes off their loans, and that's through bankruptcy and voluntary insolvency, or even debt management when the installments are high compared to income. Some debt management companies succeed in freezing the interest and the borrower pays what they can, or be directed to insolvency or bankruptcy.
Samia
You must work for Fox news ) ..only kidding I know you are trying look at things objectively
This is a complex area. The bottom line is do the bank owners ever loose money, the answer is no.
Sometimes by God's will their schemes back fire and they do suffer but the norm is that they won't.
Banks consistently show record profits, and are probably reporting written off debts (which are overly inflated) to reduce their tax liability.To be fair it's not just the banks but alot of corporations, organisations, governments operate in this way, and it's a shame that muslim only associate riba with banks, when really I would say riba is "unethical trade".
These people never mitigate their losses but compound them.
Why would a banker lendout money at 6%-10% when it can invest it at least 100% profit in other schemes?
Even our local corner shop operates on 100% mark up. eg. Can of pop bought for 20p and sold for 45p.There is only one reason .... which the quran identifies .... and that is to screw the borrower for 100% when he can't pay.
Until recently in the UK the banks charged hefty penalties if you repaid your loan early ... thats right EARLY.
I think all these practices come under those verses.
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Did anyone notice this part... "Whoever has received understanding from His Lord...".? Perhaps this is the problem because we see so much confusion about this "riba" understood as "interest/usury". Can anyone guarantee that he/she has received understanding from His Lord?
Anwar Azim
The Quran shows truly that profit and interest is not the same
2275 Those who consume usury do not rise except as one being influenced by the devil's touch. That is because they have said "Trade is the same as usury." While God has made trade lawful, and He has forbidden usury. Whoever has received understanding from His Lord and ceases, then he will be forgiven for what was before this and his case will be with God. But whoever returns, then they are the people of the Fire, in it they will abide eternally. -
Did anyone notice this part... "Whoever has received understanding from His Lord...".? Perhaps this is the problem because we see so much confusion about this "riba" understood as "interest/usury". Can anyone guarantee that he/she has received understanding from His Lord?
Anwar Azim
Dear yfm123,
That's an interesting question that I used to wonder a lot.
As for me, How can you know if an understanding is from God or not
- If it's consistent with facts/nature/reality then it's "true".
- If it's consistent with facts/nature/reality then it's consistent with the laws of God.
- God created all things laws, enforced them with His power so they happen, even a leaf cannot move without His power, we cannot understand truth/His laws without His power either. If we do see and verified a law to be true, then whose power made/allowed us to understand?
For example, Newton discovered God's law of "F=ma" in physics, he didn't create the law, he's seeing/tested that it's consistent with nature - truth, so it can only be the law that was set by the Creator. Whose power made/allowed Newton to understand that true law? I see this as only God's power can make anything happen.
In this case, I'm sure that many here bear witness that God exists and want to do good to serve God. Then, as sister Samia pointed out about fair trade, I showed in my previous post how unjust was "interest". We can see that it's true that interest is a fixed profit for one group of people whatever happens to the other group who are together putting valuables/money into the same venture, therefore unfair business. If it is unfair trade then it's not good then I'll avoid it - whatever "riba" can mean in the dictionary - I see this use consistent and true.
Same for the Quran, I will not believe an interpretation because the dictionary says so, I will believe understandings from it only when I see it leads to what is true/good/correct/consistent. This makes sense for me as for the beings in 722.
From my little knowledge, I see that those translated verses fit in well and consistent in explaining this unlawful business/trade model called "interest" (as in the example of comparing it to "profit" in my last post).
You don't need the "arabic" dictionary or deep "classical arabic" knowledge to know what's good and what's bad - what's fair and unfair. The topic is "What's so bad about Interest?" so we're showing what's so bad about it by facts/reason.
(Thanks yfm123, by writing this reply, I get a chance to revise things that I forgot some parts and learn a lot more.)
Glory be to God.
May God Guide.
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Peace "Burhan",
You said amongst other thingsBut firstly, don't lend money unless you are willing to make a loss.
In trade (business) you can make profit as well as loss. Infact that is the definition of business.JK- Ok i guess this means renting out a car or an apartment, where the renter obviously protects himself against any losses, is riba and forbidden too? I explained already that this concpt is insane. In todays world there are many, MANY customers. You cant run after everyone of them and many would exploit you would you not protect yourself through contracts. At the same time any of your clients can go and prove that he is bankupt and if proven through well established scientific means appllied in courts then he wont need to pay anymore. GOD Bless!
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Peace "Burhan",
You said amongst other thingsJK- Ok i guess this means renting out a car or an apartment, where the renter obviously protects himself against any losses, is riba and forbidden too? I explained already that this concpt is insane. In todays world there are many, MANY customers. You cant run after everyone of them and many would exploit you would you not protect yourself through contracts. At the same time any of your clients can go and prove that he is bankupt and if proven through well established scientific means appllied in courts then he wont need to pay anymore. GOD Bless!
Renting is very different, renting is a physical transfer for a quantity - renting is trade. Usury is money for money, even if the money is used to buy something. Renting ties the value to a physical object which is the entire point of trade. Without a physical object, the value is artificial. Money for money is artificial, money for a physical object is not so.
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Wakas
Bro, when I become your khalifa and start issuing fatwas I'll start providing explicit quranic evidence until that day it's up to the people to verify what I'm saying. I simply provide another viewpoint for you to consider and matchup against your own quranic evidences. Those who know me will take it on good faith that I will not say anything unless I had studied it from the quran. I'm not forcing my views on anyone. Besides, the whole quran is my evidence not individual verses. Anyway you the man with the study tools. ;D
Mr Johnny,
It depends on how that insurance is implemented. Like I said it gets complicated, hence the "those who have received understanding" part. So if you understand that your business practices are riba then you must stop.
As far as chasing people is concerned, the muslim is always the first to give the benefit of doubt. He is more interested in making profit in the next life than this one. Your fearful appproach to life goes against the spirit of the muslim.
In western societies a lot of people exploit the welfare benefit system. But we don't abolish it. Because even if it benefits one person then it is worth it. I'd rather expend my energy in encouraging people to be honest and vocally discouraging them from fraud. A muslim knows that God is his insurance policy.
Using your logic I shouldn't give money to the poor who asks, because they could be lying. There are so many beggars, I can't possibily do a credit check on all of them.
Of course there is an upper limit to how "nice" you should be. The verses describing this limit can also be applied to business. God contrasted riba with charity for a reason. Your buisness model should be fair, based on quranic principals not greed. It's hard thing to do, very hard ... cos you tell yourself "I'm running a buinsess not a charity".
Also read the verses about war, and putting faith in God ... 'cos business is kind of like war.
The bottom line is any "trade" that exploits people is wrong, call it riba, call it hiba, it doesn't make a difference.
We all know, or are shown right from wrong very plainly otherwise Judgment day will be a bit embarrassing for God. So lets stop kidding ourseleves that we don't know what those verses are saying.
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Peace "OPF",
Renting is very different, renting is a physical transfer for a quantity - renting is trade. Usury is money for money, even if the money is used to buy something. Renting ties the value to a physical object which is the entire point of trade. Without a physical object, the value is artificial. Money for money is artificial, money for a physical object is not so.
JK- This is a wrong analogy since in todays world EVERYTHING WHICH HAS AN EXCHANGE VALUE IN THE MARKET CAN BE CONSIDERED MONEY. Hence gems, silver, gold, platinum, currencies, other e-stocks etc can all be money and likewise ALL OF THESE CAN ALSO BE CONSIDERED AS GOODS. Hence this kinna definition wont work. Currency infact is a GAINED ACCEPTANCE through some kind of work and/or trade which also involves work usually, or at least thats what its supposed to be. Why should one now give out someones money to anyone else for free or at risk whilst he could otherwise use it to say invest in stocks, etc by himself? It doesnt make any sense. GOD Bless!
