Conclusiones 76

Whatever the controversy in the definition of Riba, the essence of the whole ban is to stop exploitation of either of the parties involved in the transaction. That is the ‘substance’ or the Maqasid149 of the ban on Riba in the Quran and the Hadith and it should be considered and preferred over the ‘form’ when analysing a particular transaction and deciding whether that transaction falls within the ambit of Riba as espoused in the Quran and other sources of Sharia or not. In essence the conundrum regarding the ban emanating from the Quranic injunctions and the recognised hadiths of the Prophet Mohammad is whether to blindly follow the ‘form’ or the ‘substance’ of the ban on interest/ usury/ Riba and thus mould the practical guide lines for the contemporary Islamic finance practices in such a way as to ensure strict compliance with all the rules that emanate from the debate. On the other hand, the other fundamental question that arises is whether the Ulema ( specifically those sitting on the SSB’s of the individual IFI’s or those sitting on the

149 _{This is the short form of the complete word Maqasid Sharia, which in essence means the reason} for the particular edict. This concept is discussed in more detail below

53

central regulatory and standard setting bodies) ought to be more flexible in looking at what the outcome of a particular transaction is going to be and decide whether that falls within the ambit of Riba or not. This ban on Riba in all its manifestations, contemporary as well as traditional, emphasises on the aspect of fairness, justice and ethical practices in dealings with others. Even where at times certain kinds of Riba

transactions are allowed they are still deemed immoral or discouraged (even though legal). The rationale given by all scholars across the broad spectrum spanning the different juristic schools, historical eras or specialisations (economics, law, Fiqh, finance etc) is that Islam focuses on the morality or the ‘Substance’ or the Maqasid

of the transactions and not per se the ‘Form’.

That is why a large part of the Riba debate revolves around the concept of loan giving (qard), a mainstay of contemporary banking industry. The Islamic injunctions are very categorical about the standing of loans, they are to be charitable, if the borrower can repay it back, then he must, but if the borrower cannot pay back the loan, the lender should give up the claim rather than trying to extract further payments by imposing an interest over the principal, which in essence leads to the existence of Riba al jahilya( a kind of Riba that was practiced in Arabia at the time of Prophet Muhammad). 150

There are thus very clear injunctions in Islam about the loans, as mentioned by Saleh in his writings according to the well-known Islamic scholar Sanhuri ‘the qard( loan) contract is basically a gratuitous transaction and thus it negates the existence of

Riba’.151 But then he goes on and argues that by analogy the loan can become a

150 _{The debate surrounding the present status of the loans is too long and requires an in-depth analysis} of the works of the traditional schools of fiqh, which cannot be carried out here. It should suffice to say that an interest bearing loan where the interest has been stipulated beforehand is banned in Islamic banking under the Riba ban. For more details analysis see, Nabil Al Saleh ( n 119) 151 _{Saleh (n 119) 36}

54

rabawi transaction (rabawi: meaning susceptible to Riba) by analogy with sale when it secures to the lender an interest or a premium.’152

Of course these provisions have to be taken in context of the whole business ethics perspective under contemporary Islamic finance literature. That is why Islamic business ideology focuses mainly on fostering partnerships and trade rather than giving simple loans, it is argued by scholars and all the academics that by doing so at the Macro level the economy can not only prosper but there is economic stimulation which should lead to more distributive justice and welfare for the whole society, which is what the Islamic economic system aims to achieve. In essence the Maqasid Sharia behind the ban of Riba is the overall stimulation of economy and ensuring that there is more distributive justice while decreasing exploitation of vulnerable parties.

It is however accepted that from a purely contemporary economic perspective most of these provisions banning Riba and Gharar in Islamic finance literature and ethos may seem archaic and slightly terse for the contemporary business entity, but it has to be understood that Islamic finance isn’t just about business practices; it is a part of the whole Islamic life style and not just a means to an end. And any practices that may be exploitative and unjust should be discouraged and avoided by modern day IFIs.