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IMEFM
5,4 Exploitation, profit and
the riba-interest reductionism
Mohammad Omar Farooq
292 Center for Islamic Finance, Bahrain Institute of Banking and Finance (BIBF),
Manama, Bahrain

Abstract
Purpose – The purpose of this paper is to provide a critical appraisal of the theme of zulm
(injustice/exploitation) in light of the Islamic finance literature and the general attitude and approach
of the Islamic finance industry and its advocates.
Design/methodology/approach – Based on an expanding theoretical and empirical knowledge
base about Islamic finance and banking movement, and the emerging understanding about the role
of profit and corporate behavior, a critical analysis of the role of riba, interest and profit in widespread
injustice and exploitation is presented.
Findings – On the basis of the behavior of the Islamic finance industry, it seems that the industry’s
current practices are either neutral to the issue of injustice/exploitation or mirrors the tendencies of
the conventional finance. Furthermore, when comparing the exploitative role of interest and profit,
the latter seems to be more consequential than generally understood and acknowledged.
Research limitations/implications – Islamic economics/finance literature should have more
empirical research in identifying and understanding the nature of exploitation in the contemporary
world and in how the current practices or tendencies are minimizing or abetting the challenge of exploitation.
Practical implications – The larger goal of the Islamic finance and banking movement should be to
be in harmony with the maqasid of Islam to minimize zulm (injustice/exploitation) in the society.
Social implications – The larger goal of the Islamic finance and banking movement should be to be
in harmony with the maqasid of Islam to minimize zulm (injustice/exploitation) in the society.
Originality/value – While the literature of Islamic economics and finance is rather robust, this
might be the first work that critically examines the riba-interest reductionism, especially to focus on its
implication for attention of the industry being away from exploitation in general and the relationship
between profit and exploitation in particular.
Keywords Islam, Islamic finance, Riba, Zulm, Exploitation, Finance, Banking
Paper type Conceptual paper

I. Introduction
The Islamic banking and finance (IBF) movement, now comprising of institutions in
almost all the Muslim-majority countries and also in many other countries in Europe and
North America, is a major Islamic phenomenon that is gathering momentum steadily.
The main motivation behind this pursuit of a banking system, distinguished from the
conventional banking system, is the Islamic prohibition of riba, which is traditionally
equated with interest in a blanket manner. The primary rationale given by the
proponents of Islamic economics and finance is that interest represents zulm – injustice
International Journal of Islamic and
and exploitation. Since Islam stands for justice and is against all kinds of exploitation,
Middle Eastern Finance and
Management
Vol. 5 No. 4, 2012 The author is grateful to a number of individuals for sharing their feedback on the draft:
pp. 292-320 Dr Omar Afzal, Hussam Sultan, and Nedal El Ghattis. The author further acknowledges
q Emerald Group Publishing Limited
1753-8394
gratitude to an anonymous reviewer. Of course, this author alone is responsible for any error,
DOI 10.1108/17538391211282818 shortcoming or the views and analyses in this paper.
the traditional argument is that interest in all its forms is an abomination and prohibited. The riba-interest
Therefore, the goal of IBF is to reorganize economics and finance away from reductionism
interest-bearing arrangements and on an alternative basis consistent with Islamic
norms and guidelines.
In this paper, the assumed relationship between interest and exploitation is critically
examined. By drawing on the literature about exploitation on the one hand and the
Islamic literature about economics, finance and law on the other, we scrutinize whether 293
the traditional arguments about the connection between interest and exploitation hold
up. Through exclusive focus on interest as the prohibited riba, the relationship between
profit and exploitation is generally ignored, which is explored in this paper.
Furthermore, we seek to evaluate whether the concern about exploitation expressed by
the proponents of Islamic economics and finance is serious and substantive.

II. Interest is unjust and exploitative: a common and traditional argument

In the context of a categorical prohibition of riba, the Qur’an provides a fundamental
rationale: “if you turn back, you shall have your capital sums: Deal not unjustly, and
you shall not be dealt with unjustly”[1]. Those who equate interest with riba invoke
this same verse (and a few more) and conclude that interest is unjust and exploitative.
It is important to note that in the traditional literature about Islamic economics and
finance riba should be read as “interest” (Farooq, 2009b).
Syed Nawab Haider Naqvi, former director of Pakistan Institute of Development Studies
and an eminent Muslim economist, asserted that “the abolition of riba is one [. . .] element of
a comprehensive Islamic reform to establish an exploitation-free economic system”
(Naqvi, 1981, p. 124, all emphases have been added by this author, unless mentioned
otherwise). However, Naqvi is quite cautious in equating interest in all forms with riba.
Sayyid Abul Ala Maududi, the founder of Jamaat-e-Islami, a leading, revivalist
Islamic party, and a renowned authority on Islamic institutions and traditions, had
a profound impact on the development of IBF movement. Among his notable books is
Sood (interest), in which he equated interest with riba and attempted to expose the evils of
interest and articulate an alternative, interest-free framework. His views about interest
are aptly summed up by Khurshid Ahmad: “The main reason why Islam abolishes
interest is that it is oppression (zulm) involving exploitation” (Ahmad, 1980a, pp. 253-4).
Mohammed Nejatullah Siddiqi is a pioneering Islamic economist and the winner of
King Faisal Award for his contribution to the field of Islamic economics and finance.
According to him:
What is unethical about riba/interest to revoke such a response to interest-based banking
from the Islamic civilization? The Quran (2:279) characterises it as unfair, as implied by
the word Zulm (oppression), exploitation, opposite of adl (i.e. justice) (Siddiqi, 2000).
Mosad Zineldin, the author of a book on Islamic or interest-free banking observes:
The most important, and yet the most difficult, issue relates to the Islamic position with
respect to the abolition of riba (i.e. usury, a positive rate of interest). It is important because
the Islamic commandment to abolish it signifies a distinctive socio-economic philosophy, which
abhors social exploitation in all forms, including “unbalanced” and iniquitous financial
relationships. It is difficult because the abolition of riba is in fact a signal for not only
a financial rearrangement, but, even more fundamentally, for a restructuring of the entire
economic system along Islamic lines (Zineldin, 1990, p. 49).
IMEFM One of the leading Islamic economists, Umer Chapra, asserts: “All leading jurists
5,4 throughout Muslim history have [. . .] without exception, held justice to be so
indispensable ingredient of maqasid al-shari’a” (Chapra, 2006).
Muhammad Taqi Usmani is one of the leading Islamic experts serving on the
Shariah expert boards of almost a dozen Islamic financial institutions (IFIs) around the
world. According to him:
294 [T]he concept of Islamic banking was based on an economic philosophy underlying the rules
and principles of Shari’ah. In the context of interest-free banking, this philosophy aimed at
establishing distributive justice free from all sorts of exploitation (Usmani, 2002, p. 113).
A well known contemporary scholar of Islamic law, Imran Ahsan Khan Nyazee,
who also believes in the riba-interest equation claims:
Riba is the most important issue of Islamic law in the modern world. It can, and does have,
important consequences for the lives of each citizen. Indeed, if riba can in its various
manifestations is prohibited, it can alter the entire structure of the system of distributive
justice prevalent today (Nyazee, 2000, p. 2).
An Islamic finance expert and professional, Abdulkader Thomas, affirms:
With its inimitable and characteristic economy of words, the Quran clearly identifies riba [. . .]
as an injustice, an economic evil, an impediment to spiritual growth, and a threat to the
welfare of society. [. . .] Throughout the Quran, the theme of justice, including economic
justice, echoes resoundingly (Thomas, 2006, pp. 2-3).
On a somewhat nuanced note, Mahmud El-Gamal (Chair of Islamic Economics,
Finance, and Management, Rice University) clarifies: “The prohibition of riba is not
only about exploitation” (El-Gamal, 2000). However, as corroborated above, throughout
Islamic literature about economics and finance, the connection between interest
and exploitation/injustice is regularly and consistently made. Often, the prohibition
is explained in terms of zulm (as manifested in injustice, exploitation, etc.) as the
primary reason.
However, what is the exploitative dimension of interest as an allocative mechanism
of capital in a modern economy? And, how genuine and adequate is the concern of the
proponents of Islamic economics and finance about exploitation in general?

III. Riba, exploitation and the Qur’an

Islam’s position regarding justice is unequivocal and universal. It sets the highest
standard in this regard:
O you who believe! Stand out firmly for justice, as witnesses to Allah, even as against
yourselves, or your parents, or your kin, and whether it be (against) rich or poor: for Allah can
best protect both. Follow not the lusts (of your hearts), lest you swerve, and if you distort
(justice) or decline to do justice, verily Allah is well-acquainted with all that ye do[2].
While the Qur’anic message of justice and egalitarianism is categorically on the side of
protecting the weak and vulnerable, the entire notion of justice in this regard is
supposed to be blind, whether dealing with the rich or the poor. As part of this quest for
justice, Islam is against all kinds of exploitation of humans by other humans, whether
individuals, groups or institutions. Therefore, anything, including Islamic
economics/finance/banking, that takes exploitation as a serious and fundamental The riba-interest
concern, cannot be belittled or ignored. reductionism
According to the Qur’an, “O Believers! Do not consume riba, doubling and
redoubling, and fear God so that you may prosper”[3].
So, what kind of exploitative conditions or transactions were in vogue during the
time of Qur’anic revelation specific to riba?
Explaining the meaning of the term used in verse 3:130, Tabari (d. 310/923), the 295
well-known commentator on the Qur’an, says:
Do not consume riba after having professed Islam as you have been consuming it before
Islam. The way pre-Islamic[4] Arabs used to consume riba was that one of them would have a
debt repayable on a specific date. When that date came the creditor would demand repayment
from the debtor. The latter would say, “Defer the repayment of my debt; I will add to your
wealth.” This is the riba which was doubled and redoubled[5].
The way in which riba was doubled and redoubled in the pre-Islamic period is
expressed by the son of Zayd b. Aslam (d. 136/754) as follows:
Riba in the pre-Islamic period consisted of the doubling and redoubling [of money or
commodities], and in the age [of the cattle]. At maturity, the creditor would say to the debtor,
“Will you pay me, or increase [the debt]? If the debtor had anything, he would pay. Otherwise,
the age of the cattle [to be repaid] would be increased [. . .] If the debt was money or a
commodity, the debt would be doubled to be paid in one year, and even then, if the debtor
could not pay, it would be doubled again; one hundred in one year would become two
hundred. If that was not paid, the debt would increase to four hundred. Each year the debt
would be doubled”[6].
The exploitation and injustice of such riba-based transactions are obvious, and hardly
require any further explanation or clarification. This type of riba is known as riba
al-jahiliyyah, and according to some Islamic scholars, such as Imam Ahmad Ibn Hanbal
(d. 241 AH), only such riba is unlawful without doubt from the Islamic viewpoint:
The Qur’an vehemently condemns riba, but provides little explanation of what that term
means, beyond contrasting riba and charity and mentioning exorbitant “doubling.”
Commentators describe a pre-Islamic practice of extending delay to debtors in return for an
increase in the principal (riba al-jahiliyya). Since this practice is recorded as existing at the
time of the revelation, it is one certain instance of what the Qur’an prohibits. Hence Ibn
Hanbal, founder of the Hanbali school, declared that this practice – “pay or increase” – is the
only form of riba the prohibition of which is beyond any doubt[7].
Subsequently, riba was categorized as either riba al-nasia (related to deferred payments)
or riba al-fadl (related to exchange of commodities), and the latter was added primarily
on the basis of hadiths (prophetic narrations). Gradually the scope of riba in Islamic
jurisprudence was extended in modern times to include all forms of interest (simple or
compound, low or high, nominal or real, etc.) and riba al-fadl, based on qiyas (analogical
deductions), was extended to more than six commodities – barley, date, wheat, salt,
gold and silver – covered by the prohibition of riba.

IV. Interest and the exploitation argument

The orthodox view behind the IBF movement – that, interest in all forms is prohibited –
is based on a definition of riba that is much more expansive than riba al-jahiliyyah.
The expansion of meaning is based primarily on hadith, even though, contrary to
IMEFM common claims, no clear definition can be established to justify the riba-interest
5,4 equation (Farooq, 2009b). This creates a new challenge of rationalizing the broadened
definition, especially in terms of the exploitation argument. While exploitation and
injustice involving riba al-jahiliyyah are obvious and undeniable, the same is not true of
interest in general, and the traditional arguments against it, when examined in light of
our contemporary context, do not seem to hold (Farooq, 2009a).
296 Let us take one such common/traditional argument offered by the orthodoxy as
a rationale for the prohibition of interest:
The lender is very likely to be wealthy and the borrower poor. If interest is allowed, the rich
will exploit the poor, and this is against the spirit of mercy and charity. (This is the social
aspect of the prohibition of interest) (Al-Qaradawi, n.d., p. 266).
The observation that the “lender is very likely to be wealthy and the borrowing poor” is
based on stereotyping of the lending-borrowing process at the personal level. In the
institutional context, savers as surplus units are lenders to the banks and financial
institutions, as these deposits are treated as liabilities of the banks on their balance sheets.
Many of these savers are not necessarily rich. Indeed, until savers have sufficient capital to
invest in the capital market (long-term securities, such as bonds, stocks or mutual funds),
which includes many younger or not-so-well-off people, they stick to the savings accounts
of the banks. Based on US data in 2001, top 1 percent income class constitutes 44.1 percent
in stocks/mutual funds investments; next 9 percent income class constitutes 40.4 percent;
and bottom 90 percent income class constitute 15.5 percent. In terms of bank deposits
(all categories included), top 1 percent provide 21.7 percent of bank deposits; next 9 percent
provides 35.5 percent; and bottom 90 percent provides 42.8 percent (Wolff, 2006, Table 6).
Thus, stereotyping lenders as rich and borrowers as poor is not supported by the changed
reality of our modern times. “Today [. . .] debt is not necessarily associated with poverty”
(Saeed, 1996, p. 29). Indeed, the poor has little access to credit/debt from conventional
financial institutions. Such access generally begins with adequate income and/or
collateral. Of course, greater or substantive access to the organized debt/capital market
through the primary market is limited to those who are already well-to-do individuals.
The burden of foreign debt is often cited as an example of the interest-based
exploitation. Indeed, external debt of the developing countries (or, less developed countries)
has been a frequently discussed issue in the relevant literature and policy discourse:
Total debts amassed by the world’s poorest countries shot up from $25bn in 1970 to $523bn
in 2002, resulting in endless misery and widespread poverty as many of these economies
spiraled out of control (Madslien, 2005).
Even though there are LDCs that have experienced declining ratios of external debt to
GDP, the total debt continues to rise for most such countries, creating enormous, and
often unbearable, debt burden. Many critics from both conventional and Muslim
background take a rather strong negative view about such indebtedness, while many also
view such debt as “instrument of exploitation” (Potter, 2000, p. 130). As George Ann
Potter aptly articulated:
Debt is a direct expression of the unjust global economic order which is the result of a long
history of slavery, exploitation and terms of trade which are detrimental to the poor
(Potter, 2000, p. 129).
High interest rate is also identified as an important factor adding to the debt burden. The riba-interest
As Jacob Viner points out: reductionism
Our conservatives [. . .] are hostile to the idea of American capital serving foreign industries,
and our liberals tend to oppose foreign investment as an instrument of exploitation of foreign
peoples. Our interest rates are comparatively high, and our bankers’ commissions are
superlatively so (Viner, 1951, p. 135).
297
There are also Muslim economists who critique such burdensome external debt and see it
as an instrument of exploitation and point their finger at high interest rate. However, they
go one step further and blame not just indebtedness, but interest as an instrument itself:
Foreign debts based on interest have done irreparable harm to the poor nations of the
world. Issa Abdouh [. . .] focuses attention on this role of interest and Mawdudi [. . .]
describes interest as the greatest instrument of exploitation at the international level (Ahmad,
1980b, p. 256).
While such critique is in line with the “lenders are rich and borrowers are poor” and
rich lenders exploit the poor borrower arguments, blaming interest per se, instead of
high interest rate, suffers from a pivotal weakness. Except in cases of “odious debts”
(external debt incurred often by unrepresentative governments for purposes not
necessarily in best interests of the nation), the reality is that even at zero interest rate,
which would be Qard Hasan or Islamically acceptable loan, debt can be amassed by
the borrowing parties and used as an instrument of exploitation by the lenders. For
capital-poor or revenue-poor countries, high indebtedness can be financially
unsustainable even at zero interest rate. The needy parties who might not be able
to repay their debts are zakat- or aid-eligible, but borrowing simply exposes them to
exploitation. Thus, even though interest can make the burden much greater, those who
want to use their resources to exploit others, they do not need to turn to interest as an
instrument to exploit others. They can make the borrowers captive even at zero interest
rate. Unfortunately, Muslim critics often disproportionately or exclusively focus on
interest as the instrument of exploitation, which in reality may not necessarily be so.
In connection with interest-based transactions, there is another important twist to
this “lenders are rich and borrowers are poor” argument, especially when it comes to the
actual practices of the IFIs. Either required by the central banks of the respective
countries to maintain certain level of reserves with the central banks or due to lack of
appropriate investment opportunities, many IFIs deposit their funds in interest-bearing
accounts, even in foreign countries, for which Shariah-experts have provided the
necessary fatwa of Shari’ah-compliance based on the rules of necessity (darurah):
Scholars in Islamic finance and banking have invoked necessity to permit exceptional
relaxations of rules. They have issued fatwas (opinions) allowing Islamic banks to deposit
funds in interest-bearing accounts, particularly in foreign countries, because these banks
have no alternative investments at the necessary maturities. Typically, however, they place
conditions on such fatwas, such as requiring that the unlawful gains be used for religiously
meritorious purposes such as charity, training, or research. Such fatwas are particular to
the circumstances in which they are issued (Vogel and Hayes, 1998, pp. 38-9).
Many Islamic banks have been explicitly and openly earning interest on their excess
funds, often invested in safer, debt or debt-like instruments overseas. Even Islamic
Development Bank (IDB), a “multilateral development financing institution,
IMEFM established to foster social and economic development” in its 55 member countries,
5,4 follows this practice:
Some Islamic institutions have steadfastly refused to receive interest, whereas others,
including the Islamic Development Bank and the Faisal Islamic Bank of Egypt (FIBE), have
always placed their excess funds in interest-bearing accounts, usually overseas. [. . .]
The Saudi Arabian Monetary Agency (SAMA) acts as the depository institution for IDB
298 funds. One occasional source of controversy has been the fact that those funds were receiving
interest – in fact becoming the main source of profits for the bank. The bank’s charter
expressly permits it to invest excess funds “in an appropriate manner”, and the criterion of
overriding necessity (of development in the Islamic world), in addition to the lack of suitable
investments has been repeatedly used to defend the policy (Warde, 2000, pp. 50, 144).
Thus, when simply extended from an argument against riba, the traditional argument
against interest – poor borrowers are vulnerable to exploitation by rich lenders – does not
hold. One of the vital problems of most Islamic laws is that they are rarely supported by
empirical data[8]. All these traditional arguments against interest are generally polemical
at best. Actually, Islamic finance and banking is probably the only field where the pertinent
Muslim experts and scholars seem to apply themselves from an empirical perspective.
There are many empirical works on the performance as well as other issues pertaining to
Islamic finance and banking. However, there is hardly any empirical work done by these
scholars of Islamic economics and finance in support of their claim that interest in all its
forms is exploitative and makes either the borrowers or the society in general worse.
Indeed, the modern experience of microcredit, as pioneered by institutions such as
Grameen Bank is interest based and yet it has helped in alleviation of poverty of millions
of people. While there are criticisms against such microcredit institutions and there is also
skepticism about its efficacy, after many decades of condemning Grameen Bank as
ribawi, even Islamic finance industry has also conceded that microfinance can be an
important component of the overall development and poverty alleviation strategy and has
embraced microfinance through models Islamically adapted from Grameen types. Thus,
all interest-bearing transactions are not necessarily exploitative and this is corroborated
by fact. In case of Grameen Bank like projects, interest-based credit has provided an
escape for millions of people from the chokehold and exploitation of village loan sharks.

V. Definition and matrix of exploitation

Let us consider various situations where exploitation is alleged. For examples, what
makes a contract or transaction unfair? Do big-time college athletic programs “reek of
exploitation”, as claimed by the President of Stanford University? Does the legalization
of human organ sales involve exploitation? While Muslim scholars may have specific
fatwa ( juristic opinions) on any such issue or problem, it is important to note that
Muslim scholars do not really have a clear and consistent theory of exploitation to help
understand, analyze and address the situations where exploitation allegedly occurs.
Generally, the subject of exploitation is dominated by Marxian or neo-Marxian
theories (O’Hara, 2008). Since the Marxian approach to exploitation, built on the concept
and measurement of the “surplus”, is widely known, it is not necessary to explore in
detail in this essay[9]. Alan Wertheimer, a scholar of political theory, law and ethics,
offers a broader non-Marxian framework to analyze the issue of exploitation in a book,
Exploitation (Wertheimer, 1996). In operationalizing the notion of exploitation,
Wertheimer offers the typology shown in Table I.
 Based on the above typology, there are four different scenarios. Transactions or The riba-interest
contracts that are mutually advantageous and fair or unfair; transactions or contracts reductionism
can also be harmful (to at least one party) and still it could be fair or unfair. What a
society has the most interest in is to prevent or eliminate transactions or contracts that
are both harmful and unfair (Type D) to at least one party. For example, riba al-Jahiliyya
is both harmful (to one party) and unfair. Thus, its prohibition by Islam is quite obvious.
In the Qur’an God has even declared war against those who practice such type of 299
riba[10]. This is further reinforced by a fundamental precept of Islam, as enunciated in
a hadith: “Let there be no harm nor reciprocating harm” [la darar wa la dirar ][11].
The Islamic orthodoxy that equates riba with interest and regards interest in all
forms prohibited have not been able to offer any defensible rationale or empirical
evidence that even in the case of mutually-agreed, fully disclosed, profit-oriented loans in
a competitive, regulated environment, interest is harmful to one party or that it is unfair.
Indeed, in a competitive, regulated environment, interest-based transactions are
generally mutually advantageous and fair. Though repudiated by the orthodoxy, the
grand mufti of al-Azhar, Shaikh Tantawi’s fatwa on this issue went one step further. He
argued that interest-bearing bank deposits are more Islamic than what is offered as
Shariah-compliant products:
In 1989 [Tantawi] declared that interest on certain interest-based government investments was
not forbidden riba (because the gain is little different from the sharing of the government’s
profits from use of the funds or because the bank deposit contract is novel), thus joining the thin
ranks of prominent religious figures who have issued fatwas declaring clear interest practices
permissible. [. . .] Later he went even further, saying that interest-bearing bank deposits are
perfectly Islamic, and more so than “Islamic” accounts that impose disadvantageous terms on
the customer. Laws should change the legal terminology used for bank interest and bank
accounts to clarify their freedom from the stigma of riba (Vogel and Hayes, 1998, p. 46).
Generally, any stipulation of increase or excess over the principle – i.e. interest –
is considered as riba in the context of debt instruments. As Maududi defined, riba is:
“[. . .] predetermined excess or surplus over and above the loan received by the creditor
conditionally in relation to a specified period.” This definition entails the following three
elements: (a) excess over and above the loan capital; (b) determination of surplus in relation to
time; and (c) stipulation of this surplus in the loan agreement (quoted in Ali (n.d., pp. 2-3)).
The above definition simply reflects the way classical Hanafi jurists, such as
al-Sarakhsi (d. 490 AH), had defined riba earlier. “Riba in its literal sense means excess
[. . .] and in the technical sense (in the Shariah), riba is the stipulated excess without any
counter-value in bay [sale]”[12].
However, there is a difference in nuance in the above two definitions. Al-Sarakhsi’s
definition focuses on sales (exchanges) without any mentioning of loan. Maududi’s
definition focuses on loans, which is more directly related to interest in a modern
economy. However, there are two aspects that are common to the above definitions:

Mutually advantageous Harmful

Fair A B
Unfair C D Table I.
IMEFM (1) “stipulation” of excess; and
5,4 (2) no reference to any injustice, unfairness or exploitation.

Here, stipulated or predetermined excess in loan or exchanges – without any

counter-value – is assumed to be unfair, harmful and exploitative.
As we have mentioned above, there is no theory of exploitation offered by the Muslim
300 scholars and jurists. God is Just. His revelation, thus, is just, and its implementation
guarantees prevention of zulm or exploitation. Therefore, there is no need to discuss the
issue of injustice or exploitation separately. What the jurists and scholars need to focus
on is knowing what the divine dictate is and identifying its criteria and scope of
application, and then applying or implementing it. That takes care of any underlying
problem of injustice or exploitation!
One real problem with this commonly-held perspective is that, while from the
Islamic perspective, the Qur’an provides certainty of knowledge in regard to verses
that are legal in nature (muhkam), the Qur’an rarely defines any term and the human
understanding of the Qur’an in regard to its definition and scope or context of
application is not infallible. It is important to note that beyond the Qur’an, hadith
(mostly ahad or solitary) yields only probabilistic knowledge[13]. There is no
consensus on the definition about Ijma (consensus) itself and it is an overused and
sometimes even misused doctrine and tool[14]. The other foundation of Islamic fiqh
(law) is qiyas (analogical deduction), which also yields only probabilistic/speculative
knowledge[15].
Thus, the premise or approach that merely knowing, identifying and applying the
Islamic guidance automatically ensures that the laws, codes, instruments, structures,
etc. address injustice and exploitation is simply presumptuous. Let us keep this
presumption in perspective and briefly examine the issue of “stipulation of excess” and
the lack of any “counter-value”.
There is a reason why, compared to definitions by earlier jurists, more recent
definitions focus on interest-bearing transaction. This is because barter transactions
are less common now, and there is a simplistic tendency to equate riba with interest.
For illustrative purpose, Let us focus on the more recent definitions that have been
influential in the emergence of the Islamic finance and banking movement.

a. The stipulation of excess

The stipulation of any excess in the loan agreement is a constituent element to identify
riba, and therefore interest-bearing debt instruments are considered prohibited in
Islam. However, quite ironically, as in the case of riba al-jahiliyyah, discussed above,
the exploitation element comes from not the presence, but a lack of stipulation, of
a predetermined excess in the contract (Farooq, 2007b). That is why at the time of
settlement of debt, if the borrower is unable to pay, he is given an option to defer, but
the principal owed is doubled or quadrupled, at the mercy of the lender.
There are two opinions about the nature of the riba al-jahiliyyah:
Abul A’la Maududi the chief of the Jamaat-i Islami assumes that for the first term the credit
was granted free for interest but one fails to understand how this is intelligible in a
social set-up such as the commercial Meccan society or the Jewish Medinese society, where
the riba system was quite normal. How could the usurers, who were keen on doubling and
redoubling their capital, forgo the initial interest by way of charity so to say?
 Mufti Muhammad Shafi expresses an opinion contrary to that of Maududi. He says, The riba-interest
“The prevailing practice in Arabia was that a certain amount of money was advanced for
a fixed period at a fixed rate of interest. If the debtor paid the loan within the prescribed time reductionism
the matter was settled on the payments of interest otherwise he had to pay more interest.”
However, the [. . .] statement of Zayd b Aslam, which is recorded not only by Malik but also
by al-Bayhaqi, Razi and other Muhaddithun and fuqaha, shows that the initial interest itself
was not usurious and was, therefore, not considered riba (Rahman, 1964). 301
The reference to, among others, Imam al-Razi is particularly important and relevant.
In his well known Qur’anic exegesis, in the context of these riba-related verses and
under the heading “The horrific image of usury”, he stated:
[. . .] riba al-nasiah was the more widely known in the pre-Islamic known in the pre-Islamic
days. People would advance money for a fixed term in return for an agreed monthly fee,
keeping the original amount unchanged. At the end of the fixed term, the borrower would
either pay back the original loan in full or be granted an extension with higher monthly
payments (Qutb, 2000, emphasis added). Obviously, a pre-agreed or stipulated return not only
was not unknown, but according to al-Razi rather “widely known”.
In either case, for profit-oriented financing, it is not the stipulation of excess over the
principal that is necessarily the source of exploitation or vulnerability of the borrower;
of course, if the issue of exploitation has anything to do with the prohibition. Indeed,
when a borrower knows what would be the total amount to repay the borrowing, he can
assess the contract and make the decision voluntarily whether to enter into such a
contract. In absence of a stipulation of predetermined excess (rate or lump-sum), the
borrower does not know what kind of excess would have to be faced, if the debt is not
settled at the end of the contract period. Knowing and accepting the terms of a contract
are not sufficient to ensure fairness, but they are necessary conditions.
Tracing the historical background of “stipulated excess” in Islamic discourse,
Abdullah Saeed points out that Qur’anic commentaries as well as Prophetic narrations
in Tabari (d. 310 AH), Ibn al-’Arabi (d. 1148 AH), etc. did not associate riba al-jahiliyya
with any stipulated excess:
These reports indicate that the riba as practised in the pre-Islamic period (riba al-jahiliyyah)
involved adding an amount to the principal against an extension of the maturity of an
existing debt due to the debtor’s inability to repay on time. None of the reports quoted by
Tabari, one of the earliest exegetical sources available to us, suggests that any increase was
added at the time the debt was contracted. All reports available suggest that the increase in
the debt occurred after the contract was concluded and at the maturity date and was due to
the inability of the debtor to meet his obligation. These reports refer to debts but do not reveal
whether they were the result of loans or deferred payment sales (Saeed, 1996, p. 23).
So, how did this “stipulated excess” become part of the definition of riba? According to
Saeed, almost two centuries after Tabari:
A contrasting view was expressed by the Hanafi jurist Jassas (d. 980 AH): “The riba which
the Arabs knew and practised meant lending money [dirhams and dinars] with a specified
maturity at an agreed upon increase over and above the sum borrowed.”
As Jassas’ assertion is not supported by historical evidence or reports and is, furthermore, not
in line with earlier reports quoted by Tabari, his interpretation may be regarded as unreliable.
The view of the current study regarding the fundamental nature of pre-Islamic riba, therefore,
IMEFM remains valid. [. . .] The term riba as used in these (2:274-8) verses does not differ from its
earlier usages in the Qur’an, according to early exegetes such as Tabari ( Jami, III, pp. 67ff.])
5,4 Zamakhshari (d. 1144 AH; Kashshaf, pp. 179-80), and Ibn Kathir (d. 1373 AH; Tafsir, I,
pp. 334-6). Tabari, for instance, interpreted riba in these verses, with reference to what was
practised in the pre-Islamic period, saying: “God has forbidden riba which is the amount that
was increased for the capital owner because of his extension of maturity for his debtor, and
deferment of repayment of the debt” ( Jami, III, p. 69)[16].
302
Jassas’ view of interpreting riba al-jahiliyyah in terms of “stipulated excess” – a view
without any corroboration[17] and also contradicted by earlier works – became the
basis of subsequent expansion of the definition of riba, used by the orthodoxy behind
IBF movement. Those who believe that interest is riba and thus prohibited routinely
refer to al-Jassas, but neither provide the corroboration for the view of Jassas nor raise
any question about it (Al-Amin, 2000, p. 17).
Interestingly, Ibn Qayyim (d. 751 AH), almost 350 years after al-Jassas, ignores the
view of al-Jassas and approaches the issue of riba in light of the pre-Jassas sources,
such as Tabari, Zamakhshari and Ibn Kathir:
In the pre-Islamic period, riba was practised by giving extra time to repay a debt and adding
a charge against this extension [thus, increasing the amount of debt] until one hundred
becomes thousands. In most of the cases, only a needy individual would keep doing so as
he would have no choice but to defer the payment of the debt. The creditor agreed to defer his
demand for repayment of the debt, and waited so that he might gain more profit on the
principal. On the other hand, the debtor was forced to pay the increased amount to ward
off the pressing demands of the creditor and the risk of the hardships of prison. Thus, as time
passes and the loss of the debtor went on increasing, his troubles multiplied and his debt
accumulated until all his possessions and belongings were lost to the creditor[18].
Apart from this missing corroboration, this stipulation issue is misplaced, due to a
confusion involving general financial contracts and benevolent, interest-free contracts
(Qard Hasan). If anyone wants to help another through lending, especially when the
borrowing party might not be able to repay (or, repay at the pre-agreed date), the idea
of excess (in the form of interest) does not necessarily make any sense. Similarly,
in such case of benevolent or charitable lending, there must not be any stipulation of
excess. Such a contract would be null and void from the Islamic viewpoint. However,
erroneously, this matter of stipulation or excess in case of charitable financing/loan has
been expanded to profit-oriented financial contracts or transactions, where both parties
may or do benefit – a Type A transaction, as per Wertheimer’s matrix of exploitation.
It is obvious that if it is the matter of stipulation itself, then hardly anyone can
sensibly or rationally argue that whether in terms of excess in value or deferment of
time, stipulation would be unfair or exploitation. Indeed, it would be just the opposite.
Fair contracts should include full disclosure of all the pertinent terms. However, there
is another related aspect of the orthodox definition: lack of any counter-value.

b. The lack of any counter-value

In the literature pertaining to riba and interest, it is commonly argued that stipulation
of excess constitutes riba, when it is without any counter-value. This specific issue
of lack of a counter-value is articulated and rationalized as following. Referring to
al-Razi, an eminent authority of twelfth century, Al-Qaradawi asserts:
 The taking of interest implies appropriating another person’s property without giving him The riba-interest
anything in exchange, because one who lends one dirham for two dirhams gets the extra
dirham for nothing. Now, a man’s property is for (the purpose of) fulfilling his needs and it reductionism
has great sanctity, according to the hadith, “A man’s property is as sacred as his blood.”
This means that taking it from him without giving him something in exchange is haram
(Al-Qaradawi, n.d., p. 265).
One can argue that, in trade, taking something from someone without giving something 303
in exchange is haram (prohibited). However, the argument is misleading and erroneous.
When a non-charitable transaction is involved, both the parties know what the lending
and borrowing entail. The borrower is borrowing for some commercial or personal benefit
and the lender is lending for profit motive. In such non-charity context, the lender is
giving up or foregoing the purchasing power, a part of the lender’s accumulated capital,
for a specific period. In other words, the lender is “renting out” the purchasing power of
his/her capital for a specific period of time and interest constitutes the “rent” that is paid
by the borrower. Even without taking into consideration the time value of money
argument (and many Islamic jurists and scholars flatly deny the time value of money)
(Usmani, 2002, p. 13), why would a profit-orientated lender lend at zero interest or return,
even in case of borrowers without any problem with their ability to repay? Actually, it is
not just the time value of money, the very notion of opportunity cost is also being denied
here. We will ignore here the issue of nominal vs real interest. Also, such traditional
arguments deny money any other function than being a purely medium of exchange, even
though the contemporary IFIs rarely function in an economic/monetary environment or
system, where money functions only and strictly as a medium of exchange.
So, contrary to the traditional argument, in case of the extra dirham paid to the
lender, it is the agreed/stipulated compensation to the forgone purchasing power for
the fixed duration. The lender is getting compensation for transferring for a specified
duration something (the purchasing power); it is not something for nothing. In this
context, the claim of a lack of a counter-value in an exchange is not valid.
That is why assuming that the very definition, based on fallible human
interpretations (yielding only probabilistic knowledge), automatically addresses any
underlying issue of injustice or exploitation is presumptuous.
From an Islamic perspective, any exchange or transaction that is based on mutual
consent, without:
(a) any coercion/deception;
(b) involving any prohibited products (e.g. alcohol) or practice (e.g. zulm or
exploitation); and
(c) any vulnerability to one of the parties due to a situation of compulsion
(poverty/need) that makes one eligible for Zakat (aid), should be regarded as
valid.

Riba, as explained in the context of riba al-jahiliyyah, would be invalid, because

it generally involved the condition (b) and (c), which made at least one party vulnerable
to bankruptcy, total financial ruin, and even enslavement. This is Type D in
Wertheimer’s typology, where the transaction is both unfair and harmful to at least one
of the parties. In that context, one can easily understand and appreciate the wisdom
and value of the stern position of Islam against riba. However, modern interest-based
transactions, in a regulated, competitive environment, where the borrowers are not
IMEFM of the type who should be getting aid (or zakat), do not violate any of the aspects that
5,4 would make such transaction invalid:
O you who believe! do not devour your property among yourselves falsely, except that it
be trading by your mutual consent; [. . .] surely Allah is Merciful to you[19].
Abu Said Khudri is reported as saying:
304 Allah’s Messenger (pbuh) said, “A transaction is valid as a result of mutual consent.”
[Innamaa al-bay’u ’an taraadi; according to al-Zawaid, its isnad is sahih and its authorities
are reliable (and authentic). Ibn Hibban transmitted it in his Sahih.] (Ibn Majah, 2000).
In a book In Pursuit of Justice: The Jurisprudence of Human Rights in Islam, the authors
make the following case:
We argue that the Quran does not mandate equity over debt financing, and allows transactions
that are mutually beneficial. The usury verse is not the only verse in the Quran on business.
Much more prominent in the Quran is the command to engage in honest business, in particular
to give “full measure”. Specifically, the Quran says, “Woe to those that deal in fraud; those who,
when they have to receive by measure from men, exact full measure – but when they have to
give by measure or weight to men, give less than due” (Quran 83:1-3). This command requires
that both parties to any business transaction pay the full and fair values of what they are
purchasing. Failure to do so is a profound violation of Quranic commercial principles. Debt
financing, when done in accord with this principle is permissible. When the lender gets more than
he is entitled to, he commits the sin of usury. When he gets less, he is engaging in charity. But
charity is a voluntary act, and not one required in business transactions (Hathout et al., 2006).

VI. Exploitation as rhetoric and the real world exploitation

In regard to interest, as in some issues, Islam has become a victim of overly legalistic
approach, where form has overtaken the spirit and substance. If exploitation is truly a
concern, and it definitely should be, then it is important to note that the riba-interest
equation actually suffers from a myopic reductionism. In the Islamic literature on
interest-free economy and finance, one finds animated polemics about exploitation
caused by interest, but little in terms of the structures and processes of exploitation in
general. Ironically, as much as the exploitation argument is polemically invoked in the
pertinent Islamic literature, focused attention to or studies of exploitation is rather
absent. Khurshid Ahmad’s 1980 book includes a rather comprehensive bibliography of
Islamic economics, finance and banking. The bibliography, Muslim Economic Thinking:
A Survey of Contemporary Literature, by M. Nejatullah Siddiqi in that book includes 700
entries under 51 subcategories over 115 pages, and exploitation or economic exploitation
is not one of those categories (Siddiqi, 1981). Indeed, a rather comprehensive index at
the end of the book does not include exploitation or injustice at all. The same is true about
Khan’s book (221 pages) on annotated sources for Islamic economics (Khan, 1983).
A more recent work by Siddiqi (2004), Riba, Bank Interest, and the Rationale of
Its Prohibition, is no different in this regard. Even though it emphatically makes the
same connection between interest and exploitation, its rather detailed index does not
include exploitation as a separate entry.
Of historical note is the fact that the word “exploitation” – that is, exploitative,
in a negative sense – has no equivalent in Islamic discourse until modern times.
The word that is used as equivalent is istighlali, which means being exploitative.
This word does not occur in any hadith whatsoever[20]. The word zulm covers any The riba-interest
injustice, and since exploitation – in the sense of being exploitative – is a form of reductionism
injustice, it is covered too. However, there is no separate word equivalent in Islamic
discourse for being exploitative.
Thus, while, taking the cue from the Islamic polemicists, anti-exploitation rhetoric in
the IBF literature is commonplace, no specific empirical or focused studies on economic
exploitation is listed in such bibliographic works. In reality, I am not aware of a single 305
book or paper to date by the advocates of Islamic economics and finance that has dealt
with exploitation as a focused theme. Indeed, the background of the IBF Movement and
the record of the IFIs to date are not consistent with their anti-exploitation rhetoric.
Most IFIs originated with the capital contribution of wealthy individuals of countries
that already have a very high concentration of wealth in the Muslim world, a reality that
is contrary to the Qur’anic guidance that wealth should not: “[. . .] (merely) make a circuit
between the wealthy among you”[21]. Several of these IFIs are in international off-shore
centers, not in areas of the Muslim world that are really suffering from serious
capital-deficiency on the one hand and poverty and exploitation on the other.
IBF Movement also was expected to contribute toward broader economic
development:
An interest-free Islamic system of financial intermediation will be more just and fair. This
will make it more conducive to growth and development as all members of society will be
assured of a fair treatment (Siddiqi, 1983, p. 113).
However, instead of focusing on poverty alleviation and development, many IFIs,
similar to the case of Egypt, have shown a bias toward the urban and the rich:
[. . .] [M]ost of the activities of Islamic banks have been in large cities as opposed to the
countryside, where they are most needed; and that their main customers were likely to be
well-to-do, and not the poor or the lower middle class (Warde, 2000, p. 174).
Usmani, with his personal and direct experience with several dozen of Islamic banks in
the capacity of a Shariah expert echoes:
Unlike the conventional financial institutions who strive for nothing but making enormous
profits, the Islamic banks should have taken the fulfillment of the needs of the society as one
of their major objectives and should have given preference to the products which may help
the common people to raise their standard of living. They should have invented new schemes
for house-financing, vehicle-financing and rehabilitation-financing for the small traders.
This area still awaits attention of the Islamic banks (Usmani, 2002, p. 115).
It should be noted that these incisive comments of Usmani are not from the earlier
decades of 70s or 80s, when it was popular to argue that these institutions were in their
infancy, but reflects a more contemporary period in the twenty-first century.
Another pertinent issue is the investing behavior of the rich. The capital flight,
away from where capital is needed most and to safe financial havens of the West or
offshore facilities elsewhere, is often due to such investing behavior of the rich. They
feel constrained by various structural factors in their own economies to feel
comfortable to take risk:
Short of special political conditions, it seems that Islamic banking suffers the structural
effects of incurring greater risk for domestic lending than the conventional banks. In the
absence of major economic reform and consequent reduction in monitoring costs, which
IMEFM would benefit Islamic more than conventional banks, it may be more interesting to view the
former (and conventional) banks, too, for that matter) as vehicles for mobilizing overseas
5,4 investment or “capital flight” (Henry and Wilson, 2004, p. 125).
But it also has to do with the reality that many of the leading financial patrons of the
IFIs are interested in Shariah compliance only in a legalistic sense – without really any
concern for injustice or exploitation:
306
In most respects, the investment behaviour of the estimated 200,000 high net worth individuals
from Saudi Arabia and the Gulf is little different from that of their counterparts elsewhere. Their
aim is to generate income and wealth from their assets which benefits their families and
themselves, where the funds are invested being a less important consideration. How funds are
invested is for many more crucial than where, as most Saudi Arabian and Gulf citizens like
Muslims elsewhere, are concerned about deriving income from interest, even though for
the majority this concern does not translate into positive action. Some cleanse or purify interest
income by donating it to charitable causes; others invest part of their funds in a sharia-compliant
manner to ease their conscience, while investing the remainder conventionally. In this respect,
Islamic investors are little different to Western ethical investors, who tend to adopt a partial
approach rather than deploying all their funds ethically (Henry and Wilson, 2004, p. 126).
Thus, we see that the concern and commitment of the major players in the IFIs
about injustice and exploitation is rather dubious. Some proponents of interest-free
(or Islamic) finance regard the matter so revolutionary, like the anti-riba challenge was
to the Qurayshi dominance during the time of the Prophet, that current movement for
interest-free economy and finance is to be the same toward the dominant economic and
financial powers of our time:
The revolution inherent in the attack on riba is broad and has policy implications beyond the
personal morality issue. [. . .] In Makka at the time of the Prpohet, this revolution meant that
the Quraysh, the dominant merchant tribe of the time, had to change their habits and share
their dominant financial role. In our modern Islamic world, whether in the Arabian east or in
America, interest-free or riba-free finance pose the same challenge (Thomas, 2006, p. 132).
If that prognosis is valid, the Islamic economics and finance should be bitterly opposed
by the global powerhouses of finance or capitalism. On the contrary, it is now
established that the major financial institutions/corporations of the world are offering
similar services, without either making any substantive changes in their products
except in form or adapting their existing products and services to be offered to their
conventional clients.
Indeed, as Islamic finance generally denies the time value of money in theory, but
embraces it in practice, helps to explain the growing western fascination with
“interest-free” banking. These western financial powerhouses are becoming the
patrons or partners of the IFIs. It is not because the conventional western banks are
now convinced about the claimed superiority of Islamic finance/banking in general,
and Islamic financial products in particular, but because from their perspective they do
not find any substantive difference between their conventional banking and the current
practice of Islamic banking, which has shifted away from profit-loss sharing
(PLS)/risk-sharing-based transactions (Farooq, 2007a). With basically comparable
performance of Islamic banks, it is just another vast untapped market for the western
conventional banks to penetrate. In this regard, they also have serious comparative
advantage in terms of credibility, experience, and capitalization:
 You’re a pious Muslim with a few million in oil dollars to invest. So would the perfect Islamic The riba-interest
bank for you be Citigroup, perhaps? HSBC?
reductionism
Actually, yes. Giant Western banks – or, rather, their Islamic subsidiaries – are leading
the market for financing that complies with Qur’anic laws forbidding lending money for
profit, or sponsoring un-Islamic activities such as gambling or smoking (Matthews, 2005).
Indeed, the global powerhouses of finance are now dominating the Islamic financial 307
market and they have become the avid patrons of this niche. Is this due to a “challenge”
or even “potential challenge”, especially in a revolutionary sense, to the dominant
powers in finance in our time?

VII. Profit and exploitation

It should be noted that the principle of justice is not relevant merely to financial contracts
or transactions, but to all commercial transactions as well. The reality is that, while the
pervasiveness of exploitation that has existed and continues to exist in the world is due
more to the pursuit of greed and profit in general, pertinent Islamic literature is
preoccupied with interest as the source of exploitation and focused primarily on the
financial sector.
For example, just consider the case of the British East India Company. It was a joint
stock company that received its royal charter from the British crown in 1600. In one and a
half century, the “Company transformed from a commercial trading venture to one which
virtually ruled India as it acquired auxiliary governmental and military functions, until
the Company’s dissolution in 1858” (Wikipedia, n.d.). The world knows the rest of the
story, as that Company’s role ultimately led to complete subjugation and colonization of
South Asia. This entire British venture, driven by the quest for power and profit, serves
as one glaring example of exploitation. What role did “interest” play in this as well as
other ventures to colonize? While the colonial period is gone, during the post-colonial
period, especially in the era of globalization led and controlled by the corporate
multinationals, exploitation in different forms is as rampant as before. However, what
role is interest playing in causing or facilitating such exploitation around the world? It is
important that any pertinent explanation must not be limited to merely polemics.
Through almost an exclusive focus on the presumed interest-exploitation connection,
the proponents of Islamic economics and finance have entrapped themselves into
a seriously myopic reductionism. Indeed, global financial and corporate power houses
of the world that also play a vital role in worldwide exploitation are becoming the
patrons of Islamic banking industry, and these IFIs have no concerns about exploitation
in this context, because their focus is actually on rendering the world interest-free, not
exploitation free.
As Joel Bakan in The Corporation: The Pathological Pursuit of Profit and Power and
Daniel Litvin in Empires of Profit: Commerce, Conquest and Corporate Responsibility have
demonstrated, one can find a compelling portrayal and understanding of exploitation,
where the driving force behind such exploitation is not “interest”, but the unbridled quest
for power and profit to dominate and exploit others (McCann, 2004; Hastings, 2003):
The idea that some areas of life are too precious, vulnerable, sacred or important for the public
interest to be subject to commercial exploitation seems to be losing its influence. Indeed, the
very notion that there is a public interest, a common good that transcends our individual
self-interest, is slipping away. Increasingly, we are told, commercial potential is the measure
IMEFM of all value, corporations should be free to exploit anything and anyone for profit, and human
beings are creatures of pure self-interest and materialistic desire. These are the elements of an
5,4 emerging order that may prove to be as dangerous as any fundamentalism that history has
produced. For in a world where anything or anyone can be owned, manipulated, and exploited
for profit, everything and everyone will eventually be (Bakan, 2004, p. 139).
Indeed, IBF movement does not seem to have any clue about the global corporate
308 powerhouses and their ever widening reach in terms of power and exploitation. They
are even welcoming and hailing the involvement of these global financial corporations
in Islamic finance, by which these IFIs are making themselves vulnerable to be the
facilitators of “The Pathological Pursuit of Profit and Power.”
In Empires of Profit: Commerce, Conquest and Corporate Responsibility, author
Daniel Litvin portrays a picture of the multinational corporations that is somewhat
balanced. Even colonialism has brought certain benefits to the respective colonies. Even
those multinationals that run sweat-shops in various poor countries may benefit the
child labor – relatively, because those children might be worse off without such
sweat-shops. However, Litvin also points out the fact that “these firms – arrogant,
imperialistic, and corrupt – were often malevolent forces in their host countries: they
arranged assassinations, waged wars and exploited native workers” (Litvin, 2004).
In this context it is worthwhile to note the close connection between poverty and
exploitation. The vast majority of people who are part of the global poverty are greater
victims of or vulnerable to exploitation due to poverty. At the same time, exploitation
can be an important factor behind keeping people in persistent poverty:
Exploitation is a concomitant of poverty. It is a corollary of poverty. Poverty and exploitation
are closely linked. Poverty is a temptation to exploitation. If poverty is the action, exploitation
is the reaction. So long there is poverty exploitation will persist (Ghose, 1996, p. 136).
As Pusey explains the broader dimensions of the relationship between poverty and
exploitation in gender related contexts:
While men and women are both affected by globalization, their experiences are distinct because
of their gender roles and inequality. The loss of livelihood as a result of the rampant
privatization and destruction of natural resources for profit and largely unchecked power of
corporate entities (including translational corporations (TNCs) and multinational corporations
(MNCs) have increased poverty and the gap between the rich and the poor. This impacts most
acutely on women, particularly rural women, as poverty and marginalization fuel violence
against women. Poverty has been an increasing factor in forcing women to enter new
exploitative labour markets where they face new risks of violence (such as low-wage,
unprotected industries like garment making throughout South-East Asia; moving from rural to
urban areas or from countries with depressed economies to wealthier economies to work as
either documented or undocumented migrant workers in poorly paid and unprotected
industries and workplaces) and it increases women’s vulnerability to trafficking and
subsequent risk of violence (Pusey, 2008).
Plainly speaking, poverty invites or lures exploitation, and exploitation keeps people in
poverty. The relevance of Pusey’s observations to the theme of this paper is that the
widespread vulnerability to exploitative labour markets throughout the world, including
the Muslim world, may or may not have anything to do with interest. This is demonstrated
by the globally acknowledged success of pioneering initiatives such as Grameen Bank that
are based on interest-based framework and particularly focused on women. Desires and
visions to bring end to or alleviating poverty needs to be matched by understanding of the The riba-interest
nature, cause and scope of poverty so that appropriate and relevant interventions can be reductionism
made. Unfortunately, the legalistic approach to issues like riba and interest glosses over
the problems in the real world and naively assumes that elimination of interest means the
elimination of riba and thus elimination of zulm and exploitation as well. Another word,
build a framework that avoids interest and the issues of zulm/exploitation needs or merits
no separate or focused attention. 309
Dr Syed Nawab Haider Naqvi, a leading Pakistani economist with a PhD from
Princeton, former Director, Pakistan Institute of Development Economics, Islamabad
(1979-1995), and author of Ethics and Economics: An Islamic Synthesis, undertook an
empirical research based on Pakistan data. His findings about the role of interest and
profit is quite illuminating:
It has been widely noted by Muslim economists that the rationale (’illat al-hukm) of the
prohibition of riba is not just the mathematical formula per se used to compute it; it is rather
the alleged adverse consequences of it on the distribution of income and wealth This is
a correct position to take because, contrary to the Nozickian non-consequentialism (Nozick,
1974), Islam evaluates the correctness (or their opposite) of specific policies in terms of the
acceptability of their consequences from the moral, economic, and social points of view.
However, such an assertion is essentially a refutable hypothesis, which needs to be examined
from the theoretical and empirical points of view.
Here I examine this argument, using Pakistani data, [. . .] The situation in other Muslim
countries can be examined likewise. It should be clear that the information given in the table
does not unambiguously verify the hypotheses noted above. Instead, it shows that both the
profit and interest incomes – as well as all other types of incomes identified in table – accrue
more to the rich than to the middle-income and lower-middle-income groups; while the lowest
of the low-income group gets nothing of interest and next-to-nothing of profits. The reason is
that the initial distribution of income is highly unequal [. . .]. Thus, those who have more
already shall be given even more! The table even makes clear that, relatively speaking,
interest income is more important than profit income for the low-income and
lower-middle-income groups (in the Rs 1001 to Rs 4000 range) and the reverse is the case
for the high-income group (in the Rs 4000 and above range) (Naqvi, 2000).
Even though this is based on just one country, the results of Naqvi’s research are quite
contrary to the popular perceptions and claims. If both profit and interest incomes
accrue more to the rich, then focusing exclusively on interest is misplaced. Also,
if interest income is more important to the lower income groups, and profit (not interest)
is more important to the high-income group, then the common and popular claims by
the proponents of Islamic economics and finance require much closer scrutiny and
further empirical examination.
A relevant aspect of this discourse is how do the rich become rich and then richer.
It should not take a rocket scientist to figure out that while most rich people’s journey
may begin with labour income, rarely people become rich through labour income, or
labour income only. It should not be surprising that “[. . .] the average person gets most
of their income from salaries and wages” (Kruegger and Foster, 2009). Beyond the
realm of labour income, the accumulation of wealth by the rich occurs primarily
through investment income, which can be entrepreneurial investment or financial
investment. Gradually, income from financial investment becomes more important.
This is even truer for the richest (Zrahiya, 2011). Rules and regulations are generally
IMEFM made by the rich or those who are patronized by the rich and these rules, regulations
5,4 and loopholes are stacked in favour of the rich, earning more from investment income,
much of which is unearned (Kennedy, 2010; Braun, 2010). The pursuit of profit by
the rich through investment income has now global access aided by globalization
(Isaak, 2005).
Does this mean that interest has no role in exploitation? No, interest may have some
310 role in exploitation. Indeed, usurious transactions can still be observed, for example,
in USA in certain areas of consumer finance. Internationally, the debt burden can also
be linked partially to the problem of interest, compound or higher rate of interest to be
specific, as discussed earlier in this paper. However, the problem in both cases often
relates to borrowing beyond one’s capacity and sometimes the terms of borrowing are
predatory in the sense, for example, that the initial terms (if paid within certain
stipulated period is very attractive, but if not paid within that period, the interest rate
can jump to an exorbitant rate) (Lee, 2003; Lexis Publishing, 2001; Squires, 2004;
Crossney, 2006)[22].
However, the ongoing exploitation of human beings by others (individuals, groups,
institutions) is a much larger story than interest. The myopic reductionism involving
riba-interest equation and the search for exploitation primarily within that equation are
causing the Islamic economics/finance movement to miss the mark in a big way. It is
no wonder that some countries in the Muslim world that stand squarely on the
foundation of tyranny and exploitation, especially of the migrant labour, have been the
primary source of capital for the Islamic banking movement. The exploitation and
abuse of the migrant workers are all too well known and documents (Shelley, 2007;
Human Rights Watch, 2009), but the very same Shariah scholars and experts who are
serving and guiding the Islamic finance industry are muted when comes to such
exploitation, while routinely invoking the anti-zulm verses from the Qur’an, It is also
not surprising that the Islamic movements that have been spearheading the Islamic
banking/finance movement are patronized by some of these tyrannical regimes and the
movements are silent against them as far as the relevant exploitation is concerned.
One of the fundamental quests of Islam is to take a stand against injustice and
exploitation. However, the reductionism of riba-interest equation, which buttresses the
Islamic finance/banking movement and provides its basic rationale while it completely
ignores the larger picture of exploitation, should be a matter of serious concern.
One of the economic principles laid out in the Qur’an is that the wealth should not
get too much concentrated:
What God has bestowed on his Messenger (and taken away) from the people of the townships
– belongs to God – to his Messenger and to kindred and orphans, the needy and the
wayfarer; “In order that it may not (merely) make a circuit between the wealthy among you
[. . .]”[23].
The reality of the Islamic finance is, of course, otherwise:
The ownership structure of the Islamic financial industry is highly concentrated. Three of
four families own a large percentage of the industry. [. . .] This concentration of ownership
could result in substantial financial instability and possible collapse of the industry if
anything happens to those families, or the next generation of these families change their
priorities. Similarly, the experience of country-wide experiments has also been mostly on the
initiatives of rulers not elected through popular votes (Iqbal and Molyneux, 2005, p. 122).
VIII. The Qur’anic principle of justice undermined The riba-interest
Qiyas (analytical reasoning) is the fourth source of Islamic law. The core process of reductionism
qiyas involves finding illah (effective or efficient cause) that can be used to identify
broadened scope of a particular permission or prohibition in Islam. The Text of the
Historic Judgment on Interest by the Supreme Court of Pakistan is an important legal
pronouncement, a relevant part of which was authored by Justice/Mufti Muhammad
Taqi Usmani. It is illustrative of how such scholars sometimes inadvertently undermine 311
the Qur’anic principle of justice, while they invoke it in arguing for the prohibition of
interest. Usmani is one of the leading religious experts on Islamic finance and much
sought after by IFIs for their Shariah Boards. In the Historic Judgment, he identifies
“excess over principle” as the illah for the prohibition of interest and argues that zulm
(injustice) cannot be used as an illah (efficient cause). In that Historic Judgment
he distinguishes between ’illah and hikmah (underlying rationale/wisdom). Mufti
Usmani did not probably realize that this distinction as well as the way the argument is
made for this distinction undermines the very Qur’anic concept of justice (’adl or qist):
[. . .] after prohibiting the transaction of riba, the Holy Qur’an has mentioned the Zulm as
a Hikmat or a philosophy of the prohibition, but it does not mean that prohibition will not be
applicable if the element of Zulm appears to be missing in a particular case. The Illat (the basic
feature) on which the prohibition is based is the excess claimed over and above the principal
in a transaction of loan, and as soon as this Illat is present, the prohibition will follow
regardless of whether the philosophy of the law is or is not visible in a particular transaction
(Supreme Court of Pakistan, 1999, Section 120).
Any relative term which is ambiguous in nature cannot be held to be the Illat of a particular
law because its existence being susceptible to doubts and disputes, it would defeat the very
purpose of the law. The Zulm (Injustice) is a relative and rather ambiguous term the exact
definition of which is very difficult to ascertain. Every person may have his own view about what
is or what is not Zulm (Supreme Court of Pakistan, 1999, Section 121).
If the above assessment of the notion of justice/fairness (adalah) is correct, then
basically the pristine Islamic concept of justice as mentioned in the Qur’an does not
really have any functional relevance. The Qur’an categorically calls for justice as one of
its hallmark principles and values:
O you who believe! stand out firmly for justice, as witnesses to Allah, even as against
yourselves, or your parents, or your kin, and whether it be (against) rich or poor: for Allah can
best protect both. Follow not the lusts (of your hearts), lest you swerve, and if you distort
( justice) or decline to do justice, verily Allah is well-acquainted with all that ye do[24].
O you who believe! stand out firmly for Allah, as witnesses to fair dealing, and let not the
hatred of others to you make you swerve to wrong and depart from justice. Be just: that is
next to piety: and fear Allah. For Allah is well-acquainted with all that ye do[25].
The Qur’anic call to stand for justice presumes that people know and understand what
justice is. Islamic scholars themselves explain the concept of justice (adl or qist) as
“universal justice” (Kamali, 2002; Osman, 2006; Badawi, 2005). When the Qur’an refers
to justice in the context of the humanity [an-Nas ], it cannot be taken in a parochial
sense:
We sent aforetime our apostles with Clear Signs and sent down with them the Book and
the Balance (of Right and Wrong), that the mankind may stand forth in justice [. . .][26].
IMEFM How can the mankind stand forth in justice, especially in a universal sense, if it is so
5,4 relative? If justice (or injustice) is such an elusive, ambiguous or relative thing, then
basically such a clarion call is rendered vacuous. In other words, Muslims could
polemically argue that interest is unjust and exploitative and the non-Muslims
could disagree, while neither side has to be incorrect. How can we then make the world
understand the issue of justice, for example, in the context of Israel and Palestine, if justice
312 is so relative? How can we expect to explain to the world or persuade it that interest is
unjust and exploitative? It is all relative! Curiously, even Mufti Usmani also seems to
recognize this notion of “universal justice”, as it is the title of one of his speeches, presented
not just before Muslims, but at the 1999 Parliament of the World’s Religions (Council for a
Parliament of the World’s Religions, 1999). Do Muslims understand justice in Islam as
universal when they are at such Parliament, and not universal, when they are not?
Well, Muslims cannot claim that Islam stands for universal justice and then turn around
and assert that justice is relative so much so that “Every person may have his own view
about what is or what is not Zulm.” Mufti Usmani in writing the Historic Judgment and
others sharing his view about such relativity may not have thought of such ramifications.
One of the best articulators of centrality of justice in Islam is Ibn al-Qayyim:
The principles and fundamentals of the Sharia concerning the injunctions and the good of
humankind in this life and the next are all based on justice, mercy, the good of man, and
wisdom. Every situation in which justice succumbs to tyranny, mercy to cruelty, goodness to
corruption, wisdom to foolishness, has nothing in common with the Sharia, even if it is the
result of an allegorical interpretation [tawill ]. For the Sharia is the justice of God among
His servants, the mercy of God among His creatures, His shadow upon His earth, and
His wisdom, which is both the proof of His own existence and the best witness to the
authenticity of His Prophet[27].
Unless there are reasons to take issue with Ibn Qayyim’s perspective, to approach legal
issues in Islam without taking into consideration the matter of justice can very well be
counter-productive and in some cases may produce results that are just opposite to
what is intended by Islam. Quite legitimately, there can be a lively discourse about how
to better incorporate the equity perspective into formulation of laws and pertinent legal
analysis, but there is simply no room or basis to delink the legal issues, including the
determination and application of illah, from justice. Notably, it is in application of this
illah, the identification of what is ribawi and what is not rather dramatically falls apart.
How divergent are the results of applying qiyas in categorizing something as ribawi or
non-ribawi? Abdullah Saeed provides an illuminating portrayal:
Since the hadith did not provide any reasons for the prohibition concerning these six
commodities, jurists had to resort to ijtihad to identify the ’illa. On the basis of certain terms used
in some versions of hadith, they arrived at ’illas which naturally differed amongst the schools of
law. The ’illa of gold and silver, according to the Hanafis, is that the commodities are “weighable”
or “measurable” while for Malikis, Shafi’is and Hanbalis, the ’illa is that they are “currency”.
As for wheat, barley, dates, and salt, the ’illa is that they are “weighable” or “measurable” and
that they belong to the same genus (Hanafis); are storable nourishment for mankind (Malikis);
are foodstuffs (Shafi’is); or are foodstuffs while are measurable or weighable (Hanbalis).
Based on the ’illa, there could be a host of commodities susceptible to riba. Differences among
the scholars of law on the nature of ’illa often led to irreducible consequences. Eggs, for instance,
could be exchanged one for two, according to the Hanafis, as they are not weighable
or measurable, but would not be allowed according to the Shafi’is, as they are foodstuff.
 Malikis, like the Shafi’is, would allow such a transaction because an egg is not a foodstuff The riba-interest
which is storable for a reasonable length of time, like what (Saeed, 1996, p. 34; Obaidullah, 1999).
reductionism
Claiming that interest is prohibited because of the Qur’anic prohibition on the basis of
“no excess over the principal”, but delinked from “Deal not unjustly, and ye shall not be
dealt with unjustly” – both in the same verse – is an eye-opening illustration of a
mechanical and legalistic approach, where it is expressly asserted that the jurists’ task is
to apply illah without any regard to rationale or wisdom. As Mohammed Ariff eloquently 313
asserts “The bottom line is that,” beyond the divine injunction, “Muslims need no
“proofs” before they reject the institution of interest” (Islamicity, n.d.). Such indifference
or even antipathy toward rationale (hikmah) is rather deep-rooted. Saeed explains:
Since almost all exegetes belonged to schools of law, and rationales were generally ignored in
these schools, the exegetes did not seem to find it an attractive option to interpret the meaning
of riba in the light of its rationale, particularly a rationale based on the second statement,
“la tazlimuna wa-la tuzlamun.” The attitude of the exegetes towards the statement, “la
tazlimuna wa-la tuzlamun”, is indicated by Razi’s [d. 1209 AH) view on the rationale of the
prohibition of riba. He says: “The prohibition of riba is proved by a text [of the Qur’an]. It is not
necessary for mankind to know the rationale of duties. Therefore, the prohibition of riba must be
regarded as definitely known even though we do not know the rationale for its prohibition”[28].
The position of al-Razi is understandable, because the Qur’an is explicit and categorical
about the prohibition of riba, regardless of the rationale we can identify or not. However,
when contemporary scholars and experts assert the same type of attitude about rationale,
it is tantamount to indifference or even antipathy, because unlike riba, the prohibition of
interest is based on subsequent interpretation, which is probabilistic. More importantly,
contrary to the popular perception and traditional claim, the meaning or definition of
riba is not mufassar (self-explained or obvious); rather, it is mujmal (ambiguous,
non-definitive and thus requiring human interpretation). As Kamali clarifies:
The Mujmal turns into the Mufassar only when the clarification that the Lawgiver provides
is complete; but when it is incomplete, or insufficient to remove the ambiguity, the Mujmal
turns into a Mushkil, which is then open to research and ijtihad. An example of this is the
word riba which occurs in the Qur’an (al-Baqarah, 2:275) in the form of a Mujmal, as when it
reads: “God permitted sale and prohibited riba”, the last word in this text literally meaning
“increase”. Since not every increase or profit is unlawful, the text remains ambivalent as to
what type of increase it intends to forbid. The Prophet has clarified the basic concept of riba
in the Hadith which specifies six items (gold, silver, wheat, barley, salt and dates) to which the
prohibition applies. But this explanation is insufficient for detailed purposes in that it leaves
room for reflection and enquiry as to the rationale of the text with a view to extending the
same rule to similar commodities. The Hadith thus opens the way to further ijtihad and
analogy to the goods that it has specified (Kamali, 2003).
Lest it is misunderstood, the argument that while knowing hikmah of a
commandment/prohibition, it may not always be ascertained, and that is correct
because unless it is explicit stated in the Qur’an or explained by the Prophet, hikmah is
generally identified as part of human understanding and interpretation. However,
the same argument also applies to illah, as it is also based on human interpretation and
thus probabilistic.
Therefore, it is not adequate or appropriate to say that something is haram even
though the very reason mentioned in the Qur’an – i.e. zulm or exploitation – cannot be
IMEFM established or determined. At least, if this is denied, then illah should also be treated
5,4 consistently. Furthermore, if none of these matters, at least as Muslims there should be
genuine sensitivity to zulm/exploitation as it occurs in the real world. Unfortunately,
while many exponents of Islamic finance and banking routinely offer pious statements
about Islam’s prohibition of riba (and interest, as part of the riba-interest reductionism)
based on the injustice and exploitation argument, when it comes to the application or the
314 reality, suddenly the issue of injustice and exploitation becomes immaterial or irrelevant.
Ruth Sample has given a definition of exploitation that might be illuminating. “[. . .]
[E]xploitation is taking advantage of another’s vulnerability in a way that fails to
respect the personhood of that being” (Sample, 2003, p. 164). Indeed, the examples of
riba-related examples in early Islamic sources corroborate that the practice of riba was
dehumanizing not just in concept, but often in reality. Merely legalistic approach to
exploitation is unable to capture the relevant and substantive dimensions zulm or
exploitation, as reflected in riba.

IX. Conclusion
So, why is it easy to understand the rationales for the prohibition of riba, but not the
rationales for the blanket prohibition of interest? Why have the evolving IFIs, contrary
to their own polemics, marginalized the equity-based, risk-sharing modes and have
embraced debt-like instruments as the mainstay? (Farooq, 2007a). Why are these
institutions still concentrating on short-term products rather than on long-term
products, where the latter is more important for production-oriented projects for
development? Why is the Islamic banking movement facing an increasing need to resort
to Hiyal (legal stratagem) to claim Shariah-compliance of its products? Why and how are
the conventional western banks not only penetrating, but also becoming backers and
even financiers of this “Islamic” niche?
Some common explanations offered by the Islamic banking movement are that:
.
the problems and challenges are part of its learning curve; and
.
IBF cannot operate in its essence in a society and environment that is not Islamic.

This essay’s limited scope will not allow us to examine those explanations here.
However, there is another explanation that seems to be more relevant and applicable,
and that is the one explored here. That the riba-interest equation in a blanket manner is
not tenable from Islamic viewpoint and, maybe, that explains why the traditionally
offered rationales for prohibition of interest do not hold up. Through the riba-interest
equation, it is not just that the IFIs have entrapped themselves into a situation where
they often have to resort to Hiyal [legal stratagem, trick or even gimmick] to maintain an
Islamic veneer, but also that they have to adopt things (e.g. fixed rate of return;
or a mark-up that is indexed, pegged, benchmarked to the interest rate) that they have
otherwise rejected as Islamically unacceptable.
Interest can be riba (and thus prohibited in certain situation), if it has an exploitative
element or dimension. Indeed, in such case, a more relevant equivalent of riba is usury.
Also, the relationship between riba and exploitation/injustice is evident, but the
relationship between riba and commercial bank interest (in a competitive environment
and under government regulation that protects the borrowers) is not. In any case, if one
is to generalize about the prohibition of all interests (commercial and non-commercial,
nominal and real, simple and compound), then we have to come up with better and
more convincing rationales. Furthermore, the discourse has to be elevated from The riba-interest
a polemical level to a more substantive level, supported with empirical analysis, reductionism
especially surrounding claims about the deleterious effects of interest on, for examples,
western economies and elsewhere.
Finally, while the traditional rationales for prohibition of interest are indicative of an
anti-exploitation concern, the reality is that the intellectual and theological framework,
within which the interest-free economy/finance movement places exploitation, does not 315
really show a genuine and adequate understanding of the extent and nature of the
ongoing exploitation in the contemporary world. Starting from a focus on exploitation
may lead us to the goal of eliminating or at least limiting the role of interest in the
economy and if so proven, appropriate steps in a comprehensive manner must be taken.
However, preoccupation with interest, as evidenced by the riba-interest reductionism,
leads to mechanical and legalistic approach to remove interest, while the broader and
harsh reality of zulm/exploitation remains untouched. Regardless of the debate about
riba-interest equation, beyond the orthodox discourse of Islamic economics and finance
focused on freedom from interest, due to the categorical prohibition of riba in the Qur’an
there is a critical need for a more refined and substantive discourse about freedom
from zulm/exploitation.

Notes
1. “[. . .] La tazlimuna wa la tuzlamun,” Qur’an 2/al-Baqarah/279.
2. Qur’an 4/an-Nisa/135.
3. Qur’an 3/ale Imran/130.
4. The expression “pre-Islamic” appears only in quotations from others. When various authors
use “pre-Islamic”, they basically mean pre-Muhammad or pre-Qur’an period. From the
Islamic viewpoint, there is no “pre-Islamic” period in human history, as Islam began with
Adam/Eve and continued through the prophets all the way to the last Prophet and
Messenger, Muhammad [Qur’an 42/ash-Shura/13].
5. Saeed (1996, p. 22), quoting Tabari (1986, p. 59).
6. Saeed (1996, p. 22), quoting Tabari (1986, p. 59).
7. Vogel and Hayes (1998, pp. 72-3), quoting Ibn Qayyim al-Jawziyya (d. 1350/1973).
8. Farooq (2011), see the chapter “The neglected empirical foundation of Islamic law.”
9. An excellent summary is provided at Reference.com, available at: www.reference.com/
browse/wiki/Exploitation (accessed 28 July 2010).
10. Qur’an 2/al-Baqarah/279.
11. Ibn Hanbal, Musnad Ahmad, Vol. I, No. 2870.
12. Nyazee (2000, p. 24), quoting al-Sarakhsi’s Mabsut, Vol. 12, p. 109. Actually, this type of
definition of riba was introduced by another Hanafi jurist/exegete Al-Jassas (d. 370 AH). See
Note 15.
13. Farooq (2011), see the chapter “Islamic law and the use and abuse of hadith.”
14. Farooq (2011), see the chapter “The doctrine of Ijma: Is there any consensus?”
15. Farooq (2011), see the chapter “Qiyas (analogical reasoning) and some problematic issues in
Islamic law.”
16. Saeed (1996, pp. 23-4), quoting Jassas, Ahkam al-Qur’an, I, p. 465.
IMEFM 17. Readers can read the translation of al-Jassas’ commentary on riba in his exegesis.
The translation is by Imran Ahsan Khan Nyazee, a Pakistani scholar of Islamic
5,4 jurisprudence. It is available online. See the bibliography. Jassas’ commentary is interesting
as it does not refer to any earlier commentaries (Tabari, Zamakhshari or Ibn Kathir) on or
understanding about this issue. It does not even document with proper citation any of the
narrations that it presents as “hadith”. The translator did not add the citations either.
316 18. Saeed (1996, p. 28), quoting Ibn Qayyim, A’lam al-Muwaqqi’in, II, p. 154.
19. Qur’an 4/an-Nisa/29.
20. Now there is a searchable database al-Marja’a al-Akbar for the Islamic Heritage that contains
all the hadith collections. It is published by El Ariss in DVD format (http://elariss.com/index.
php?c¼9&lang¼en). The hadith collections included for this particular search included:
Sahih al-Bukhari, Sahih Muslim, Sunan Abu Dawud, Sunan at-Tirmizi, Sunan an-Nasai’,
Sunan Ibn Majah, Muwatta Malik, Musnad Ahmad, Sunan ad-Daraqutni, Sunan al-Kubra
al-Baihaqi, Sunan al-Darimi, Sahih Ibn Khuzaima, Sahih Ibn Hibban, Musannaf ibn Abi
Shaibah, al-Mustadrak as well as dozens more secondary collections. The word istighlal does
not occur in any hadith – narrations from the Prophet or anything reported in connection
with his acts or approval/disapproval.
21. Qur’an 59/al-Hashr/7.
22. For predatory behavior in international lending, see Krugman (1986, p. 127).
23. Qur’an 59/al-Hashr/7.
24. Qur’an 4/an-Nisa/135.
25. Qur’an 5/al-Ma’ida/8.
26. Qur’an 57/al-Hadid/25.
27. Ramadan (2004), quoting Ibn Qayyim, Ilam al-muwaqqiin an rabb al-alamin, Vol. 3, Cairo,
pp. I, 42.
28. Saeed (1996, p. 27), quoting Al-Razi, Tafsir, VII, p. 94.

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About the author

Mohammad Omar Farooq is the Head of Center for Islamic Finance at Bahrain Institute of
Banking and Finance (BIBF). Before joining BIBF, he was the Acting Dean of the Faculty of
Business and Financial Sciences at Royal University for Women in Bahrain. He also taught
IMEFM Islamic finance courses there. Prior to that, he spent 20 years in the USA, teaching economics and
finance, the last 13 of which were at Upper Iowa University. Dr Farooq received his PhD in
5,4 Economics from the University of Tennessee, Knoxville in 1988. He was a Ciriacy-Wantrup
post-doctoral research fellow at the University of California, Berkeley during 1988-1989. His
teaching experience and interests span economics and finance in general and Islamic economics,
finance and banking in particular. Among his research interests are economic development,
history of economic thought, and Islamic economics/finance/banking. During the past ten years
320 his research has focused particularly on the field of Islamic economics/banking/finance,
especially with emphasis on the roles and mechanisms to interface Islamic finance with
development, poverty alleviation and the real sector of the economy. Furthermore, his works also
include important areas, such as Shariah, hadith and Islamic jurisprudence. His works have been
published in several refereed journals. He presented a paper at the Harvard Islamic Finance
Forum in April 2008. Mohammad Omar Farooq can be contacted at: [email protected]

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