The Rehbar Financial Consultants (RFC) June 2014 Dinner Meet: A Public Gathering against Interest

An important aspect of the Islamic economy is its interest-free financial dealings. There are several Ahādīth and verses from the Qur’an which strictly prohibit any dealings in interest. In the Qur’an, Allah (swt) has declared war against those who deal in interest, irrespective of whether they are givers or takers, writes AMMATUL HAKEEM.

A relatively recent event organized by Rehbar Financial Consultants (RFC) on 7thJune 2014 on the role and feasibility of Islamic banking in the contemporary world gathered together a large audience that cut across a wide cross-section of Bangalore society.

The chief guest for the occasion, Ashraf Mohamedy, Director of IDAFA Investments Pvt. Ltd., Mumbai, delivered the keynote address. In the main, he posited the view that though adopting interest-free finance in an interest-based economy is a major challenge, this is the only solution to prevent the complete downfall of the crumbling economy of today. With the growing realization that both capitalism and socialism have proved unhealthy for a sound economy, the time is ripe for the Islamic Shari’ah-based banking and financing to take over the market.

He elaborated on both capitalism and socialism explaining their ill-effects on the economy. Capitalism is purely ownership-based where production, distribution and marketing is, most often, controlled by the private investors, who tend to make more money for every investment they make. This system, in consequence, widens the economic rift between the rich and the poor. Giving an example, Mohamedy cited the findings of the United Nations, put forward as the Human Development Report (1998), where it says:

“About 225 richest people of the world own more wealth than the 2.5 billion poor and the three richest people of the world have wealth equal to GDP of 47 poorest countries of the world.”

The report further confirmed:

“If 225 of the most rich paid a wealth tax of 4%, that would be enough to eradicate world poverty.”

On the other hand socialism is a system where the government takes over the ownership keeping production, distribution and marketing under their control. This de-motivates the people and keeps them from fully utilizing their potential and, therefore, the economy takes a steep fall. Suggesting a solution to the economic problems of the present day, Mohamedy briefly explained the Shari’ah-compliant economic system thus:

“In an Islamic economical system all the activities are based on justice and equity. Allah (swt) is the only owner and every individual is just a trustee of God’s trust. Islam strongly recommends the practice of both Ibādāt and Muāmalāt, where the former restricts the move towards the forbidden and the latter makes one appreciate and fully utilize the bounties made permissible to the humans.”

He further stressed on wealthy Muslims paying their Zakah and Sadaqa by the rich, which forms the back-bone of the Islamic economic system. “Zakah, if paid properly by all rich Muslims every year, would permanently eradicate poverty,” he commented.

Another important aspect of the Islamic economy is its interest-free financial dealings. There are several ahādith and verses from the Qur’an which strictly prohibit any dealings in interest. In the Qur’an (2: 278-279), Allah (swt) has declared war against those who deal in interest, irrespective of whether they are givers or takers. The prohibition against interest is not unique to Islam; the scripts from other major religions, too, condemn interest or usury. Mohamedy narrated a few excerpts from Manu Smriti (Hindu law) and the Bible, which clearly prohibit the dealings with interest.

The loans borrowed by the developing countries on the basis of interest have been futile for their progress. There have been many western intellectuals who have expressed their concern over the interest-based banking system. Thomas Jefferson, third president of the United States said:

“The system of banking is a blot left in all our constitutions. I sincerely believe that banking institutions are more dangerous than standing armies; and that the principal of spending money to be paid by posterity is but swindling futurity on a large scale.”

Further explaining the concept of Riba, Mohamedy said: “There are two types of Riba,

  • Riba al-Nasi’ah – which is interest on loans, or money earned by money
  • Riba al-Fadl – which involves exchange of superior quality of goods with inferior quality in the same transaction. Other forms of unjust dealings which have been forbidden in Islam also come under this category.

He further said, “Interest contributes to 96% of inflation in a society, with inflation comes lack of demand, lower production, job cuts, unemployment, social unrest, chaos and anarchy.”

Delineating the difference between interest-free banking and the interest-based conventional banking system, he said:

“The former is entirely based on equity, where profit and loss is equally shared between the two parties, whereas the latter has Mudāraba (Fund Manager), Mushāraka (venture capital and PE funding), Ijara (leasing), Murābaha (cost plus) and diminishing Mushāraqa, which is the innovative form of financing.”

He concluded his note by naming a few Islamic banks which have successfully established themselves globally like, Noor Islamic bank, Meezan bank, IBB, and Citi bank – Dubai.

This session was followed by a series of questions by the audience. A brief talk was given by Sherif Kottapurath explaining the mission, role and approach of Rehbar Financial Consultants (RFC) in business financing. He claimed RFC as a Shari’ah-compliant value creation for business and investors, with equity, trust, integrity and transparency as their core values.


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