Guaranteeing a Fixed Profit as an Alternative to Riba

The Supreme Court of Pakistan, in

determining the applications and implications of the term “Riba” asked for

assistance of religious scholars and other interested people of the country. For

this purpose, answers to ten questions were sought. The tenth among these

questions was:

Whether a creditor can fix time

and rate of profit while the debtor saying Insha

Allah, he will be able to earn and pay the same in time; failing

which the guarantor may give profit asked for plus also a bonus or

compensation for delayed payment, if any, also according to other arrangements

regarding the loan. What will be the position if the system of insurance for

the said profit is introduced?

My Reply

to the question follows:

Fixing the “rate of profit” on a

loan prior to the accrual of profits is the very essence of “Riba”. Any one who

stands as guarantor of such “profits” in effect stands as guarantor for the

payment of “Riba”.

The position of insurance for such “profits” shall also not be any different

from the position of the guarantor.

Guaranteeing the payment of “Riba”

is guaranteeing the payment of something prohibited by the Shari`ah.

In all these cases, the person or the institution charging “Riba”

shall be committing an act that in the eyes of the Shari`ah

is a very big crime.