"Our Dialogue" 6th Edition Rev

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If he is so troubled by the fact that he works for a commercial bank which does not implement the Islamic system, he should try to change his job. If he takes up a teaching or accounting job, God will reward him indeed for quitting his job in order to live in accordance with Islamic teachings. We may all be contaminated with the banking system that is based on interest, but many of us are not so heavily involved, and those are certainly in a better position than whose who help to operate that system.

Working for an insurance company is not objectionable unless there are particular reasons to make it otherwise. What we are talking about here is how does the insurance company invest the money it receives from its customers as premiums. If it invests them in a usurious way then working for it is the same as working for a bank. If it invests them in legitimate businesses, then there is nothing wrong with working for it. Many people tend to think that insurance is forbidden. I have explained on several occasions that it is not.

• Bank employees: Prayers at the Bank's premises

Some magazine contained an article saying that the fact that a bank pays and receives interest on its loans and deposits makes it forbidden to pray there. How does a bank employee solve this problem. Some employees offer their prayers at the Bank while others are influenced by the statement that bank is a forbidden place for prayers.

If you are working for a bank which runs its business on usurious basis, then you must try to get yourself moved to a job which does not involve much handling of usurious transactions. There are certain aspects to the work of any bank which may have very little to do with interest or usurious charges. If one does a job of this type, no blame may be attached to him. It is even better to try to find an alternative job, away from a usurious bank. One need not leave his job in the bank until one has another job lined up.

As for prayers within the bank premises, the Prophet says : "The whole earth has been made a prayer place and a source of purification for me." That obviously includes his followers in all generations. Every place on earth may be a prayer place for a Muslim. Similarly, every spring of water can be a source of purification. In the absence of water, we may resort to dry ablution ( Tayammum ), which uses clean dust for purification.

What the argument entails is that the actions done in a particular place may render it unfit for prayer. Such a view cannot be given haphazardly. It must be supported by firm evidence. The fact is that only the absence of purity in a particular place renders it unfit for prayer. If some impurity falls on a particular spot, we must not pray in that spot until the impurity has been removed. Here we are speaking of physical impurity. This does not apply to what may be considered mental impurity, such as forbidden practices.

There is no statement in the Qur'an or in the Hadith which suggests that the home or office of a money lender is unfit for prayer. We may have to adopt a certain position towards people who are engaged in forbidden practices, but that is a different matter altogether.

Those who pray in the bank do better because they are keen to offer their prayers on time. To leave obligatory prayers, is certainly wrong.

• Banking; An overview of the system

Are 'riba' and interest synonymous? There exists a general impression that transactions involving all forms of interest are forbidden in Islam. Perhaps an international debate amongst Muslim scholars and religious leaders on this important issue is necessary. What is submitted here are thoughts of a layman who, like most others, is beset with many doubts concerning this rather complex matter. Almost every one agrees that Islam desires the development of a fair economic and commercial system that will prevent wealth from being inactive or concentrated in the hands of a few. Instead it encourages its continuous circulation and utilization so that the whole society becomes prosperous.

Circulation and utilization of wealth presupposes an arrangement that will permit the pooling of our individual resources in some shape or form, especially in an industrialized society. Not everyone that possesses capital can become an entrepreneur, nor does everyone with commercial acumen possess enough wealth to finance all the projects he may be able to manage efficiently. Thus a way has to be found which will enable the entrepreneur to borrow funds from those who cannot put them to good use, and, most importantly, make him share the profit of this venture with the lender on an equitable basis. Now, it is obvious that not everyone with money to spare can find an entrepreneur whom he can trust and who needs exactly the amount that is available for investment. This is particularly [true] of small savers (e.g. widows, peasants, small income earners, etc.) not well versed in business matters. Also if the entrepreneur needs to locate and enter into partnership with a large number of small investors, he may find the task wearisome and would not have much time left to attend to the business. Therefore, it seems that a pooling center or a clearing house would need to be set up to bring together the investor and the entrepreneur, ensuring that the legitimate interests of both parties are adequately safeguarded. Without such an arrangement, it would not be possible to collect funds from small savers and make them available to those who need them, especially if this is to be done after due scrutiny and securing reasonable guarantees. This process requires financial and business expertise which can only be provided by a group of properly qualified professionals and not by individual investors themselves.

In the system that prevails in almost all countries today, this function is provided by the banks, that secure deposits from individuals and then give loans to businessmen after due scrutiny. The bank charges interest on the money loaned and after deducting its own expenses and profit, passes it on to those whose money it had so utilized. Current practices also allow for the rate of interest charged and paid out to vary according to the market conditions, and the rate does not necessarily remain fixed at a predetermined figure. Thus, both the saver and the entrepreneur gain or lose as a result of the market conditions and this, perhaps, satisfies the requirement of a partnership between the borrower and the lender where the profit or loss is shared equitably.

Needless to say, the interaction of a bank makes all lending and borrowing deals impersonal and virtually eliminates the chances of disagreements and disputes between individuals. Also the banking institution is able to cater to the changing demands of the lender and borrower, both with regard to the amount and period involved, which simply will not be possible if the borrower has to deal directly with the lender. All this makes for more efficient utilization of available resources. But not even banks can really become full partners in all business ventures they finance for two reasons. First it is not their line of business and secondly the overheads would become too much of a burden.

Now the objection against the current banking system is that it is based on interest which is forbidden in Islam. Perhaps here we need to consider the matter carefully and dispassionately and determine what is the real substance of what is forbidden. The word used in the Qur'an is 'riba' which has not been defined but, perhaps, an insight into its meaning can be gained by examining its context. Many scholars are of the view that an essential component of 'riba' is an exploitation of the needy borrower by a lender. If, for instance, a widow or an orphan or an unemployed person is loaned money by an individual on the condition that the amount returned would be greater than the amount borrowed, then it would be an attempt to benefit from someone's misfortune and this would certainly fall within the ambit of 'riba', but if a businessman obtains a loan to expand his business and increase his profits, surely there is no element of exploitation in requiring him to pay a charge for use of money given to him. After due deductions, this amount is passed on to the individual depositor. Thus, there is no suggestion of any exploitation of a borrower or a lender in such a deal. Indeed, this is a simple business or commercial deal where both the borrower and the lender are subject to the vagaries of the market-place. This becomes even more so when one considers the modern phenomenon of inflation which causes the purchasing power of currency to vary as a result of market forces and even fixed rates of interest do not really remain fixed.

The saving schemes floated by various governments also fall under business loans as the money collected is spent on development schemes and infrastructure which, in turn, spur greater commercial activity and create more employment. Again, there is no question of the saver taking undue advantage of the borrower. Another element that needs to be considered is that hardly anyone objects to letting out a house or shop on rent although the rent is a fixed amount. Now, it may be argued that basically a building or money are various forms of the same commodity capital. Thus, if rental of a building is permissible and does not contain an element of exploitation of the poor and the needy, why should borrowing money be otherwise.

We Muslims have generally started equating all forms of interest with 'riba'. What may have been understood by learned and pious men hundreds of years ago, however valid in the conditions prevailing at that time, may not necessarily be rigidly applicable to situations and forms of transactions that have evolved only recently. Many discerning people are of the view that perhaps the nearest equivalent of 'riba' in current parlance is usury where money is loaned at exorbitant rates to those in a tight corner in an effort to profit from their misfortune. They do not think that the term 'riba' can really be applied to the current form of commercial interest charged or paid out by a financial institution. Surely what we need to do is to understand the spirit and the essence of the original Qur'anic message, and not put ourselves into a straight jacket of semantics. Occasionally a term used in one language does not have an exact equivalent in another. Therefore, we should not, I think, attempt at translating an essentially untranslatable term, 'riba', into a multifaceted term in another language, 'interest'.

It is very interesting to receive a letter like this one in which a reader argues a case in an orderly relaxed manner, defending his point of view and airing thoughts that are inevitably shared by numerous other readers.

My reader argues that the role of the bank these days is that of a medium, facilitating the all beneficial need of introducing savers to businessmen. Thus the money of the first is made available to the second who are thus able to utilize their expertise and business acumen in order to ensure the growth of the investment. He argues that there is a strong need for this service which is provided by banks which actually act in this respect as clearing houses. That there is such a need cannot be doubted. But whether the system operated by the bank satisfies Islamic requirements is a totally different matter. My reader tries to show that it does meet its requirements, particularly the changes required in the rate of returns on investment.

When the objection is raised to the interest system on the basis that the returns are fixed in advance, some people think that if the rate of interest changes then that objection is met. We find this argument clearly exposed by our reader, who goes to the extent of saying that if the rate of interest drops, then both the depositor and the borrower lose. If the rate of interest goes up, both of them are bound to benefit.

To start with, this is not correct. Fluctuations in the rate of interest affect depositors and borrowers in opposite ways. If the rate of interest drops, the borrower is pleased because the charge he has to pay to the bank on his loan becomes less, and he benefits as a result, while the saver or depositor receives less on his money, which is something definitely unwelcome to him. The same is true when the rate of interest goes up. The depositor is pleased because he receives more, but the borrower is displeased because he has to pay more. In business, partners either profit together or lose together. If you are a sleeping partner in a business, your share increases at the same time as that of the active partner, because the income comes from a better performance in the business. When the business does not do all that well, both your shares drop.

Moreover, changes in the rate of interest do not reflect the performance of the particular business project in which your money has been placed, they only reflect the situation in the money market which is affected by considerations totally different from how individual businesses are performing. Changes in interest rates are determined by central banks which have a totally different role from that of ordinary banks and in isolation of individual business performance.

Moreover, the depositor will never share in the loss of the business in which his money is invested. Suppose you have deposited a certain amount in a bank and the bank gives this total amount to a borrower who runs a particular business. It so happens that the project in which money has been invested fails and makes considerable loss. What is your position at the end of the year? You will still receive the interest agreed upon between you and the bank, allowing for any changes in between, and you will not even bother to know to whom your money was lent and what sort of performance it made. We cannot in any way associate this banking transaction with the partnership approved by Islam in which both investor and borrower are actual partners and they share in any profits or losses. The fact is that there is no partnership whatsoever in the arrangements made between the bank and its depositors on the one hand, or between the bank and its borrowers on the other. There are two separate transactions which the bank is happy to run, because at the end of the day, it stands to make much profit. You need to look at the announced performance of leading banks in most countries to discover that they actually make huge profits which come mostly from their running this facility.

Besides, one of the basic functions of a bank is to make money available to those who need it. This raises questions on the whole operation because it facilitates for its depositors taking the position of lender. Muslims generally would rather not have the dubious privilege of becoming lenders either to business projects or indeed for any other purpose. It is far easier for us to consider an "investment" role for banks. But this relates to a different aspect of banking operation. Leading banks nowadays operate systems for investing the money of their depositors, putting it in shares and stocks. Such systems are much easier to sort out so that they become acceptable from the Islamic point of view. But when the bank is lending out our money at a profit, then it places us in a position of a lender who gets back more than the principal he lent. The fact is that when you lend someone else an amount of money and you agree with him either explicitly or implicitly that the amount he will return to you at the end of the period of the loan will be more than what you paid him, then this transaction is 'riba', or, to use the proper English term for it, "usurious". The Prophet says: "Every loan that brings in a gain is usurious." It is perfectly permissible that a person who has borrowed money from another pays it back and gives the lender something extra, a gift perhaps or an increase in the amount, but this must not be the result of any prior agreement between them, either explicit or implicit. Indeed, there should be no hint that the lender will be getting anything other than the amount he had advanced. My reader makes much of the differences between what a bank does and the money lender does, to the extent that he prefers to use the Arabic term, 'riba' and makes it clear that he is against usury. At the end of his letter he claims that 'riba' is "an essentially untranslatable term." In this he is totally mistaken because riba is a simple Arabic term which means, from the linguistic point of view, "excess."

In a financial transaction, 'riba' refers to the payment of something over and above what has been given in the first place. Early Muslim scholars have told us what is exactly meant by 'riba', when they said that the person would borrow some money for a specified period. At the end of that period he would go to the lender and tell him that he is unable to repay the loan and requires an extension of it. The extension is granted on condition that the amount he repays will be higher. Is this not practiced by banks today? Does the bank charge you the same amount if you repay your loan over three months or six months or a year? Do you not pay much more interest when you make your repayment over an extended period?

Besides, who says that banking arrangements do not exploit the weakness of those who need the money? My reader gives the case only of people who have business acumen, but what about borrowing from a bank for a specific purpose which is not expected to generate income, such as buying a car, or indeed a diamond ring for your wife? What does a bank do after the collapse of a business project to which it had made some advances? Is it not true that there is no consideration of the weakness or the status of the borrower? Instead, receivers and liquidators are called in without any regard to the terrible position in which the borrower finds himself.

Nevertheless, I have said in the past that the interest system is not exactly synonymous with the usury as it was practiced in the pre-Islamic days. Nevertheless, there are aspects of similarity between the two which are, in the view of most Muslim scholars, sufficient to make the interest system forbidden from the Islamic point of view. If banking facilities are to be made lawful, the first thing that is required is a thorough discussion of the various aspects of the banking system, to be conducted between bankers, economists and Islamic scholars. Who will bring about such a discussion, and when, is far from clear. We can only hope that someone will start the ball rolling.

• Banking: PLS Bank Accounts in Pakistan

I have not made any judgment on that [ the banking ] system as such. I have answered readers' letters which spoke about certain accounts and transactions. Let me say clearly that I do not have sufficient information about the banking system in Pakistan to make a judgment. What I know is that the government has declared that it is bringing that system into line with Islamic teachings. How far has it gone with its declared objective, I am not in a position to judge. When a reader tells me that he has deposited some savings into a profit and loss sharing account, I give him my opinion that it is permissible to accept any returns on these deposits. What this means is that we accept at face value what an institution like a bank in Pakistan tells us. If that institution tells us that we will have a share of profits and we will bear a share of any loss, then the transaction is permissible. If, however, it transpires that the claims of the bank or the financial institutions are merely made to attract deposits, while the system itself remains the same as the Western type of banking, then that claim should be rejected. Our attitude should be based on two elements which we apply concurrently; trust and reasonable inquiry. We accept on trust the statements by a bank but we should also undertake a reasonable degree of inquiry to determine whether the claims of the bank are correct or not. We do not reject such claims out of hand, nor do we accept them blindly.

• Bath with pants on

Some people insist on having their pants on when they take a bath for grand ablution. Is this correct?

When we take a bath as a religious requirement, such as to remove the state of ceremonial impurity or on a Friday, we should make sure of properly washing every part of our bodies. At the same time, when a Muslim takes a bath, he should not allow his private parts and the area close to them to be seen by anyone. If one is taking a bath in the type of bathroom which we have nowadays in our houses, there is no need to keep one's pants on while taking a bath. Indeed, it is better to remove them, in order to make sure that every part of one's body is properly washed. On the other hand, if one is doing his grand ablution by a dip into the sea or a swimming pool, or indeed having a bath outdoors, he must make sure that he is properly screened. Otherwise, he may wear something to prevent himself being seen.

• Becoming a Muslim: How to become a Muslim

What are the procedures and requirements if one wishes to convert to Islam?

The adoption of the religion of Islam is very simple. Nothing is required except a declaration by the person concerned that he believes in Allah as the only God and in Muhammad, peace be upon him, as His messenger. What this declaration actually means is an acceptance that worship can be offered only to Allah and that the authority to legislate rests solely with Allah. Man's position is to obey and implement Allah's laws, whatever they are. Should the law of any authority, government, parliament, society or tribal council clash with Allah's laws then the latter must be implemented without any question. The Prophet says what may be translated as follows: "No creature may be obeyed in what constitutes disobedience of the Creator."

Now, how do we know Allah's legislation? The second half of our declaration provides the answer to this question. Our acknowledgment of Prophet Muhammad, peace be upon him, as Allah's messenger means that we accept him as the man through whom Allah has conveyed to us the code of legislation He wants us to implement in our lives for our own benefit. It is through Prophet Muhammad, peace be upon him, that the Qur'an has been sent down to us as the book containing the divine constitution for human life. Prophet Muhammad's own pronouncements serve as an explanatory memorandum for the Qur'an, providing the details of what the Qur'an may state in general terms, and giving us guidance on how to implement the Qur'an in our lives. Thus, obedience to Allah necessitates obedience to His messenger. Indeed, Allah commands us: "Whatever the messenger gives you, accept it, and whatever he forbids you, refrain from it."(59;7)

Thus the declaration means that Allah is the only God to be worshipped, that obedience to Him and submission to His law is an essential part of worshipping Him and that Muhammad, peace be upon him, His messenger, is the one who has taught us how to worship Allah and conveyed to us His laws.

Anyone who makes this declaration, fully convinced of it, is a Muslim. The Arabic wording of the declaration is: "Ashhadu an la ilaha illallah, wa Ashhadu anna Muhammadan rasolullah." This translates as follows: "I testify that there is no deity save Allah and I further testify that Muhammad is His messenger." Once this declaration is made by anyone, in full consciousness of its significance, then the person making it becomes a Muslim. Anyone who is embracing Islam is required, however, to have full ablution, that is, a complete bath at the time he makes the declaration. This is a gesture which symbolizes washing off all one's past misdeeds. No Muslim is held accountable for any thing he or she did before adopting Islam.

When one becomes a Muslim, one is required to do all the things Muslims do and to refrain from all those things which are not allowed to be done. This should not prove difficult as many people do observe Islamic teachings throughout the world. It requires, however, a fair measure of determination to conduct one's life in the manner which is sure to win Allah's pleasure.

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