Interest Rates
&Interest can be defined as an excess—riba (in the Qur’aan) or ribit (in
the Jewish Bible and the Old Testament)—over the original amount of
the capital given as a loan (qard). The increase is divinely prohibited
(haram) in case of a qard to the poor and needy. Any increase in what-
ever form—be it in the form of excess money, compensation through
free and unpaid labor, the free use of the borrower’s facilities, or publi-
cizing the borrower’s indebtedness—is not allowed.
&In afiatmoney regime, the interest rate used by central bankers to de-
cide on the policy of how much money to print or to withdraw out of
the market—called the Fed Fund rate in the United States—is different
from the riba prohibited by Judeo-Christian-Islamic values.
&Interest charged as a price for renting money to those who do not have
it is what the prohibition of riba (and usury) is all about. Interest
charged for a transaction that implies the renting of money to a user of
money for credit (dayn) without marking it to market is considered riba
or ribit, and is not allowed by Shari’aa.Money and Commercial Transactions
&The original teachings of the Judeo-Christian value system focused on
the abuse exercised by the rich against the poor in agrarian societies
in order to expropriate their land, crops, and properties and render
them slaves in their own originally owned land. The Judeo-Christian-
Islamic value system reinforced that ruling, which prohibitedusury
(orinterest), the act of charging for the use of money, which is con-
sidered an act of riba or ribit. The system encouraged helping those
who need money through the system ofqard hassan,agoodloan
that does not charge any increase over the original amount in any
shape or form.
&As commerce developed, the Judeo-Christian-Islamic system expanded
upon the Judeo-Christian system to allow buying and selling at differ-
ent prices, but not renting the use of money (usury, now calledinterest).
Buying and selling transactions that involved an increase due to profit
making are not like charging riba by charging for the use of money, as
revealed in the Qur’aan. For buying and selling to be perfected, the title
of the item to be acquired must change hands from the seller to the
buyer in a documented buy-sell agreement. Different models developed
to put this rule in effect were used during the Muslim reign and adapted
in the 1700s by the rabbis in the eastern European areas in their ‘‘Hetor
Iska’’ models (also known asMusharakaor Joint Venture in Islamic RF
banking applications).230 THE ART OF ISLAMIC BANKING AND FINANCE