3.9 Debts

The writing down of debts is an ordinance of the Holy Qur’an: “O you who believe, When you contract a debt for a fixed time, write it down. And let a scribe write down between you with fairness; nor should the scribe refuse to write as Allah has taught him, so let him write. And let him who owes the debt dictate, and he should observe his duty to Allah, his Lord, and not diminish anything from it. But if he who owes the debt is unsound in understanding or weak, or if (he) is not able to dictate himself, let his guardian dictate with fairness. And call to witness from among your men two witnesses … And be not averse to writing it whether it is small or large along with the time of its falling due. This is more equitable in the sight of Allah and makes testimony surer and the best way to keep away from doubts” (2:282).

Debtors should be dealt with most leniently: “And if the debtor is in straitness, let there be postponement until (he is in) ease. And that you remit (it) as alms is better for you, if you only knew” (2:280).

These two regulations, 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 the debtors is reflected in his sayings on this point, of which only a few are as follows: “May Allah have mercy on the man who is generous when he sells and when he buys and when he demands payment of debt” (Bu. 34:16). “The angels received the soul of a person from among those who were before you and asked him if he had done any good. He said, I used to deal leniently with the well-to-do debtor and to remit the debt to one who was in straitened circumstances, so he was forgiven” (Bu. 34:17). “Allah will give shelter to His servant who gives respite to one in straitness or remits to a debtor” (Ah. I, p. 73). “Whoever gives respite to one in straitness or makes a remission in his favour, Allah will save him from the vehement raging of the heat of Hell” (Ah. I, p. 327). “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 maula (guardian)” (Bu. 65, sura 33, ch. 1). “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” (Bu. 69:15). These hadith show that the debts of a debtor who is in straitened circumstances and unable to pay must either be remitted or paid by the state.

While the lender is advised in numerous hadith to be lenient and not to exert undue pressure, and to remit, if the debtor is in straitened circumstances, part, or even the whole, of a debt, the debtor is also told to repay the debt in a goodly and liberal manner (Bu. 40:5, 6). In the hadith narrated in these chapters, the Holy Prophet is reported to have said:

“Among the best of you are those who are good in payment of debt.” The rich, especially, are told not to postpone payment of debt. Postponement in their case is called injustice (zulm) (Bu. 38:1, 2). The man who contracts a debt intending not to pay it back is condemned (Ah. II, p. 417). The hadith has already been quoted which shows that the payment of debt has preference over spending in charity. In the case of an inheritance, the heirs do not take their shares until all debts have been paid (Ah. IV, p. 136); and when there is a will, the debts must be paid before its execution (Ah. I, p. 79).

Though the necessity of contracting debts at time is recognised, and the Holy Prophet himself is reported to have done so on occasion, yet he, at the same time, gave warning against being in a state of indebtedness. It is related in a hadith that “he 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 thou prayest against being in debt; and he replied, A man when he is in debt speaks and tells lies and makes promises and fails to fulfil them” (Bu. 43:10). According to another hadith, “Anas said that he heard the Holy Prophet often praying, O Allah! I seek Thy refuge from anxiety and grief, and from lack of strength and indolence, and from niggardliness and cowardice, and from being overcome by debt and the oppression of men” (Bu. 56:74). It is also related that when a bier was brought to him, he would enquire if the dead man was in debt, and if so, he would tell his Companions to say funeral prayers over him; and if he was told that he had left something to pay his debts, he would personally lead his funeral prayers (Bu. 69:15).

It would be seen from what has been stated above that helping those in distress forms the basic outlook of Islam on 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 in the property of men, it shall not increase with Allah; and whatever you give in charity desiring Allah’s pleasure, it is these that shall get manifold” (30:39). Prohibition came later, and is contained in the following verses which are among the latest revelations: “Those who swallow usury (riba) 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” (2:275). “Allah will blot out usury and He causes charity to prosper. And Allah loves not any ungrateful sinner” (2:276). “O you who believe, keep your duty to Allah and relinquish what remains due from usury, if you are believers. But if you do it 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, devour not usury, doubling and redoubling, and keep your duty to Allah that you may be successful” (3:130).

The prohibition of usury is clearly associated in these Qur’anic verses with charity, for inasmuch as charity is the broad basis of human sympathy, usury annihilates all sympathetic affections. 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 to his wealth. 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 Holy Qur’an 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 Apostle.

Hadith is equally emphatic against usury. It condemns not only the usurer but also the man who pays the usury because he helps the cause of usury; and, according to one hadith, the witnesses and the scribe in a usurious transaction are equally blamable. Certain details are also added, describing the exchange of gold with gold and wheat with wheat, and dates with dates, as riba (usury), unless it is a hand to hand transaction. Another report makes it more clear. Usama reports that the Holy Prophet said, “There is no riba unless there is postponement in payment.” (Bu. 34:79). This shows that only those cases were treated as usury (riba) in which there was a barter only in name, the transaction being really usurious. Gold was given to a man on condition that he would pay a greater quantity of the same after some time, or wheat was delivered on condition that he would repay a larger quantity of the same. 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 riba. 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. Such excess is in fact a gift made by the debtor of his own free-will and is not prohibited.

The basis of the prohibition of usury is undoubtedly sympathetic feelings towards those in distress, but the word used is riba (lit. an excess or addition) which means an addition over and above the principal sum lent (TA., LL.); 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 schemes. 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 Qur’anic injunction regarding riba faithfully into practice. The material civilization of Europe has, however, given rise to conditions in which usury and interest seem to be unavoidable, and so the Muslims were told thirteen centuries before: “The Holy Prophet said, A time will come over people when not a single person will remain who does not swallow down riba and if there is anyone who refrains from it, still its vapour (or dust) will overtake him” (AD. 22:3).

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 Qur’anic law which prohibits riba? 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, today, 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 riba overtakes the man who does not swallow it, as the hadith says.

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 riba comes in indirectly.

To be on the safe side, a depositor may spend the excess amount which he receives as interest on his deposit for a charitable object. 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 riba, as commanded by the Holy Qur’an. The only difference is that he relinquishes it, not in favour of the bank, which takes the place of the borrower in the case of a debt, but in favour of some charity. But still the depositor, who takes the place of the creditor, does relinquish the interest. A little thought will show that, in this case, the person in whose favour the interest should be relinquished is not the bank, or a Government treasury, which does not stand in need of such help, but only charitable institutions which are working for the welfare of the Muslim community as a whole.

The co-operative banks are more in consonance with the spirit of the teaching 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 moneylenders. 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 labourers. In the co-operative bank, moreover, the shareholders are also the depositors as well as the borrowers of money, and that interest paid to the bank is, more or less, in the nature of a contribution by which the borrower of money is also ultimately benefited.

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 view-point 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. It is sometimes urged that the keeping of an account of profit and loss is impracticable, but this is really not the case, as every businessman must keep an account of profit and loss, if only for the purpose of taxation. Similar accounts are also kept by all joint-stock companies, and there is not the least difficulty in keeping them. 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.

Borrowing by a state or a company for the purpose of executing large-scale projects stand on a different basis. In such cases the shareholders who supply the capital are generally paid a dividend, which is calculated on the basis of profits. But sometimes the shareholders are paid a fixed rate of interest. The question is whether these cases would come under the Qur’anic prohibition of riba? The rate of interest is no doubt fixed, but still this interest is paid out of the profits and is generally a part of the profits. Occasionally the profits of the concern may be less than the amount of interest paid, or there may even be a loss, but in such cases there is a reserve fund to fall back upon. It cannot, however, be denied that the payment of a varying dividend is more in accord with the spirit of the teachings of Islam than the payment of a fixed rate of interest.