31 islamic banking sources of shariah consumption or

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31 Islamic Banking
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Sources of Shariah: Consumption or Productive Loans Productive Loans in the Age of Antiquity More than enough material has now come on the record to prove that commercial and productive loans were not foreign to the Arabs the banking operations developed from religious institutions to private business institutions, until in 575 BC there was a banking institution in Babylon, the Igibi Bank of Babylon. In the days closer to the advent of Islam in Arabia, all kinds of commercial, industrial and agricultural loans advanced on the basis of interest were prevalent in the Byzantine Empire ruling in Syria. The practice of commercial loans was so wide-spread in the Roman Empire that a separate law was enforced to fix their rate of interest. 32 Islamic Banking
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Sources of Shariah: Consumption or Productive Loans Commercial Interest in Arabia The caravan led by Abu Sufyan at the time of the battle of Badr consisted of one thousand camels and had returned with 100% profit Holy Prophet, Sall-Allahu alayhi wa sallam, has said: "Allah Almighty will call a debtor on the Day of Judgment. He will stand before Allah and will be asked O son of Adam, why did you take this loan and why did you violate the rights of the people? He will say, My Lord, you know that I have taken this loan, but neither used it in a eating or drinking nor in wearing clothes nor in doing something, instead, I was afflicted either by fire or by theft or by a business loss. Allah will say, My slave has told the truth. I am the best One who will pay today on your behalf.” Imam Ahmad, Al-Bazzar and Al-Tabarani from Abdurrahman ibn Abi Bakr, Radi-Allahu anhu The hadith contemplate that this person had borrowed money for commercial purpose where after he suffered a business loss. 33 Islamic Banking
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Sources of Shariah: Consumption or Productive Loans Excessive Rates of Interest Prohibition of riba is applicable only to those interest transactions where the rate of interest is exorbitant or excessive. This argument is sought to be supported by the verse of Surah Al-i-'Imran: "O ye who believe! devour not Usury, doubled and multiplied; but fear Allah; that ye may (really) prosper." *Al‐ i ‐' Imran 3:130] It is argued that this verse of the Holy Qur'an is the first verse that came with a clear prohibition of riba, but it has qualified the prohibition by the words "doubled and multiplied" to denote that the practice of riba is forbidden only when the rate is so excessive that it makes the payable amount twice that of the principal. 34 Islamic Banking
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Sources of Shariah: Consumption or Productive Loans Excessive Rates of Interest This argument overlooks the fact that the different verses of the Holy Qur'an relating to the same subject must be studied in combination with each other. No verse can be interpreted in isolation from the other relevant material available in other parts of the Holy Qur'an.
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