Riba In Secured Loans For Consumables
Brother Wadood. Please see my last response. I am ok with a fixed amount as long as it meets the rules of Preferred Stocks as described in the referenced article.
it depends on the loan contract – if the loan is secured against land the borrower has to sell his land no matter he is rich or poor. if loan is only for business venture and not secured against land, the lender will lose his principle in case of a loss. in case of profit he will get his loan back and agreed share of profit. In both cases the agreement should be based on good faith and fair dealing (i.e. custom of trade / maroof) of the society.
Bro Nadeem, Given below are two of the scenarios from your “rent vs interest” discussions: 5. A student needs money to travel back to his university from holidays. His friend has some savings but that is invested in stocks at 10 to 15% return in form of dividends on year on year basis. Both agree to use the money to buy plane tickets on the condition that the borrower will indemnify the lender for his loss of opportunity. This is win win for both parties. Is it oK? Bear in mind travel expense is “consumable” 6. Many people invest in a business as “principle-secured” financing at 10% fixed dividend hoping the actual profit is more than that. The business invest money in both consumables and usable assets and makes 18% profit at the year end. Of which it distributes 10% to the investors. No one knows whose money was used where. Who’s eaten Riba here? What is your views on the above in light of “value for value” and “contract based on good faith and fair dealing” bases?
“Scenario 3: This is Riba: You simply can’t make money on loaned money for someone’s pressing personal needs, where money is consumed and where the money needs to regenerated . If the lender loses 10%, he shouldn’t loan the money . Even if the borrower agrees to pay 10% cost of lender’s loss , it is still Riba . Islam asks people, in this case to loan money to such people without interest and if they absolutely can’t give it back then let the loan go as charity / Zakat.” l though we have already agreed that it’s not the profile of the parties or the goods that make the surplus riba (no matter it is in form of interest, usuary, rent or profit) but riba in its own nature is a sin/’zulm just like robbing, stealing or fraud and it arises when someone is short changed in a transaction be it loan or trade. We can’t say robbing is bad if rich robs the poor but if the poor robs the rich then its fine. No matter who robs who it’s a sin and zulm. We also can’t say you can steal software but not hardware. no matter what you steal, it’s a sin/zulm. Similary, a surplus is riba or zulm in its own nature for making more money than the value you offer in return based on fair market and custom of trade. I thought we also agreed that whatever profit sharing formula two parties agree between them with free consent, good faith and fair dealing is not riba or zulm. If a rich guy who’s temporarily lost access to his foreign bank account (due to technical reasons) needs to borrow money from his poor granny (who lives on her small fixed income of 10% from her life long savings) and agrees to return the money to her with some profit to indemnify her loss, how can it be riba or zulm with this millionaire guy? Granny is only trying to help this stranded guy to go back to the other country to fix his bank account access. How can she be a “sinner” in this transaction? No body in his sane mind can ever accept this based on consumable/non-consumable criteria. Lets stop here as we are going in circle. This discussion has dragged too long and i was hoping that we would deep dive and drill down into those two basic principles and see how they can be applied to our day to day challenges but that’s not happening for some reason – the poorly inferred bases like consumable, non consumable, surplus money and charity (that’d gotten nothing to do with riba) can never help people avoid injustice and zulm God has forbidden in loan or trade transactions. so lets call it a day and see you in some other discussion topic.