Wednesday, April 12, 2017

The prohibition of Riba in Islam

The prohibition of Riba in Islam is very obvious from the Quranic verse “O you who have believed, do not consume usury, doubled and multiplied, but fear Allah that you may be successful” 230 Al Imran, All Muslims agree that riba is prohibited, however in the modern economy interest rate is a main part, that is why Islamic Economics differ from the modern economics.
Interest rate plays a role of stabilizer to the economy and it regulates the demand, interest rate is a price for investment, when there is no interest rate people will not lend their money; however Islam proposes a shared profit rather than an interest, Islamic economists agree that it is a good thing and a very possible alternative, and Islamic banks should invest with the investors and share the risk and profit with them.
Another problem is that international economics rely on interest rates, and especially in 3rd world countries they have crippling foreign debt this is because they have corrupted governments and incompetent managers, they take no responsibility because their money will come back with an interest, however in the case when they cannot pay their debt because of the undeveloped business environment and their economics situation, so the debtors might not return their debt and they have debt however interest-debt could be a solution and it is a benefit for the society.
Islamic economists agreed on a profit-rate, it means that the lenders will share risk with the investors and they will get benefit; which is an Islamic perspective.

No comments: