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| Islamic institute blesses interest |
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| Fatimah |
| 11/18/02 at 22:21:30 |
| [slm] I just came across this and was so very upset. Al-Azhar is changing so much it's unbelievable. :'( Monday, 18 November, 2002, 14:24 GMT Islamic institute blesses interest Conservative Islam's opposition to paying interest on savings could be in line for a shake-up after the most august institution in Sunni Islam gave its blessing to the practice. Traditionally, Islamic banks have only been able to pay interest that was tied to the bank's profits. A fixed interest rate, conservative scholars hold, is equivalent to usury or "riba" - the earning of money without doing any work for it. But Agence France-Presse reports that the Islamic theological research committee of Egypt's Al-Azhar institute - seen by many as the philosophical centre of the dominant Sunni strand of the faith - has voted 21-1 to approve fixed interest rates. Moving on? In practice, Egyptian banks may not notice any immediate difference. Despite the problems traditionalists have with interest, nine out of 10 banking institutions in Egypt pay a fixed rate of interest. And from the Al-Azhar institute's point of view the decision was necessary. "Religious jurisprudence means change, and it is illogical to remain frozen while the world changes around us," Sheikh Saber Talaab, head of the research committee secretariat, told AFP. "So long as we do not go against what is written (in the Koran) or the Sunna (Islamic tradition), we have a clear conscience." Different readings But despite Al-Azhar's importance and influence, the decision risks stirring up controversy. The prohibition of riba is at the heart of Islamic financial practices, and the arguments are all the more vocal for being rooted in differences in the interpretation of the Prophet Muhammad's writings and deeds. For the reformers, there is a parallel between Muhammad's acceptance of money from members of his tribe in order to finance trading caravans. The sharing of the profits between the contributors, they say, is broadly similar to a bank paying interest using the profits it makes on commercial deals using the money deposited with it. But the conservatives say that can apply only if the interest is proportional to the profit - in other words, if depositors are taking a risk with their money. Otherwise, the rule of riba applies, they say. |
| Islamic institute blesses interest...> Not Exactly |
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| SuperHiMY |
| 11/19/02 at 02:13:09 |
[url=http://Asalamalay.com]AsalamAlay.com[/url], Peace and e-Greetings be upon you. TODAY is exactly 1064 HIJRI Years since the foundation for what would become Al-Azhar, was laid: [url]http://www.alazhar.org/english/about/index.htm[/url] That's the official Al-Azhar website. It's rather a sad way to mark this anniversary... eh? Here in my city, at the downtown [url=http://masjidtoronto.org]MasjidToronto[/url] where I've chosen as my Ramadan retreat/refuge, we have had the blessing of having a resident Alim from Al-Azhar. His name is Abd Rab An Nabi Towfeek. He holds an informal question and answer session for half an hour before Isha as well as around Dhur time as his schedule permits. Of course I asked him many Shariah as well as basic things related to Riba earlier, and again tonight, another brother asked the Alim whether it was okay to buy a house on (interest) mortgage when they have no choice...? The sheikh broke down the question into its root and cause and unintended effect. The root question is not whether we can take riba mortgages or not. The root issue is that whether we have a [i]choice[/i] or not. People, muslim or not, in ANY part of the world almost always have a choice before entering into an interest contract. People volunteer into these arrangements. If one's life depended on it, meaning that if we didn't do this or didn't do that, then we would die, well, for survival, then it would be permissable. But today, where there are options to finance without riba, we do have a choice. All of the points raised in the bbc news article you posted as well the article I posted on my website [url=http://tyo.ca/islambank.community/modules.php?op=modload&name=News&file=article&sid=1037]HERE[/url] are eloquently raised, clarified, backgrounded, and then answered in [i][url=http://tyo.ca/islambank.community/index.php?name=EZCMS&menu=2&page_id=2]The Historic Judgment on Interest Given By The Supreme Court of Pakistan[/url][/i]. It's essential, even mandatory reading for anyone still thinking that even simple interest is allowable for humanity. [i]Usury is a Latin word meaning "Simple Interest".[/i] ~ HiMY! ~ |
| Re: Islamic institute blesses interest |
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| Traveler |
| 11/22/02 at 00:25:23 |
"Religious jurisprudence means change, and it is illogical to remain frozen while the world changes around us," Sheikh Saber Talaab, head of the research committee secretariat, told AFP. "So long as we do not go against what is written (in the Koran) or the Sunna (Islamic tradition), we have a clear conscience." what are these statments suppose to mean?! How can something so clear become so ambigous?! I just don't get it?? |
| Limited validity of Al-Azhar ruling on interest |
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| SuperHiMY |
| 11/25/02 at 15:06:59 |
| [i]A factual clarification regarding the supposed Al-Azhar opinion on interest:[/i] We just got word from a senior faculty member at Al-Azhar that the opinion in question has not yet been issued by Al-Azhar. The BBC article refers to recent preliminary discussions regarding an opinion that might be issued within a month. With all due respect to the BBC and Agence France-Presse, non-specialist journalistic accounts relating to Shariah matters must be approached with great caution. No judgment can be made regarding a fatwa without having access to the text. [i]I'm on an Islamic Banking And Finance mailing list, Our esteemed brother in Texas, who I personally met last year, posted the following message, I found it a breath of fresh air, inshAllah, I thought this thread might benefit by adding it... ~ HiMY! ~ [/i] Limited validity of Al-Azhar ruling on interest The recent ruling by Al-Azhar's Islamic Research Institute is a direct consequence of the patently false claim that Riba = interest. Fifty years of bad economics have canonized the wrong view that "Islamic" finance must be built on "profit and loss sharing", and that any fixed interest is by necessity the forbidden Riba. Nevermind the fact that 95% of Islamic Banks' operations are fixed interest transactions in the forms of Murabaha (mark-up trading), and Ijara (leasing), in which the fixed interest rate is directly linked to LIBOR (see Justice Taqi Usmani's book on Islamic Finance for the most popular argument justifying this linkage to LIBOR -- that a legitimate business may decide to earn the same "profit rate" as an illegitimate one, without losing its own legitimacy). Last month, during a brief meeting with the Awqaf Minister of an Islamic country, the Minister asked how Islamic home financing is done. When I explained to him the three dominant models, Murabaha financing, Ijara financing, and diminishing Musharaka financing, all of which are interest-based (quite literally), he exclaimed: "but this is not profit-and-loss sharing, so how is it Islamic?" In essence the Islamic finance industry has itself reached the recent Al-Azhar opinion (that not all interest is the forbidden Riba) more than twenty years ago in practice. It is the rhetoric, and there is a lot of it, that continues to lag behind. What was missing from this public rhetoric about interest and Riba was the crucial distinction between loan contracts (in which interest is the forbidden Riba), and other forms of finance (in which it may not be Riba, as in the case of Islamic bank operations). By insisting on the wrong claim that all "fixed interest" is Riba, and that the only alternative is variable profit rates that may be negative, the rhetoric invited this official statement that the demarcation of Riba does not necessarily have anything to do with the constancy of the rate of return (cost of funds). Thus, one false argument (that all fixed interest is Riba) invited another false conclusion from the Al-Azhar Research Institute (that all bank interest is permissible). Indeed, this entire episode in Islamic thought parallels in striking resemblance the development in Judaism of the concept of Heter Iska, that variable profit rates to silent partners are permissible but fixed interest rates are forbidden Ribit (the Hebrew term in the Bible for Riba). Thus, Judaism had reached the false conclusion that Mudaraba or Commenda (silent partnership) was *the* permissible/ideal form of finance. With experience in practical finance, they learned that moral hazard problems (potential falsification of profitability reports) dictate the usage of fixed interest rates in financing projects that are not easy to monitor. Going down the same wrong path, Islamic economists have driven the Azhar Institute members to notice the same moral hazard problems with Mudaraba, as well as the patent falisty of the claim that fixity of the rate of return necessarily makes the contract ribawi. What is most regrettable is that this opinion comes at a time when the banking sector in Egypt is in a catastrophic condition. Scandals due to numerous large bad loans (many tied to government officials) have crippled the sector, led to a major credit-squeeze (banks do not wish to extend any more credit), and virtually destroyed the public's confidence in the banking sector. The only thing keeping that sector from collapsing are high interest rates on government bonds and quasi-government "investment certificates" issued by state banks. Those high interest rates have kept deposits (and the currency) from plummeting, but they have also killed investment spending in the country and led to its most serious and prolonged recession/depression in recent memory (my entire life). It is regrettable that the Azhar Institute simply addressed the wrong public perception regarding the proper definition of Riba, but failed to address the shortcomings of a financial system built on interest-based lending, without the regulatory framework of Islamic jurisprudence (which ties extended credit to an underlying asset, hence allowing the time value of money to be determined properly, and the legitimate usage of funds to be ascertained). In western financial institutions, a man-made regulatory framework approximates the Islamic ideal, but falls slightly short. Thus, a conventional home-mortgage contract here in the U.S. differs from an Islamic home financing alternative only in very few (and relatively minor) legalistic details. In contrast, the financial sectors of the less developed Islamic countries, while borrowing the forms and names of western regulatory agencies, lack the culture of checks and balances necessary for such a financial system to work as designed. Thus, one continues to recall the famous statement of the late Sh. Muhammad Abdu (Grand Mufti of Egypt in the early 20th Century, and leader of the Islah movement of his time along with Rashid Rida, Muhammad Iqbal, etc.) upon visiting Europe that he found there "Islam without Muslims" and returned to Egypt to find "Muslims without Islam". Indeed, I may take my critique to the Islamic financial institutions of the Islamic world themselves. By obeying the letter of the law (against Riba), and in many instances ignoring its spirit (by employing modern versions of the medieval Hiyal to circumvent the law -- see the recent use of Tawarruq in Saudi Arabia and Bahrain to make interest-based loans without collateral under the banner of Islamic finance!), they have encouraged skepticism about the entire enterprise upon which they are embarking. It is difficult for anyone to be honest with oneself and not share this skepticism. Coupled with the deceptive rhetoric about fixed percentages, etc., it is no wonder that Al-Azhar's Institute came to this conclusion. Indeed, I expect others to follow in the same direction. All I have seen so far on this forum are ad hominem attacks regarding Sh. Tantawi, and now other Al-Azhar scholars. Perhaps the industry needs to look more closely at its own soul as exemplified in its practice (are they merely engaged in what I call Shari`a arbitrage -- finding legal tricks to sell conventional financial products to Muslims at a premium?). Religious scholars can only judge by what they hear and see. The bulk of the economics underlying the Islamic finance industry does not pass intermediate economics exams, and disagrees with the practice of the industry. Therefore, while the conclusion of the Azhar Institute is only partially valid, I think that it is a useful development. I hope that we will take this opportunity to build a correct understanding of what is the forbidden Riba, and how we can avoid it in reality and not just in form. Simply attacking the messengers (in this case the scholars of Al-Azhar's Research Institute) means that we are not willing to listen to the message. May Allah make us all among His discriminating servants, who take the best of what they hear, and who do not follow their own whims and interests in the face of Truth. Mahmoud. ______________________________ Mahmoud A. El-Gamal Chair of Islamic Economics, Finance and Management Professor of Economics and Statistics Department of Economics -- MS 22 Rice University 6100 Main Street Houston, TX 77005 TEL: +1(713)348-6301 FAX: +1(713)348-5879 URL: http://www.ruf.rice.edu/~elgamal |
| 11/25/02 at 15:30:56 |
| SuperHiMY |
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