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|Taqi Usmani answers al-azhar's fatwa on Interest|
|12/09/02 at 21:11:01|
|Al-Azhar Fatwa Declaring Interest Permissible|
by Mufti Taqi Usmani
Posted: 25 Ramadan 1423, 30 November 2002
Question: There are media reports of a new Al Azhar declaration on Interest. This poses a serious dilemma for us in the West and your guidance is needed as to how we should deal with it. [Abdul Hai Patel]
Answer: I have not yet seen the text of so-called Fatwa issued by Majma-ul-Bahoos of Al-Azhar of Egypt. What I have seen is the press reports that have appeared in different newspapers and magazines which have reported that Majma-ul-Bahoos has allowed fixed interest by a resolution adopted by it with a majority of 20 to 1. The following points may be kept in view about this resolution:
1. Majma-ul-Bahoos, at present, does not comprise of very competent scholars of Shariah. There was a time when this institution was regarded as the most prestigious research institute with regard to Shariah and great scholars from all over the world used to attend its meetings. At that point of time this very institute had issued a detailed resolution about the prohibition of bank interest which was adopted unanimously by the personalities not less than Sheikh Abu Zahra, Hassanain Makhloof, Mustafa Zarqa etc. At present no one of that caliber is available in this institution.
2. It is well known that Sheikh Tantavi had issued his opinion about the permissibility of bank interest as a Mufti of Egypt after which he was elevated by the government to the post of Sheikh of Al-Azhar. His views were forcefully rejected and refuted by the Shariah scholars throughout the world and he was condemned by them for the Fatwa issued by him in this regard. It seems that the same Sheikh Tantavi has somehow managed to get this resolution issued by the Majma-ul-Bahoos which has at present has no outstanding scholars in it.
3. The importance in Shariah is always of the evidence produced from the Qur'an and Sunnah and not from the individual opinion expressed by some scholars. Since all the noteworthy Shariah Scholars have declared the bank interest as Riba and prohibited by Qur'an. This scanty opinions expressed by some unknown persons cannot contradict the position taken by the Ummah throughout the centuries.
|Mudaraba vs. wakala & Justice Taqi Usmani's argume|
|12/11/02 at 12:47:55|
Mudaraba vs. wakala & Justice Taqi Usmani's argumentum ad hominem
[The two issues are discussed in reverse order. The wakala
discussion starts after three paragraphs:]
1. Justice Taqi Usmani's argumentum ad hominem:
(For those not trained in formal logic, "argumentum ad hominem"
is the fallacy of attacking the person making an argument --
his post, knowledge, etc. -- implying that this renders the
First of all, I am disappointed that Justice Taqi Usmani
offered in response to this new development yet another
ad hominem attack: that the Islamic Research Institute today
does not have the likes of Abu Zahra, Khallaf, and Al Zarqa'
among its members (note that no names of living jurists
were mentioned in this gratuitous attack!). The further argument
that the Islamic Research Institute's current members are unknown
and not very competent is rather short-sighted. Those who are known to
some, or in certain circles, are likely to be (and indeed are)
unknown to others and in other circles. For instance, I have
encountered many Muslims here in the U.S. with origins in the
Indo-Pakistani sub-continent who did not know of Dr. Al-Qaradawi,
and similarly the vast majority of Arabs I know have never heard
of any contemporary jurists from the Indo-Pakistani sub-continent.
As Justice Usmani correctly points out, the validity of an argument
does not rely on its proponents, but rather on its foundation
in Qur'an and Sunnah. That renders the rest of his attacks on
the IRI opinion(makers) nugatory, and thus needlessly insulting.
I think Justice Usmani would have done well if he had
just said that he would like to wait to read the full text of
what he referred to as a "so-called fatwa", and refrained from
ad hominem attacks against Dr. Tantawi and members of the Azhar IRI
-- personal attacks not befitting a Scholar of his caliber.
2. Mudaraba vs. Wakala and Islamic banking frameworks
Now, returning to the important issue discussed by Mr. Walid Hegazy.
Mr. Hegazy suggested that Dr. Tantawi had already made the current
argument to reconsider banking relationships from a wakalah (agency)
viewpoint, but then proceeded to discuss his (Dr. Tantawi's)
discussion of Mudaraba, and its defectiveness if the profit amount
is pre-specified. I have not read Dr. Tantawi's book to which Mr.
Hegazy refers, and would love to get a citation to read the full
treatment for myself. In the meantime, I would like to highlight,
again, the potential novelty of the wakala (agency) argument.
In particular, in view of the fact that the bulk of Islamic banks'
assets are in the form of fixed-interest-based accounts-receivables
from Murabaha (cost-plus sales) and Ijara (leasing) finances, it
would make sense to fix the "returns" to liability-holders/
depositors. We also know that Islamic banks have special purpose
accounts to smooth rates of returns and do precisely that. On the
other hand, a lot of the Ijaras are now being done separately
(away from Islamic banks) and directly securitized for sale to
wealthy individuals in the Arabian Gulf. The institutional framework
of Islamic banks remains one of silent partnership (mudaraba) with
special provisions to fix rates of return post hoc, while the
securitization (market) approach has had relatively limited appeal
to Islamic bank customers who are not very rich.
My question is regarding a middle-ground that the wakala argument
presents, which I have not seen before (again, Dr. Tantawi may have
discussed it, but I have not seen that book). Unlike the mudaraba
setup, wakala has a lot of the characteristics of securitization of
the accounts receivables -- which accrue directly to the muwakkil
(principal), while the agent may only be paid a fixed fee or a percentage.
If the agent/wakil is paid a percentage of the profits, the agency
does become an instance of mudaraba (silent partnership) as Mr. Hegazy
suggests. However, it would make more sense to bridge the institutional
(Islamic banks' mudaraba/investment) approach and the market (securitization
of 'ijaras and/or murabahas in so-called mixed funds) approach through
the vehicle of wakalah. My suspicion is that most bankers turned Islamic
bankers would rather collect a fixed fee as a percentage of funds under
management (as mutual funds do), and then all interest-based returns
on Murabaha and Ijara can be passed-through to Islamic bank liability
holders (now neither depositors/mudi`in, nor investors/mustathmerin,
but principals/muwakkilin). This keeps the wakalah as a separate
contract-basis (unrelated to Mudaraba) for studying Islamic banking.
For instance, in Murabaha, the Islamic bank merely becomes wakeel lil-bay`
(agent commissioned to sell on behalf of the principal), whether or
not it is paid a fee for its services. As long as the fee is not made
a percentage of the profits, this contract remains immune from instigating
factors (`ilal) that would render a mudaraba (silent partnership, or
agency for a percentage of the profit) defective. [Otherwise, jurists
would not have studied aHkam al-wakalah (legal status of agency contracts)
in chapters separate from those for mudaraba].
Actually, whether or not Dr. Tantawi had brought up this issue of wakala
earlier, I think it merits a detailed discussion. The mudaraba route
has known consequences -- defectiveness of silent partnerships with
pre-specified profits. However, the wakala route, with some work, may
yield interesting results.
Looking forward to a fruitful debate.
Mahmoud A. El-Gamal
Chair of Islamic Economics, Finance and Management
Professor of Economics and Statistics
Department of Economics -- MS 22
6100 Main Street
Houston, TX 77005
|Re: Taqi Usmani answers al-azhar's fatwa on Intere|
|12/11/02 at 14:21:59|
On a tangent.. we know that as muslims in the US we shouldn't have all our money in US banks because even if we don't take interest from them they are taking our money, making money off of it and no doubt sending alot of that money to israel, etc :(
So what's the best thing to do with our money? Invest in real estate? Give as charity to build institutions? Donate to the poor after we die? I was thinking about this and I really don't think Muslims need more masjids or schools even. They need long term development and long term service organizations. Whatever happenned to the concept of Waqfs? Some of the greatest masjids and schools were built on waqfs and ppl continued to give to waqfs as time went on. Are there any waqfs in the US? What about youth organizations and stuff.. every year they struggle to get some money and survive based on donations...seems like we just don't plan long term.. economically or otherwise :(
|Re: Taqi Usmani answers al-azhar's fatwa on Intere|
|12/12/02 at 18:06:20|
[quote]What about youth organizations and stuff.. every year they struggle to get some money and survive based on donations...seems like we just don't plan long term.. economically or otherwise [/quote]
You'll have to wait at least a couple of generations till they get people who think like you and me into the mosque committes, commity forums and then will see change. I went to an Interfaith council and one of the bros said that the New Muslims, those who have accepted Islam are doing more to promote Islam than those who born Muslims and whos origins eminate from the South East. I think thats right, we can't build any further mosques adn istitutes because we're at risk of losing everything, yet when will the community listen, when its too late.
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