48 chapter two
base of creating capital. Capital however is not labour alone, rather,
it is labour in conjunction with natural resources that compose the
stored capital, which may require widening the definition to include
both labour and natural resources in combination, though at vari-
ous levels, in the process of creating capital. This would be more
consistent with the Islamic view that begins with natural resources
as bounties given by God in His divine wisdom to make the earth
habitable added to labour which is highly regarded in Islam as an
important factor in the production process, that aims, among other
things, to increase the utility of the divinely provided natural resources.
This is emphasised further by defining economic labour as the labour
applied to nature in order to extract the consumer’s utility or increase
a production opportunity from natural resources (Bàqir-al-Sadr, 1968).
The Price of Capital
In Islam, the price of capital is not the rate of interest but the rate
of return on capital, generated mainly from profit. Interest is pro-
hibited in the Qur"àn and the Sunnah, referred to as Ribà, but trad-
ing is allowed in its place, “God has permitted trading but has
forbidden Ribà” (Qur"àn, 2:275). Indeed the Prophet himself was a
merchant. Therefore, the relationship between the lender and the
borrower is twofold: (a) if the loan is for consumption purposes, it
should be given free, and (b) if it is for business purposes, it should
be given either with the intention of earning money on it, which in
this case be a share of the business profit against bearing a share of
the business losses, or, alternatively, with no intention of earning a
return, and in this case it should be given free with the loan paid
back at the agreed time. The business results will have no bearing
on the repayment of the free loan. Given the controversy the issue
of interest has raised it may be worthwhile to elaborate on the pro-
hibition of interest below.
Ribà, defined as the lending of money at interest is forbidden in
the Qur"àn in four references, with punishments being introduced
in four stages.
The first reference is rather mild, though is still very discourag-
ing, as it states that investment at interest does not increase in the
sight of God, “That which you have acquired of Ribàseeking to
increase your wealth by (charging) Ribàon people’s holdings, is not
an increase in the sight of God (not being blessed by God)” (Qur"àn,
30:39).