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Abstract
The main aim of this article is to study and find out more about the prohibition of usury. Muslims are prohibited from taking any kind of usury. Usury has obviously been banned without any disagreement by scholars. There are some Quran verses and hadith prohibits usury. Therefore, usury must be avoided by Muslims. Usury used in buying and selling, loan and other transactions. Usury makes the borrowers more difficult if they make loan. Increasing interest rates allow borrowers to have financial problems. Some borrowers do not pay on a fixed date make the interest rate higher. Deregulation price produces negative external factors that make restrictions on usury. Question that always play people mind are; why usury should be prohibited? Why Islam does not allow prohibition? Which verse of the Quran describes usury is illegal? This qualitative research is using library research and using documentation. This approach is used so that loan transfers have no element of usury.
INTRODUCTION
Usury is the act of lending money at an exceedingly high interest rate, and this rate and this rate is normally regarded as illegal by law. Islam prohibits the acceptance and payment of usury or charged interest. Therefore, all operations of Islamic banking must be conducted without element of usury. A great majority of Muslim intellectuals are of the opinion that only is the practice of usury immoral, but that it also hinders the growth of society. Usury is seen to cause ones wealth to erode, to be the source of immoralities and to create classes in society, thus creating friction. Usury may also bring about a situation where the rich become the rich become richer and the poor poorer. Why does Islam prohibit Muslims from accepting and giving usury? It seems that usury was a pre-Islamic business practice by which money or commodity lent to a borrower by a lender doubled and tripled itself with the passage of time so that the borrower had to pay to lender many times more than what he had borrowed. This caused great economy misery to the people who borrowed money or commodity to meet their vital needs. This pre-Islamic Arab society had a number of other usury bearing dealings, especially in the six commodities which are not covered by the Quranic ban on usury.
RESEARCH METHODOLOGY
To achieve the aim of this study, qualitative research has been using in this article. Besides, this data was taken through library research as a method for data collection. The data were analysis properly by the content.
In line with its function as the original and external source of Syariah law, the Quran neither defines usury nor provides any detailed explanation of usury (Ahmad,1992). The prohibition of usury is revealed in Quran which serves as a universal and fundamental guideline for Muslims. Hadith, on the other hand, is a source of reference which enables Muslims to confirm or to acquire further explanation on the rules stipulated in the Quran. The hadith reports prohibition of usury in numerous accounts. Sometimes there are slight differences among the narrators. Hadith related to usury can be classified into three areas, namely directive Hadith, explanatory Hadith and reminder Hadith. Directive Hadith is Hadith that prevents Muslims from dealing in any kind of usury. Explanatory Hadith is Hadith that explains the types of usury and the circumstances of trade that generate usury. Reminder Hadith is a Hadith that visualizes the consequences for those who associate themselves with usury. This classification is however not absolute. There is a possibility that some Hadith belong to more than one classification. For instance, the Hadith which says, Gold for gold, silver for silver& is suitable for both the directive and explanatory categories.
The interest on loan violets these two rule. Loan involves an exchange of money (commodity) but the exchange (payment) is deferred sometime in the future. This exchange violates the first rule. Next, the amount exchanged (future payment) is in excess of the principal amount, which violets the second rule. One may argue that usury represents as an opportunity cost to the lender, which they could earn by investing the same amount of money in other profitable ventures. However, the concept of opportunity cost in this context refers to a chance to earn profit, without certainty. We cannot be sure that the lender will get to earn the exact rate of return (opportunity cost) if he were to invest his money elsewhere. Hence, earning a profit from a trade is not the same as an opportunity to earn a profit.
Then, how does interest on money capital (usury) differ from the exchange of trade? Trade generates profit, which is an amount of money add to the cost of goods is known as mark up. The seller charges a mark-up price to cover his expenses and to compensate his effort and for taking risks to bring the goods or services to the market. Hence, profit is earned as opposed to interest on loan, in which the lender gets his interest without putting in any effort or putting the money into productive use. We can see here that usury and profit are different because each is earned in different ways. In addition, wealth can be generated from trading activities. Money however is not considered to be real wealth. It is merely a medium of exchange that facilities the flow of trade, a standard of value, a unit of accounting and store of value. Usury transactions deviate from these functions of money.
The following verses of the Quran expressly prohibit usury. We need to note the prohibition is unequivocal and the condemnation of the usury-based transaction is very strong and without compromise.
Allah deprives usury of all blessing charity; He loves not the ungrateful sinner. (Surah Al-Baqarah, 2; 276)
O, believers! Fear Allah and give up what is still due to you from usury if you are true believers. (Surah Al-Baqarah, 2;278)
If you do not do so, then take notice of war from Allah and His Messenger. But if you repent, you can have your principal. Neither should you commit injustice nor should you be subjected to it. (Surah Al-Baqarah, 2:279)
Oh, you believe! Devour not usury doubled and multiplied; but fear Allah that you may prosper. Fear the Fire which has been prepared for those who reject faith and obey Allah and the Prophet so that you may get mercy. (Surah Al-Imraan, 3:130)
Islam encourages business people to create and grow their wealth through trade as opposed to usury-based lending and transactions. Loan on interest allows the lender to increase his or her wealth without any effort. This action implies a lender is appropriating a borrowers property without giving him anything in exchange. In Islam, a mans property is sacred for which it is meant for satisfying his needs. Charging interest loan and requiring the borrower to pay a higher amount than what he owes is akin to taking his property from him without giving him something in exchange. This type of transaction is unfair because one party receives greater value than the counterparty (borrower). The lender receives higher benefits at the expense of the borrower, which can be seen as taking advantage of the latter.
Usury is also prohibited due to the negative effects it brings to society. It encourages people to be lazy instead of working to earn money to sustain their life. One can earn money by charging interest without working for it. Islam encourages people to put their money into productive use by participating in trade. The prohibition against usury applies to both the one who imposes it and the one who pays it. Islam encourages Muslims to engage in partnership and sale of commodities. Islam forbids debt contracts but encourages sale and partnership contracts.
Usury-based lending promotes inequalities of access to funding and subsequently income and wealth. Banks will only lend to big business with establish financial means to ensure safe return. New and small businesses without the financial strength are usually assigned lower priority and face difficulties in gaining access to financing from banks. Further, the unfair usury-based transactions in the long term propagate a divided society between debtors and creditors. In the end, the rich will be richer and the poor will be poorer. This situation is against the emphasis of Islam to create balanced economic development by wealth sharing as opposed to making a few wealthy creditors wealthier at the expense of the majority.
Islam also strongly forbids in transactions. Usury is associated with loan interest and exchange trading. It is prohibited because the payment is deferred in the future and the interest amount is in excess of the principal amount. The lender receives greater value than the borrower at the expense of the borrower. Further, this excess amount is unjustified because the lender increases his wealth without putting any effort. Islam believes in productive effort to create and grow wealth. Money has to be employed in productive activities such as trading before one can generate wealth from it. In barter trading, any exchange must be of equal amount or values). If the value or amount of a commodity exchanged is less or more than the other commodity, then usury occurs.
According by hanafis, the exchanged countervalues are all measurable or all weighable and belong to the same genus. For example, the sale of wheat for wheat. No gain permitted in a hand-to-hand transaction and no deffered transaction, even without gain. The exchanged countervalues are all measurable or all weighable but belong to different genera. For example, the sale of gold for silver.
According by shafiis, the exchange countervalues are all currencies or all foodstuffs and belong to the same genus. For example, the sale of gold or dates for dates. No gain permitted in a hand-to-hand transaction and no deferred transaction permitted, even without gain.
In Islamic business it is considered as a very honourable activity. It is called a worship and also the Sunnah of the Prophet SAW. For those who carry out traders ‘activities with trust, they are promised a good reward of heaven with the prophets, the righteous and the martyr.’ However, if it is done outside the limits of the Islamic Shariah then it is no longer a ritual but an activity that can bring about the
destruction of the world and the hereafter. Anyone whodoing business whether small or large but still in business, has a high rank and position in the presence of Allah SWT. Uusry leads to a bad influence in a business that can lead to risks and failures in doing business. In carrying out business, the practice of usury should be avoided by Muslim. Good traders and goodwill Allah SWT is a trader capable of doing business in accordance with Islamic law, free from usury whether in getting capital, making savings, investing and the like. The person who tells usury is halal will be disbelievers and dismissed from Islam, because usury is one of the great sins that must be avoided by a Muslim clearly mentioned in the Qur’an and Sunnah about his ban.
Riba al-buyu is the usury which arises in the contract of trading of ribawi items and occurs in two situation. The first situation being the trading or switch of two usurious items with differences in weight or quantity. The second situation being the trading or exchange of different ribawi items but the exchange takes place in adjournment. Thus, the suspension is considered usury. As stated in the hadith narrated by Muslim, this deferred exchange conflicts with the terms and conditions applied in the switch of ribawi items.
Riba al-duyun is the usury that happens in the contract (aqad) of debt and loans. This type of riba also appears under two circumstances. The first appears when an additional rate or benefit is applied to the total amount of the principal loan. The second situation appears when the additional rate or benefit exceeds the total amount of the basic loan imposed due to the borrowers failure to pay the stated loan repayment amount at the agreed time.
CONCLUSION
Based on the article, we can conclude Islam forbids its followers to accept and give usury. This prohibition is clearly stated in the Quran and Hadith. Islam offers a definite guidance which forbids Muslims from dealing with usury. The prohibition of usury is revealed in four chapters in the Quran. Hadith related to usury can be classified directive Hadith, explanatory Hadith and reminder Hadith. Guidance given by both sources had prevented any serious conflicting views on usury among Muslim scholars. All scholars concurred that usury is illegitimate or haram regardless of the size of the loan. Furthermore, all types of usury are considered illegal regardless of whether they originate from productive loans or consumption loans. In general, leaving aside the prejudice attribute to religious interest or practical motive, it is clear that all almost all historical errors about the scholastic usury theory arise from a single failure to consider the theory broadly enough, to take into account either the multiple character of its foundations, theological, economic, and legal, or the multiple aspects it presented in practice, particularly the aspects under which it encouraged the growth of interest titles and above all the use of alternative methods of credit besides the loan. Once money is viewed as productive, making a loan will automatically involve lost profit, and once a rate of inflation is established, ones money depreciates in value over time, resulting in loss. It can be strongly argued that these two extrinsic titles to interest can now be considered an intrinsic part of every loan that is made. In fact, today there is an established market rate of interest, a common estimate of how much this loss is. This does not mean we should not retain the parts of the usury teaching that can still apply today. Many commendable practices fall under this umbrella: debt reduction for developing counties on an international level; the elimination of loans which are made at exorbitant rates of interest among private individuals and in third world countries; low-interest or interest free of loans for poor yet resourceful entrepreneurs. Finally, the usury prohibition also affected the development of economic patterns.
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