Bilal Philips – Contemporary Issues Part 7 (Interest & Islamic Banking)

			Bismillah R Rahman r Rahim, the name of Allah, the Beneficent, the Most Merciful, like to welcome
your viewers to our program, contemporary issues.
		

			And this segment of our program, we are shifting now to the area of economics, economics,
		

			a field which Islam addresses, there are laws within Islam which govern human economics, how their
economic dealings should function. When we look into Islamic legal requirements of business deals,
etc, etc, sale purchase these type of things trade,
		

			we find that one of the basic principles is that it should be free from deception. Anything which
involves deception, where you're deceiving the buyer of really what you're selling, you know, he
thinks he's by one finger, in fact, selling something else, you know, however, this may come in all
different forms. From a sound perspective, all of that is forbidden.
		

			The other basic principle we can see there is that the the issues of interest where business
dealings involve interest. This is not another area where things again are strictly forbidden. So
what we know today is modern mortgages, people buying home with bank loans, and they have to pay
back the bank over this period of time and this kind of thing, or taking out loans for cars or a
variety of other purposes, where you end up paying back the money plus an additional amount.
		

			This has been forbidden in Islam. And really, it is not something new that you can find even in the
		

			Old Testament, in ancient beliefs of the followers of Moses and others, that interest is forbidden.
And we find in Deuteronomy
		

			23, verse 19.
		

			Thou shalt not lend upon interest to your brother, interest on money, interest in victuals that's
food or provisions.
		

			interest on anything that is lent for interest
		

			is a basic prohibition.
		

			However, and this has been understood, however, this prohibition for the Jews, they there was a
modification there in verse 20, goes on to say to a foreigner, you may lend upon interest, but your
brother, you shall not lend upon interest. So interest became for Jews forbidden to take from
themselves from each other. But it was okay to take it from the Gentiles, the others, right. And the
prohibition of interest actually existed in the Christian world, right up until the Middle Ages, you
know, the
		

			13th 14th century otherwise, prior to that it was banned, we find, you know, Shakespeare writing
about The Merchant of Venice, bound to flesh, individual lending and interest in seeking upon the
flesh in return for those who couldn't pay it. You know, this idea, this was the evil Jew, this is
what he was, how is functioning, taking people's flesh even, you know, that's a so it was opposed
thority in Western society, but eventually,
		

			though, the people were able to influence
		

			the the
		

			religious beliefs, the economic segment was able to influence it under the Jewish influence, to a
certain degree that they introduced it eventually interest on a low scale, and eventually that
spread spread spread until it became the foundation of Western economics. Interest dealings became
that foundation. However,
		

			in the 70s, of course, Islam totally prohibits interest a lot makes no uncertain terms about its
mission, even talking about the fact that people will compare it to trade. Right? You know, that
they will say that trade is just like interest. Interest is just like trade really no difference.
You know,
		

			you lend somebody a property, they pay a fee for it, you lend somebody money, they pay a fee for it.
It's not the same, but the trade in money, a law says is devoid of any good, it's cursed, whereas
		

			proper trade is blessed by a law.
		

			So, dealing interest is forbidden for Muslims, and Muslims have functioned economically over the
centuries, without dealing with it. However, once the Muslim world became conquered by Western
civilization, mainly out of Europe, England, France, Germany, etc, conquered various Muslim lands,
Holland, Indonesia.
		

			Then they introduced with with their conquest, interest based governmental systems.
		

			And the banks were introduced into the countries and interest in the belief and the practice of it
spread.
		

			With the revival of Islam in this century,
		

			we find that the proposals for Islamic banks, the alternative, you know, came up, especially in the
early 70s. They the concepts are being proposed, you know, things have been worked out, the plans
for it have been identified, you know, he finds those son, brother, Muhammad Faisal,
		

			working on it, when it's the idea was first broached in the West, the western economists etc, they
scoffed at the idea, this is ludicrous, the idea of banking without interest, what kind of bankers
this cannot possibly work, though, in their own books, in their own theories, they will tell you
that the lower the interest rates, the healthier the economy, the better the economy is, the higher
it is, the weaker the economy, this is well known. But the idea of zero interest, you know, you see
getting lower and lower and Lord gets this economy gets better and better and better. But the idea
of zero interest could not be dealt with and want to deal with it. That idea was forbidden. Why?
		

			Because the elements that control the banking systems of the West,
		

			they will be put out,
		

			if they shifted to interest without banking without interest. So
		

			they, you know, keep that concept in, they're strong, and they continue to teach it absolute
necessity, whereby people can just live no effort on their part. People take their money, they have
to pay back more money, you know, no effort involved here. Well, what we find today,
		

			you know, after some 30 years have passed,
		

			that the majority of the major banks of the West now carry Islamic portfolios. They offer business
in without interest, banking, without interest, they're offering it now bank, all the various big
banks, Bank of London, etc. They're all offering it Now, why? Is it just to capture Muslim money?
Because they don't want to lose their clients? No, because a bank is not going to do that.
		

			Just to maintain this reputation, no, because it's not going to involve itself in what it sees as
clear financial loss. The only reason why they're getting involved in it is because they have seen
its successes. The Islamic banking has reached a massive state of success.
		

			This is the what was thought impossible, has actually been implemented. Today, you have more than
200 Islamic financial institutions worldwide, managing funds of over 150 billion US dollars. You
know, and even with its strict codes, Islamic banking is growing at a fast rate of some 15% annually
over the last 10 years. In recent years, Iran, Sudan, Pakistan, you know, and others have banned
traditional commercial banking, you know, based on interest and adopted Islamic models.
		

			Of course, Pakistan is not complete as it has been in Iran and Sudan etc. But there are more and
more countries are broaching this idea Malaysia is experimenting with it also is having banking is
developing there quite strongly. And we find Muslim
		

			Wherever we go, looking into this calling for this as an alternative to the
		

			the other banking is interest based banking institutions. So
		

			how does Islamic bank function? Well, you know, there are different
		

			means by which the bank maintains its money. One of those means they referred to as murabaha. You
need to buy something the bank goes and buys it for themselves, it's for you sends it to you at a
higher price, buying commodities and selling them right, based on demand.
		

			Secondly, you have what is known as moussaka, where to financers their partners they come in they
put their time, effort money together, and they share the
		

			the profits
		

			proportionately, then we have what is known as mudaraba
		

			where, again, two parties come together, but one is bringing all the money, the other ones making
all the effort, and they share proportionately again, the
		

			profits. But in all of these cases, they also share the losses, the point which makes them
different, that if there are losses, they all share in the losses. In the case where it is a matter
of one person providing money, no effort, another one just providing the effort.
		

			Obviously, the financial loss will be borne by the one who put in the money, whereas the one who put
in the effort, of course, to be the last of the value of their efforts, but were their equal
partners or similar partners sharing, then they both are going to share in the financial losses. And
you'll see when a person invest in a financial Islamic institution, the profits are not fixed, they
cannot be given fixed amounts every year, you'll get this much, you know, returns on your money
know, this may vary from month to month, you know, half your copier annually vary. And as such, the
profits
		

			cannot be fixed. And the difference between Islamic banking
		

			and Western banking is that it's about credit, you know, what is your credit, if you have money, you
have a reputation, you have contacts, whatever, you can get loans. And you pay these loans back is
what the bank is interested in, you pay the loan back, it doesn't matter what you're going to do
with this money. If you're going to build something corruptive which is going to hurt the society or
you want to squandered whatever, as long as you pay that money back. That's what's most important to
the bank. And through these mortgages, systems, and, you know, this
		

			systems, interest based systems, you find that people, you know, run into financial loss and courage
to live on a credit system, you know, whether it's the, the banking cards and things like this, you
buy more than you have the money to pay, and then you end up paying up with interest in this type of
thing. Eventually, much of this becomes a dead weight on the backs of the people, you know, and they
find themselves in financial crisis, the bank steps in repossess their car, their homes are kicked
out in the streets. So that you find in America as this estimated way back in the early 90s, there
are over two and a half million Americans living in the streets.
		

			They have no homes, no place to go. They live in the streets. This is something normally we
associate with the very poor countries, the third world, you know, the black hole of Calcutta, you
know, this, the British used to write about it, you know, Calcutta, you know, people are living
there and just dying in the streets. While it's happening in America. People tend to associate
America with you know, ultimate success in which is the skyscrapers glittering buildings. But nobody
bothers to look at the bottom. You know, the night when time comes, people leaving the work and
going to sleep you see all these people coming up, putting their pieces of cardboard on the ground
		

			and sleeping right there. Went to chill catches them, sometimes they freeze to death, they're in the
streets.
		

			So you have some two and a half million Americans living in the streets. Most of them you'll find
when they got into look into the circumstance, what happened to them, how do they end up in the
streets, it was due to interest based problems. Either they could make their bank loans, or they had
some kind of medical problems, which causes the money to be gone, they can make the payments
anymore, so their stuff is repossessed, and they're out on the streets, living in the streets
themselves, man, their wives, their children, these kind of things happening.
		

			terrible situation so unimaginable the richest country on the earth. You know, having this kind of
situation where they don't have homes, they cannot provide homes, they cannot deal with the
situation of their homeless is something which shows the kind of heartlessness in that system,
though, people like to talk about mercy and love and all these different things. The interest system
is a very harsh system. It doesn't take into account the contingencies of life. A man borrows money
for his farm. His intention is to grow products, which people are going to benefit from from his
profits, he will pay you back. But now something happens in natural phenomena. You know, some
		

			disaster natural disaster comes and destroys all his crops. And you're still going to ask him for
that money back with interest. Regardless, I don't care. I don't want to hear your problems, just
pay some money. If you can pay it, then we're gonna come in and take your farm get out of that farm,
we'll sell it and get our money back.
		

			This is the
		

			interest based heartless interest based system whereas Islam is based more on sharing our
difficulties then sharing our profits, sharing our successes, you know, or you have what is known as
part of the house and you know, the good liloan which is an interest free loan people lend and you
pay back what you have borrowed.
		

			They're also the instruments of ijarah, where the bank is sort of being developed to purchase
something and leases it to somebody who wants to own it. They pay rent or whatever over a period of
time, and then eventually, it can come into their possession. But in any case, what we're talking
about in the end is an alternative to the interest based system, that there can be found a variety
of alternatives. Islamic bank banking is the most popular one present today. And we said it is
expanding rapidly.
		

			And something which the West, as we said, is initial contact, rejected, scoffed at. But today in
Harvard University in the United States, you know, the top universities in the United States, they
have a chair of Islamic banking, they're teaching Islamic banking, their Islamic Finance, their
professors, Western professors were specialists in it, teaching, you know, Western students, etc.
Because it is a part and parcel of the future. Islamic economics is a part of the future. And this
shows the relevance, again, that we spoken before of Islam, to all aspects of our lives, we're not
left in the lurch left on our own modern circumstances developed, what do we do? How do we handle
		

			it? Can we handle it? No, Islam provides guidance in all of these various fields, fields of, of
learning, all these various contingencies of life, different new developments taking place, Islam
does provide guidance in dealing with these things. So from looking at that, you know, we can see
the greatness of Islam, that it is not limited, you know, in the sense of human beings life, you
know, its, its ideas, or whatever, are not suitable for contemporary life. Because oftentimes, this
is the issue that people raise, how can a system which was developed 1400 years ago, be of relevance
today? how, you know, when they look at the other systems, they're totally irrelevant, they don't
		

			cover they cannot handle with modern developments. However, Islam being the religion of God,
		

			providing guidance for human life in general. And then all of the knowledge of modern science being
ultimately from God. By accident, people discovered this at the outset, but in fact, is really from
God.
		

			These things don't necessarily clash at all.
		

			So, from the sonic perspective, there are ways and means of dealing with anything which happens in
this life. Islamic banking is only one example of such things.
		

			Without their viewers would like to thank you for being with us in this segment of our program,
		

			which in which we have looked at basically, Islamic banking, banking without interest, we looked at
some of the issues of interest and the harm that it has produced in society. And we looked at the
alternative, which Islam offers that's of interest free banking, which is user friendly, as we say,
today, you know, it does take into account the needs of human beings tries to solve them, resolve
their problems, help them, as opposed to milk them to squeeze them to take the blood, sweat, and
tears just gobble it up, which is what the interest system does. Islam provides Islamic economics,
which we said was opposed to any form of deception. And at the same time, it provides a system by
		

			which people can get access to capital. And when they get that access, they will be accessing what
is good. Because if a person comes to the bank and says this, I got this plan to build something
which is against Islam, the bank will say no, or they plan to build something which is useless, it's
not going to produce anything good. They'll say no, you know, or it's not effectively planned out.
They'll say, listen, we need some planning, let's get some planners, you know, to help you with this
project. So it's a good idea in general, but you just haven't planned it properly. So they care
whether the people will succeed or not. So they will share it with them from that perspective. And
		

			in that way, the bank and the society are directly linked. It's not like the banks thing, one and
just trying to milk the Society of everything it has. So Islam is the answer.
		

			That's the bottom line. Islam has the answer.
		

			So the viewers, I hope that this this brief reflection on the issue of banking and Islam, interest
systems, etc. You know, is of some enlightenment to you, and I hope that inshallah you continue to
follow our programs as we look at some of the other contemporary issues facing the Muslim world
today. With that, the viewers I now bid you farewell.
		

			The Islamic greeting was Salam aleikum wa rahmatullah wa barakato. And may Allah peace and blessings
be on each and every one of you