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Finance in Early History of Islam

Abstract

Prophet of Islam, who was the messenger of Allah, was responsible for a great
mission (Risalat and Nabuwat). Emigration to Madina (Hijrah) marks a turning point
in the life of the Prophet Muhammad, upon him be peace and blessings, as well as in
the history of Islam.

The Islamic financial system is one of the most independent and noble systems in
Islamic civilization. Qur'an states this fact that: "In order that it may not (merely)
make a circuit between the wealthy among you.1" Therefore, the Islamic civilization
aims at the necessary rotation of money among all people, not only the rich ones,
because this may cause embarrassment to the Muslim community and raise a social
class unrightfully.

Prophet(s.a.w) applied great methods in early history of Islam regarding collecting,


saving and spending the public treasury (Bayt Al-Māl) at that time, which shows his
management in politics and finance for the benefits of Ummah.

This article is about to clarify Islamic Finance in early history of Islam and Islamic
crime preventions at that time.

Introduction

The Prophet of Islam (s.a.w), Last Prophet of God, was born around the year 570 in
the city of Mecca, Arabia. 2 According to Islamic beliefs, at age 40, in the month of
Ramadan, he received his first revelation from God. Three years after this event
Muhammad started preaching these revelations publicly, proclaiming that "God is
One", that complete "surrender" to Him is the only way acceptable to God, and that
he himself was a prophet and messenger of God.3 After his emigrating to Medina (or
Yathrib) he established an Islamic Government and managed the Islamic Society in
all aspects including culture, politics, military, Economy and finance.4

The Islamic institution of Bait al-Māl (the Exchequer of the Islamic State) is a
concept occupying a central position in respect of public finance in Islam, not only as
a Treasury, but more so as an entire fiscal system of state. It was based oa Qur'anic

1
Quran, 59:7
2
Mecca is in a country name “Saudi Arabia”
3
Alford Welch, Muhammad, Encyclopedia of Islam.
4
Ibn Hisham, Al-Sirah, 2, p. 110
1
injunctions and put into practice by the Prophet: Māl Allah or Māl al Muslimin i.e.
public funds in the possession of the Prophet or Amir-al Mumi'nin only as a trustee
(amin), entitled for his services only to a stipend to meet his needs. This concept of
Bait al-Māl was acted upon by the Khulafa-e-Rashidin, but the dynastic rule of the
Ummayyads changed the practice eventually leading to their downfall.

The Importance of Bayt Al-Māl

Islam respects finance but not as a goal. It is neccesary to live life in the normal way
which can serve people to be a better servant for Allah. 5

Bayt al-Māl is an Arabic term that is translated as “Public Treasury”, "House of


money" or "House of Wealth." Historically, it was a financial institution responsible
for the administration of taxes in Islamic states, particularly in the early Islamic
Caliphate. It served as a royal treasury for the caliphs and sultans, managing personal
finances and government expenditures. Further, it administered distributions of zakah
revenues for public works. Modern Islamic economists deem the institutional
framework appropriate for contemporary Islamic societies and is a foundation that
supervises all the revenues of the Islamic State and its different expenses, to be under
the authority of the caliph or the viceroy, who is responsible for putting them in their
legal ways of spending for the benefit of the Muslim Ummah (nation) both in peace
and war.6

The important revenues of Bayt al-Māl include Zakah (obligatory charity), Kharaj
(land tax), Jizyah (poll tax required from non-Muslims living in an Islamic state),
booty, spoils and endowments. All of these types, excluding the endowments,
include tax whether on property, land or soul7.

The jurisdictions of Bayt al-Māl include the money due for Muslims collectively not
owned by one of them and the money spent for the benefit of Muslims. 8 Therefore,
Bayt al-Māl is one of the important foundations of the Islamic civilization as it is the
only authority entitled to spending on the different Muslim welfare. It has the
authorities of a ministry of finance and a central bank in the current days.

The expenses of Bayt al-Māl include:

5
Babulli, Kitab Al-Maal, p. 32
6
Munir Hasan Abdul-Qader, Mu'asasat Bayt al-Māl fi Sadr al-Islam (The
Foundation of Bayt al-Māl in the Early Days of Islam), P. 47
7
Shawqy Abu Khalil, al-Hadarah al-`Arabiyyah al-Islamiyyah (The Arab Islamic
Civilization), P. 331
8
Al Mawardi: al-Ahkam al-Sultaniyyah (The Ordinances of Government), p. 278
2
First: Salaries of viceroys, judges, civil servants and staff of public offices, including
Commander of the Faithful or the caliph himself.

Second: Salaries of soldiers and army.

Third: Supplying the army with weapons, fighting equipment, ammunition, horses
and their equivalents.

Fourth: Establishing public projects, such as bridges, dams, leveling roads, public
buildings, rest houses and mosques.

Fifth: Expenses of the social foundations, such as hospitals, prisons and other State
facilities.

Sixth: Providing the poor, the orphans, the widows and their dependants because the
State has to sustain them.

Therefore this is the precise economic system developed by the Islamic civilization
in its early stages, preceding any other civilization. The Islamic civilization has the
precedence in regulating the revenues and the expenses of the State. However, after
regulating these revenues and expenses, there may be some urgent circumstances,
such as disasters, famine, and lack of rain or deadly epidemic, which force the State
to ask the rich people to donate without coercion to save the majority of Muslims.
`Uthman ibn `Affan (may Allah be pleased with him) donated much money to save
the Muslims at the time of a famine during the reign of Abu Bakr (may Allah be
pleased with him). The same was done by `Abdul-Rahman ibn `Awf (may Allah be
pleased with him) during the reign of `Umar ibn al-Khattab (may Allah be pleased
with him). There many examples for that in the Islamic History, which secured flow
of money to the State treasury without coercion, expropriation or force.9

Speaking of history of Bayt al-Māl, should say that it was the department that dealt
with the revenues and all other economical matters ocf the state.

In the time of Prophet (s.a.w), It was established by the Prophet Mohammed (s.a.w)
in Madinah after the battle of Badr and originally based at the Masjid Al-Nabi, the
Bayt Al-Māl served as the centre of collection and distribution of Zakah, Fitra and
Sadaqah (and also as the central financial repository) for the Muslim Ummah for
many centuries. We would like to explain that in Prophet’s time, whatever revenues
or other amounts were received, were distributed immediately.10

9
`Ali Ibn Naif al-Shahud, al-Hadarah al-Islamiyyah bayna Asalat al-Madi wa Aamal
al-Mustaqbal, The Islamic Civilization between the Genuineness of the Past and the
Hopes of the Future, P. 257
10
Al Qalqashany, Subh al-A`sha, 3, p. 285
3
When there were too many spoils of war flowing to Madinah full of gold, silver,
precious stones, millions of dirhams and dinars, slaves and clothes, in Caliphahs time
were gained and therefore, they expand Prophet’s financial system and issued orders
more.11

Bayt Al-Māl Finance Resources and Budgeting

The Islamic State, founded and run by the Prophet of Islam (s.a.w), was a growing
and over-expanding organism. It began in the first year of the Hijrah with only a few
streets of the small city of Medina. But a few years later when he breathed his last,
the whole of Arabia and parts of southern Palestine and Iraq were under his
jurisdiction. 'This meant almost a million square miles. This was the achievement of
ten years only, that is to say, about 274 square miles were on an average added daily
to the Islamic State. Naturally, therefore, the income of the State varied from year to
year, even from day to day. It is not possible to (rive exact figures for the whole
country for any year; only odd figures can be given:

The income from Bahravn (not the island of this name hut modern al-Ahsa' district,
opposite the island of Bahrayn) was 80,000 dirhams12.

The region of Khaybar had agreed to divide its agricultural products in a fifty-fifty
ratio. This brought 20,000 wasq (apparently of dates and wheat) to the Muslim
government every year13.

The localities in Palestine (of Jarba and Adhruh) had each engaged to pay annuallly
100 dinars (Ibn Sa'd, etc.).

The port of Aylah, on the Gulf of 'Aqabah, paid 300 dinars every year14.

The region of Najran, in the Yemen, paid 2,000 garments every year, each garment
worth 1 oz. of gold15. There was weaving industry in this locality, which was
inhabited by the Christians.

The port of Maqna, on the Gulf of 'Aqabah, paid one-fourth of its date harvest', one-
fourth of fishery catches, and one-fourth of the spuming of the womenfolk16 . But the
actual income is not mentioned. The same is true of Fadak, and Wadi al-Qura, where

11
Al Tabary, Tarikh al-Umam wa l-Muluk (History of Nations and Kings), 2/519
12
Yaqut, Mu'jam al-Buldan. Bahrayn
13
Ibn Abi Shaybah, cited in the footnote of Abu 'Ubayd's Amwal, 1437, 1587, 1590
14
Ibn Sa'd ; Maqrizi, Imta', I, 468
15
see, among others, al-Kharaj of Abu Yusuf, p. 41
16
Ibn Sa'd, II/I, p. 48, etc
4
the farmers had to deliver half of the harvest, yet I have not come across the actual
amounts paid.

There were other vaster and richer regions, and their incomes could be assessed from
what we have cited above.

As to the expenditure side, I shall refer to one case, that of the Jewish tribe of the
Banu 'Urayd. In a document quoted by Ibn Sa'd Daybuli and others, the Prophet of
Islam (s.a.w) had granted them " ten wasq wheat, and ten wasq barley at every
harvest; and fifty wasfl of date fruits every year ".17

The inflow of state revenues was mainly from war booties, and perhaps from such
other sources, as Kharāj 'Ushr, Jizya and Zakat. The discussion of spoils of war as a
source of revenue is justified by the fact that one fifth of them belonged to the state
and the remaining four-fifth was to be divided among the soldiers. This in fact, alone,
constituted a state expenditure.18 At that time there was no standing army, and there
were even no material means to organize a similar one. The state was in the making
having no regular revenues.

The problem was solved by the Qur'an: “Behold, God has bought of the faithful tneir
persons and their possession, offering them paradise in return.” (Quran, 9:111)

Military service was declared to be a part of religious duty for every Muslim. For
their aintenance they were allowed by God shares from the four-fifth of the booty
that fell into their hands during their encounters against the enemies. 19

In the Qur'an, the war booties have found expression in three words : (i) al-Ghanima,
(ii) al-Fay', and (iii) al-Nafi. Probably no other single problem of the Shari'a, has
attracted such a wide variety of opinions and statements in the Qur'anic exegesis, in
the commentaries on the tradition, as well as in the works of the Fuqaha' as that of
war booties.

It is generally held that Ghanima is that which, both movable and immovable, is
acquired from the enemies in fighting; and of this one fifth is for Allah or for the
beneficiaries prescribed in the Qur'an: the Prophet, his near relatives, the destitutes,
the orphans and the poor wayfarers; and what remains after the fifth is to be
distributed equally among the soldiers who took part in this war.

Al-Fay' signifies what is obtained from the enemies after laying down arms, and what
is received from any alien people under a treaty, the proceeds of which, according to
the majority of fuqaha', go to the public sector of the Islamic state. According to

17
Culturgeschichte, 1, 262
18
Aghnides, Muhammadan Theories of Finance (Lahore, 1961), p. 205.
19
Hamidullah, "The Military Deptt. of the Muslim State in the time of the Prophet".
Islamic Review, September, 1970.
5
some, however, a fifth of Fay' like that of Ghanima, is to be divided among the
above five beneficiaries.20

It should be noted here that after the demise of the Prophet, the two shares of the
Prophet and his relatives from the fifth of the Ghanima or the Fay' as held by the
majority, were withheld by Abu Bakr, and this practice was followed by the
subsequent three Caliphs also. These two shares were either absorbed in the shares of
the other three beneficiaries, or as some reports say, went to the general public
sector.21

The word al-Nafi, in its wider sense, includes both Ghanima and Fay', but in its
narrower sense it is that which is given to the warrior for performing an excellent job
in the battle-field in addition to his regular share in the booty, or what is given as an
endowment announced beforehand for doing certain specific duty.22 Some say that
this additional payment should be made from the Khums of the booty, and according
to others, from the total amount of Ghanima before its distribution into fifths; in that
case it should not exceed the one-third of the total Ghanima.23

In pre-Islamic Arabia, it was a customary that the commander-in-chief had the right
over the one-fourth of the entire war booty and to him went also the indivisible
fractions. The remaining four-fifth was appropriated by the combatants only. The
other comrades who did not participate in the actual fighting and remained in reserve
or did some other duty had no share at all. The Prophet changed the whole affair, and
now the entire booty was centralized, four-fifth of which was equally distributed
among all the participants of war irrespective of the fact that some remained in
reserve or did other duties under the order of the commander. And the remaining
fifth went to the Prophet as head of the state. Besides, some choice gifts were also
retained by the Prophet.24 Thus the war booties took the place of state revenues
principally to meet the requirements of mi.itary expenditure.

Although, there are some verses regarding Islamic Finance in Quran regardless of
Islamic Communities situations in early Islamic History. Islam looks at wealth as life
sustaining, to be used efficiently. God says: “Give not unto the foolish your wealth
which Allah has made a means of support for you”. (Quran, 4:4).

20
Aba 'Ubayd, K. al-Amwai (Cairo,) p. 254. Muhammad Abduh, Tafsir al-Manar
(2nd ed., 1367/1947-48), 9 : 537, 10 : 3-4.
21
Aba Yusuf, K. al-Kharaj (Cairo Maktaba Salafiyya, 1382/1962-63), p. 21; Ibn
Kathir, Tafsir (3rd ed., Cairo, Matba'a al-Istiqama, 1375/1956), 2:312-3; K. al-
Amwal, p. 332.
22
Tafsir al-Manar, 10:4; Ibn Taymiyya, al-Siyasa al-Shar'iyya (ed. 'Abd Allah
al-Saminan, Baghdad), Maktaba al-Muthanna, pp. 33-4.
23
Al-Siyasa al-Shar'iyya, 34.
24
Hamidullah, "The Military Deptt. of the Muslim State in the time of the Prophet".
Islamic Review, September, 1970.
6
Private ownership is affirmed but viewed as a trust: “Believe in Allah and His
messenger, and spend of that whereof He hath made you trustees.” (Quran, 57:7).
Islam encourages enterprise, efforts to create wealth, which has been characterized
as God’s bounty: “And when prayer is ended, then disperse in the land and seek
Allah’s Bounty”. (Quran, 62:10).
Muslims are obligated to fulfill contracts and keep their promises: “O you who
believe fulfill your undertakings”. (Quran, 5:1)
“…And be true to every promise, for, verily, (on judgment day) you will be called to
account for every promise you made”. (Quran, 17:34)
All exchange should be with willing consent of the parties concerned: “O you who
believe squander not your wealth among yourself in vanity Except it be a trade by
mutual consent”. (Quran, 4:29)
Use of wealth and exercise of freedom of enterprise is constrained by the obligation
not to harm others. The Prophet ruled: “No injury, and no inflicting of injury”. (Ibn
Maja, Sunan: chapter on Ahkam)
This has to be seen in the perspective of the positive obligation to care for others and
share with them. This is symbolized by the well-known duty of paying Zakat or poor
tax. But that is not all, the important thing is the spirit of a cooperative, helpful
behavior as mandated by the Islamic view on life being a test: “Who hath created life
and death that He may try you, which of you is best in conduct”. (Quran, 67:2).
These clear texts provide a sound basis for a positive attitude towards wealth creation
and economic activity in Islam. Clear and secure individual ownership rights, one’s
right to the fruits of one’s efforts and contracts enforceable through a social
authority, strengthen that attitude and provide a wide arena for it.

Structure of the Finance in Early History of Isalm


(based on Bayt Al-Māl)

The Muslims started founding Bayt al-Māl since the time of the Prophet (s.a.w). He
used to appoint the governors and the commanders for the different regions. Every
commander was responsible for collecting Zakah, Jizyah and the fifths of the booty
and Kharaj. Sometime, the Prophet (s.a.w) used to appoint someone responsible only
for the financial affairs to collect the due money for the State including, Kharaj,
Jizyah, Tenths (Zakat on lands, properties and the fruits) and charity and pay them to
7
Bayt al-Māl. The Prophet (s.a.w) did the same with Mu`adh ibn Jabal (may Allah be
pleased with him) when he sent him to Yemen to collect the money of Zakah from its
officials and with `Ubaydah ibn al-Jarrah (may Allah be pleased with him) when he
sent him to al-Bahrain to collect the Jizyah.25

The founding of Bayt al-Māl since the reign of the Prophet (s.a.w) is a clear evidence
on the precision of the Islamic financial systems since this early time. Therefore, it is
natural that Bayt al-Māl develops according to the different ages.

Prophet(s.a.w) applied great methods in early history of Islam regarding collecting,


saving and spending the public treasury (Bayt Al-Māl) at that time, which shows his
management in politics and finance for the benefits of Ummah.

As mentioned, Bayt Al-Mal was collected from Ghanima, Fai’, Zakah, ‘Ushr (Tax)
and was distributed for salary, needy and poor people. The Bayt Al-Mal was not a
charity organisation/foundation - but an independent, stand-alone (yet regulated)
global Muslim social security & welfare system: funded through corporate &
personal Zakah, Sadaqah, Awqaf, Qardh al-Hasanah, etc and it run by the Prophet
(s.a.w) himself.

In the Prophet (s.a.w) the finace system was not complicated so much. Ghanayem,
Sadaqah and what ever came to the Prophet were distributesd among people.

The Hoply Prophet (s.a.w) asked certain people to be responsible of a mission.

Prophet(s.a.w) arranged 10 system such as:

1- Ministry

2- Administrative

3- Technical

4- Finance

5- Diplomatic

6- Milirary

7- Education

8- Dakwah

9- Security

10-Hasbah

25
Abu 'Ubayd: al-Amwal (The Money), P. 41
8
The original Bayt Al-Mal was the name given to the physical building attached to the
Prophet’s masjid and not an organisation. However – over time, the name came
to signify much more than a building and at present, it represents an ‘ideal’ and a
‘symbol/standard’ for Muslims – with a historical/religious link going right back to
the prophet Mohammed himself.26

On 4th year of Hijrah, Bani Nadir lands were the first immovable spoils which could
distribute between Muhajirin. On 7th of Hijrah, Fadak was compromised with the
Holy Prophet (s.a.w) and half of that was “Fai” for the Prophet (s.a.w) and the other
part was for Muslims. Jizyah and Zakat were also distributed among Muslims and
non Muslims.

After 13th of Hijrah, the vase conquests of Muslims, brought them movable and
immovable spoiles, which was in need of collecting and protecting by the
government which was in time of Abu Bakr.27

After the Holly Prophet’s dimise, persons in charge were not competent same as
Hakam Bin Abi Al-‘As, Harith Bin Hakam, Walid Bin Aqabah, Sa’id Bin ‘As who
were treat badly with people and After Uthman, Ali Bin Abi Talib fired and changed
so many of them and explained the conditions of a responsible in a system which is
based on honesty, trustfullness, good treatind and so on.

In Prophet period, Bait Al- Mal and finance was not complicated, Ghanimah and
Sadaqah and what ever Prophet recieved, distributed immidiatly and there were
some people who were in charge;

1- Persons who should collect Sadaqah and Zakat. Udai Bin Hatam, Zibarqan Bin
Badr and Qays Bin ‘Isam were responsible to collect Sadaqah from Bani Sa’d.

2- The holly Prophet (s.a.w) chose Ali Bin Abi Talib (a) to collectSadaqah and
Jizyah in the last years of his life, who was the medium between the first group
and the Hakim.

3- Sometimes The Holly Prophet (s.a.w), himself distribute Bayt Al-Mal among
people, same as what he did in Badr and Hunain, but sometimes he also asked
others to distribute like when Ali Bin Abi Talib, Zaid Bin Malik Ansari and Aba
Sufian were in charge of distributing among Bani Khuzaimah and Bani
Quraizah.

4- There were peolpe who should look and suggest the price on Bayt Al-Mal items
for example Abd Allah Bin Rawahah who put the price on Dates form Ahl
Khaibar.

26
Mawaradi, Ali bin Muhammad, Al-Ahkam Al-Sultaniah wa Al-Wilayat Al-Diniah, Bairut,
1990/1410. P. 354
27
Soyuti, Abd Al-Rahman, Tarikh Al- Khulafā, Published Mohamad Mohi Al-Din Abd Al-Hamid,
Qum, 1992, p. 79
9
5- A person who should record the prices which were more than 23 persons and
After 4th Khalif it was more organaized and developed.

According to Qalqashandi, Umar was the responsible for the Bayt Al-māl. In the
second Khalif period, the more conquesting they had, the more they need an
organaized finance system in the government. The first problem Khalifah faced was
protecting of lands they conquest.

There were

The concept of riba

Riba, is the Arabic term for the prohibition of interest on money. Taking, paying or
witnessing Riba transactions is considered impermissible (Haram).

Riba is commonly translated as usury or interest. Translating a technical term is a


difficult issue. The Quran was not sent at once in came over a period of 22 years in
multiple revelations; the first relevation regarding Riba is those of Sura Al Rum (30),
verse 39:

“That which you give as Riba to increase the peoples wealth increases not with God;
but what you give in charity, seeking the goodwill of Good, multiplies manifold.”

Riba lexically means “increase” and has therefore a different ethymological root than
in English or other European languages. This verse is giving more an advise than an
abolition in the sense that taking money on money, does not increase with God, but
giving money to charity does increase with God.

“And for their taking Riba even though it was forbidden for them, and their wrongful
appropriation of other peoples’ property, We have prepared for those among them
who reject faith a grievous punishment.”28

A verse which is more directed to the Jews and Christians which received prior to the
Muslims the abolition of Riba (Hebrew “Ribbit”).

“O believers, take not doubled and redoubled Riba, and fear God so that you may
prosper. Fear the fire which has been prepared for those who reject faith, and obey
God and the Prophet so that you may receive mercy.” – Third relevation, Sura Al
Imran (3), 130-2

28
Quran, 4:161
10
This verse is directed towards the practice of a prolonged credit with an increase of
the principal; which is called Riba Al Jahiliyya.

“Those who benefit from Riba shall be raised like those who have been driven to
madness by the touch of the Devil; this is because they say: ‘Trade is like Riba’
while God has permitted trade and forbidden Riba. Hence those who have received
the admonition from their Lord and desist, may have what has already passed, their
case being entrusted to God; but those who revert shall be inhabitants of the fire and
abide therein for ever.” Sura Al Baqarah (2) verse 275

The verses after 2:275 elaborating further on the subject and ending with a war
declaration from Allah and his messenger for those who still go on taking Riba. This
verses are the strictest against this practice to be found in the Quran.

The other important primary source are the sayings of the prophet (pbuh) which are
authenticated by scholars with a chain of known reliable persons transmitting them.

“Gold for gold, silver for silver, wheat for wheat, barley for barley, dates for dates
and salt for salt – like for like, equal for equal and hand to hand. If the commodities
differ, then you may sell as you wish, provided that the exchange is hand to hand.”

Based on these saying an increase in money is abolished even without passage of


time; the six commodities were used as money. The contractual implication are the
conditions of simultaneity and equality. An increase without passage of time is
referred to as Riba Al Fadl in the literature.

“From Anas Ibn Malik: The Prophet, peace be upon him, said: ‘When one of you
grants a loan and the borrower offers a ride on an animal, he should not ride, unless
the two of them have been previously accustomed to exchanging such favors
mutually.”

The above saying refers to Riba Al Nasiah, which occurs when there is delay in
closing a transaction in any of two types from the six commodities mentioned before,
whether there is an increase or profit or not. The exchange is permitted, however, if
one type is currency and one type is not. According to this saying the amount of Riba
is not subject of the conditions, even gifts should be avoided. And therefore the
commentaries of the Quran agree that Riba is forbidden, whether is small or high.

A working definition could be as follows:

“Riba is named any increase in money to be paid regardless time based on contracts
about money itself (loan).”

It is credential to understand that the term “Riba” has its own genuine meaning
derived from those sources and that interest has different roots and usage. Islamic
11
law basically differentiates between profit, interest and rent, which in most European
languages are differently used. From the Islamic perspective this distinction is
crucial. One argument to bear in mind is that the increase (riba) in money enables the
vicious circle of indebtment; while the Islamic ruling should prevent this from being
happen without hampering trade.

It shall be noted that the abolition of Riba is known in Judaism and Christianity as
well and named in Hebrew “Ribbit” with the same linguistic meaning like in Arabic:

XXIII, 19-20 Book of Deuteronomy: “You must not lend on interest to your brother,
whether the loan be of money or food or anything else that may earn interest.”

Also the new testament shows similar content like the Quran:

Luke VI: 34-35: “And if you lend to those from whom you hope to receive, what
thanks can you expect? Even sinners lend to sinners to get back the same amount.
Instead, love your enemies and do good, and lend without any hope of return. You
will have a great reward, and you will be sons of the Most High, for he himself is
kind to the ungrateful and the wicked.”

“O you, who believe, fear Allah and give up what remains due to you of interest if
you are indeed believers.” (al-Baqarah: 278)

Riba is an element that contaminates your money. The Qur’an and numerous
authentic Hadith remind that riba is strictly prohibited in Islam. Whether one is
paying off interest, a recipient of interest on a savings account or facilitating the
enactment of an interest-based contract, Muslims are liable to be frowned upon by
Allah (SWT) (Bukhari).

Riba is defined as an increment in the repayment of a loan and a passive stream of


income.

Car loans, housing loans, education loans, personal loans, and overdue credit card
bills... all of these comprise interest. Preferably, Muslims should only engage in
Islamic loans, those that are not riba-based. Where there is no choice, Muslims
should look into repaying outstanding debt quickly. Funds or savings from
investments such as unit trusts or other savings plans should be used to pay-off
interest-ridden debt.

On the other hand, if savings accounts thrive on interest, Muslims are disallowed
from keeping this money. “Do not earn from interest!” reminded Prophet
Muhammad (s.w.a) in his final sermon.

12
Muslims are to save money in Islamic savings accounts (that pay dividend).
Otherwise, interest income has to be disposed of to charitable causes in order to
purify our money. This does not constitute zakat.

Make money more Islamic!

Islam has always advocated the rights of women – especially the exclusive right to
income. However, it is inappropriate to abuse that right by ignoring Allah (SWT)
commandments regarding money.

Paying zakat not only reminds Muslims of their ability to earn an income and curbs
indulgences in aesthetics and material whims. By avoiding interest, Muslims avoid
transacting with service providers that are fed by passive income.

13