Islamic banking and debate on religious status of bank interest

There is a query whether the purpose of interest during the time of the Prophet (s) and that of today is the same or not. Reply to the query is usually required to assess whether Islamic banking, as a separate discipline, is essential or not.
Nature of interest (or any interest-based transaction) of the time of the Prophet Muhammad (PBUH) may differ from that of today. This difference may relate to its application, implication and/or its purpose etc. Conversely some of the basic features of interest between any two periods may/may not necessarily differ. Mere difference of purpose can not change the religious status of interest.
Again, the question of similarity or difference is not limited to the issue of interest only. The same question may also be equally raised in respect of any other 'do' or 'do not' advice of the Quran. For example, wine is prohibited in Islam. But wine of earlier days may be similar or different from that of today. It may differ in respect of processing manner, refining level, hygienic quality and proportion of ingredients of mixture. It may also differ in respect of the purpose of drinking by different persons.
Similarly, gambling of the medieval time differs from that of the present days. Now-a-days gambling is extremely sophisticated in respect of its technique. Its style has been escalated by virtue of advancement of modem technology. Diversification has now reached gambling/bribery up to the playground. Such a progress (?) is accomplished by way of spot fixing/match-fixing and/or betting on prophecy of result of an important game.
Assassination procedure has also been diversified. Murder or killing is now possible by way of physical torture, with lethal weapons, hanging, poisoning or suffocating and even remote bombing. It is also possible to kill anybody with chemical weapons, electric shock or simply by feeding overdose of sleeping pills. But the sin of killing an innocent person can never be justified only by virtue of digitalising the process of murder, or what amount of pain the victim suffered while dying.
Thus arguments on difference of nature can not always justify committing a forbidden action. No such difference suffices to make illicit things (like interest, wine, gambling and murder) licit. Worldly laws may differ from country to country and from time to time. But Quranic law is perpetual. Verses of the Quran are applicable neither only to a specific territory nor are they for the people contemporary to the concerned prophet; but these are for all the people of any time thereafter.
When a directive is generalised by the master, a slave himself can not restrict it by imposing other conditions thereon. Interest is prohibited by the Quran from the Master of the universes. So after revelation of the verse '...And Allah has permitted trade and forbidden interest …' of Sura Baqara (275), there remains no room to further stipulate other man-made provisions thereon. Human validation cannot supersede the Quranic verdict of prohibition.
We must specially note that it is not the Prophet, but it is Allah (SWT) Who prohibits interest. An injunction by Allah is not subject to the inquiry of His creature regarding its justification on the plea of difference of time, nature, utility or anything else.      
In fact, the controversy of difference in the nature of modem interest and ancient interest is raised to discriminate bank interest from interest in general. Here the focal point is bank interest. Some of the key arguments to set aside bank interest beyond the purview of Quranic interest or riba are: (i) Bank interest has reduced the exorbitant (say 10 per cent per month) rate of interest prevailing in the non-bank informal sector. Thus bank interest has rather relieved the society from unbearably high rate of mahajani interest; (ii) Only the compound interest and exorbitantly high interest or usury are prohibited in the Quran. So simple interest and/or low interest of a bank would not be regarded as riba, which is prohibited; (iii) Bank borrowing is substantially used in the business sectors resulting in increase of the GDP for benefit of the masses. Such a good deed must be permissible; (iv) A subsidised (rate of) interest, specially meant for weak sector or a distressed group, targeting welfare must not be adjudged unjust or forbidden; (v) Interest within the range of inflation rate is rather a justice to the lender/ creditor in consideration of purchasing power or time value of money; (vi) Charging interest on rich borrower is not unjust; (vii) For the sake of associating the wheel of economic cycle of the global village, banking is unavoidable; (viii) Interest based banking industry has now attained a very strong global foundation; we must not direct go against the giant for the sake of our survival; (ix) Bank interest imposed by government or laid on intergovernmental deals is indispensable; and (X) Interest is prohibited only when its rate is determined unilaterally. Bank interest is applied according to bilateral agreement. 'Offer and acceptance' of the rate must validate interest based deals.
All such arguments to legalise bank interest were being placed from personal level to institutional, national and global levels. In response, the scholars acknowledged the feasibility of doing any isolated material good deeds by way of dealing with bank interest. But they stick to the essence that any such plea of doing welfare or consensus on rate of interest could not overrule the Shariah prohibition of interest.
Establishment of the Islamic Development Bank (IDB) under the auspices of the OIC (Organisation of Islamic Conference) is treated as the global consensus that bank interest falls within the purview of riba. Official definition published by the OIC clearly indicates that an Islamic bank must be devoid of interest. Pivotal importance on the issue of interest has led our society to typically call 'banking without interest' as Islamic banking. In the modem language of financial management, it is a financial inclusion to cover 'banking with religion'.
The OIC defines Islamic bank as "a financial institution whose statutes, rules and procedures expressly state its commitment to the principles of Islamic Shariah and to the banning of the receipt and payment of interest in any of its operations." Had the bank interest been considered permitted, there must not have been any commitment (in the definition given by the OIC) to ban the same in operations of an Islamic bank.
The Quran gives a message of war against dealing with interest. But it deserves special noting that the declaration of war was made not all on a sudden. It took around 19 years to ban interest. During that long period, dealing with interest had been discouraged in different ways. This span was allowed to gradually make people prepared to abstain from interest. Finally interest was prohibited without any condition. So on no plea, mere human arguments can make a revealed prohibited item permitted.
Halal or haram (religiously lawful or not) is a shariah (Islamic Jurisprudence) matter. 'A shariah matter must be resolved by the shariah people. As already discussed, shariah experts consider modem bank interest prohibited or haram. Yes, there might be some people who can not yet consider bank interest prohibited. In the past, even some scholars like Tantawi, the Sheikh of al-Azhar in Cairo, argued that bank interest is sharing of a bank's profit and is therefore permissible.
But as of today such a view, religiously validating bank interest has been almost unanimously rejected. Any such dissent is now strongly parted with the mainstream consensus and regarded as extremely personal and isolated. Above all, even consensus of all the people of the world is verily inadequate to make a Quranic illicit act licit or vice versa. While the Quran directs to give up interest in all its forms and in its entirety, who else can modify the direction to exceptionally accommodate bank interest as permissible? Allah knows the best.
We must give up the prejudiced view that the world can not run without interest. Although Islamic banking is open for serving all, irrespective of any religious belief, its genesis is rooted in upholding the basic standard of a Muslim.
The emergence of Islamic banking, as a separate discipline, is the outcome of the debate on the Quranic or religious status of bank interest. Bank interest is considered forbidden in general. Yes, the Quran gives concession for any compelled situation. Under certain prescribed circumstances, the prohibited items become permissible. In such cases even a haram food becomes halal owing to dire necessity.
But such reference of exemption must not be abused as a blank cheque to indiscriminately indulge in interest-based banking deals. This sort of excuse is applicable only to specific cases on the gravity of individual exigency, not as a general rule.
It now appears that for prohibition purpose, riba includes all sorts of interests irrespective of their any qualified terms. Moreover, interest is prohibited regardless of usage of the concerned fund for consumption or commercial purpose. The basic issue is absolutely a religious one.
The writer heads Islamic Banking of Bank Asia Limited. Opinions expressed in the article are of the writer himself and in no way of the organisation he is serving. [email protected]