Riba al-Fadl
While riba an-nasiya=interest is a major issue among Islamist/revivalist preachers, writers and economists, and forms the basis of Islamic Banking, another type of riba—what jurists call riba al-fadl ("surplus riba") -- is also forbidden by orthodox jurists. Riba al-fadl does not involve paying back over time but instead the trading of different quantities of the same commodity (gold, silver, wheat, barley, date, or salt), typically because the quality of the smaller quantity is superior.
Because riba al-fadl involves barter, and barter is much less common than it was in early Meccan society, riba al-fadl is of much less interest nowadays than riba an-nasiya.[440] It is also considered (at least by some sources) a form of riba prohibited by the Sunnah rather than the Quran. [Note 54] Taqi Usmani states that Riba al-fadl was developed by Muhammad and so was not part of pre-Islamic jahiliya.[53]
Hadith
Examples of the ahadith cited in forbidding riba al-fadl — many from Sahih Bukhari — are:
- Narrated Abu Said: We used to be given mixed dates (from the booty) and used to sell (barter) two Sas (of those dates) for one Sa (of good dates). The Prophet said (to us), "No (bartering of) two Sas for one Sa nor two Dirhams for one Dirham is permissible", (as that is a kind of usury). (Sahih al-Bukhari, 3:34:294)[150]
- Narrated 'Umar bin Al-Khattab: God's Apostle said, "The bartering of gold for silver is riba, (usury), except if it is from hand to hand and equal in amount, and wheat grain for wheat grain is usury except if it is from hand to hand and equal in amount, and dates for dates is usury except if it is from hand to hand and equal in amount, and barley for barley is usury except if it is from hand to hand and equal in amount". (Sahih al-Bukhari, 3:34:344)[441]
- Narrated Ibn 'Umar: Muhammad said, "The selling of wheat for wheat is riba (usury) except if it is handed from hand to hand and equal in amount. Similarly the selling of barley for barley, is Riba except if it is from hand to hand and equal in amount, and dates for dates is usury except if it is from hand to hand and equal in amount. (Sahih al-Bukhari, 3:34:379)[442][443]
- Narrated AbuHurayrah: Muhammad said: If anyone makes two transactions combined in one bargain, he should have the lesser of the two or it will involve usury. (Sunan Abu Daud)[444]
Raqiub Zaman notes that when riba is described in hadith literature, it is "in the context of sales" (where riba al-fadl might apply), with "no mention of loan (qard) or debt (dayan)",[45] (where riba an-nasiya might apply).
However, there are various contradictions and discrepancies in ahadith on riba al-fadl. Both M.O. Farooq and M.A. Khan quote a well-known hadith by Usama bin Zayd (in Sahih al-Bukhari) making a rather categorical statement that
Farooq cites another from Sahih Muslim
- “There is no riba in hand-to-hand [spot] transactions.”[448]
Farooq quotes another scholar (Iqbal Ahmad Khan Suhail) who believes the two ahadith “demolish the self-invented castle of riba al-fadl”.[449] M.A. Khan also believes the hadith indicate that riba in a spot exchange is "ruled out".[445] According to scholar Farhad Nomani, ahadith citing Ibn `Abbas, a companion of Muhammad, "report that there is no riba except in deferment... [of] delivery and/or payment", again questioning the existence of riba al-fadl.[107] (Ibn Rushd also reportedly agreed that according to Ibn ‘Abba, Muhammad did not accept riba al-fadl because, "there was no Riba except in credit".[450][451] But according to Mahmoud A. El-Gamal, Ibn Rushd later reversed his position.)[452]
(There are also contradictory ahadith on trading silver for gold: one stating: “... The bartering of gold for silver is Riba except if it is from hand to hand and equal in amount...",[441] while others say: "the Prophet ... allowed us to sell gold for silver and vice versa as we wished.”)[453]
Application[edit]
Islamic jurists have traditionally interpreted the admonition of riba by the ahadith to mean that if one amount of commodity is traded for the same kind of commodity then the two items exchanged must be of the same quantity, ignoring the quality of the commodity or the labor added to it. (Although there is some question of why anyone would ever exchange equal quantities of the same quality commodity -- "like for like"—that the ahadith seems to call for—for example 100 kilograms of wheat for 100 kg of wheat.[454]) If, for example, a jeweler is paid in gold bullion for a gold ornament or piece of jewelry, and charges any money for their labor, they are guilty of riba al-fadl.[455] If someone has a 100 grams of 24 karat gold and needs 100 grams of 18 karat gold (and can only get it by trade with their gold), they must trade their 100 grams for an equal amount of that less pure gold or commit riba al-fadl.[455]
All the schools of Islamic jurisprudence (fiqh) accept this prohibition.[456] In more recent times, the International Institute of Islamic Economics 1999 Blueprint of Islamic financial system including strategy for elimination of riba,[457] declared riba al-fadl forbidden under Islamic law, defining it as exchange transactions of the `same general kind` where there are `qualitative differences`. The Concise Dictionary of Islamic Terms (1979) also states that riba al-fadl is one of two kinds of riba which are "strictly forbidden by the laws of Islam".[458]
While all the schools of fiqh agree with the prohibition, they do not agree over its rationale or whether it is restricted to the six commodities mentioned in ahadith—gold, silver, wheat, barley, date, salt—as the ahadith do not say "whether or not other commodities will assume the same status".[459]
- Imam Abu Hanifa, of the Sunni Hanafi school of fiqh believed that the six commodities shared the common feature (`llah) of being able to be weighed or measured, so that other commodities sold by weighing or measuring were subject to the same rule.[459]
- Imam Al-Shafi‘i, of the Shafi'i school of fiqh, was of the opinion that their common feature (`llah) was that they were either eatables or were used as a universal legal tender.[459] Thus, to him, all eatables and universal legal tenders were subject to riba al-fadl.
- For Imam Malik ibn Anas of the Maliki school the common feature of the six was that they were either food items or could be stored (i.e. were non-perishable),[459] so in this school only food items or storable items are included in this category.[459]
This disagreement (according to Taqi Usmani) is the part of the lament of Rashidun Caliph Umar that Muhammad did not explain the prohibition more clearly.[19]
- Criticism
Critics of this interpretation include activist Khalid Zaheer and economists M.A. Khan and Muhammad Omar Farooq. Zaheer believes that "the literature on Islamic Finance and Economics is presenting very strange applications of the concept of riba al-fadl, which are ... being applied in areas of business and finance where their application was never intended."[460] He notes that some scholars "openly" admit they do not understand the logic of the ban on Riba al-Fadl.[460][461]
M.A. Khan and Farooq find the commandment suspicious on the grounds that it makes no sense. Khan asks why anyone would ever trade equal quantities of the same kind of commodity ("like for like") — for example 100 kilograms of wheat for 100 kg of wheat — in a riba-free transaction called for by quoted ahadith. Or how "divine law" could prescribe that a jeweler — "who has spent his time and effort to convert gold into jewelry" and is taking gold as payment — not be compensated?[455][462] M.A. Khan also notes that the authors of the IIIE blueprint have no objection to traders selling higher purity/quality commodity for cash and using the proceeds to buying more less purity/quality commodity, and wonders what would be accomplished by such "an ineffective and roundabout method of handling a simple exchange transaction".[463]
Abdullah Saeed complains that the legal cause or feature (`illa) used by the schools of Islamic jurisprudence to determine what commodities were subject to riba (i.e. being able to be measured, eaten or used as legal tender) ignores reasons why a sale should be prohibited (hikmah) -- issues such as "the circumstances of the transaction, the parties thereto, or the importance of the commodity to the survival of society."[180]
Mahmoud El-Gama notes that orthodox interpretation (or at least orthodox Hanafi) of riba (the basis of what he attacks as "shari'a arbitrage") distinguishes between fungible (mithli) and non-fungible (qimi) items. Thus (allegedly) fungible gold may not be traded one ounce for two, but trading one nonfunglible item (such as diamonds) for two is permitted, whatever the items' market value. Thus "selling a diamond worth $10,000 today for a deferred price of $20,000 tomorrow" and immediately selling the diamond for $10,000 in cash is halal(legal) under orthodox rules of riba al-fadl — notwithstanding the fact that it would give the financier an effective rate of 100% interest. El-Gama describes this as avoiding "riba in form" while being "usurious in substance".[464]
Rationale
According to Abdullah Saeed, "the intended meaning" of the ahadith concerning riba al-fadl "was not very clear even to many jurists", who nonetheless believed the prohibition "was to be observed and complied with ... without probing into the reasons for the prohibition."[465]Other scholars have probed. Ibn Rushd stated that "what is targeted by the prohibition of riba is the excessive inequity it entails".[466] Taqi Usmani asserts that Riba al-fadl was developed by Muhammad after his ban on riba to avoid "certain barter transactions might lead the people to indulge in Riba", picking out commodities that were "a medium of exchange like money".[53]
Iqbal Suhail believes trading lesser quality foodstuffs for better quality and less quantity was forbidden because the frugality and austerity of Muhammad was offended by something like the spending resources on higher quality foodstuffs "for the sake of gratification of the palate."[467] Others believe riba al-fadl makes little sense as a prohibited sin but does as a sort of consumer advice. Mohammed Fadel (of the faculty of law, University of Toronto) calls it a ‘prudential regulation’.[468]
Farooq suggest it may have arisen to warn Muslims that barter is usually less profitable than buying and selling separately,[Note 55] and notes several hadith where Muhammad tells a Muslim not to trade dates of different quality but never mentions riba.[470][471][472][473] M.A. Khan argues that the prohibition against riba al-fadl comes not from any clear understanding of the ahadith but from an attempt to find a plausible explanation "to rationalize the ambiguity in the text".[454]
( Source: https://en.wikipedia.org/wiki/Riba )
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