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A COMPARISON
Rhesa Yogaswara1
rhesayogaswara@yahoo.com
Abstract
In the business activities within an economic system nowadays, there are have
many violations occur in which each transaction contains riba, which is called the
interest. Islam has been revealed by God, with one of the purpose is to regulate
economic affairs.
There are many assumptions which the interest is perceived allowed in some
cases. But in Shariah rules, the usage of interest in the transaction is not allowed.
Riba is part of the prohibited transaction in the terms of the way we do the
transaction. There is no strong reason to assumed that the prohibition is only applies
for the debt in consumptive purpose and not for commercial loan.
Therefore, there several aqads in the business transaction, which are allowed
and do not violate the Shariah rules. We can compare the transactions between
transaction which comply with Shariah rules and transaction with interest based, in
the aspect of law, transaction process, and also the impact after the implementation.
We can see that the implementation of Shariah in every transaction, economic
stability can be achieved accordance with the Maqasid Shariah, where protect the
Religion, Life, Knowledge, Inheritance, and Treasure.
Finally, we can conclude that with the elimination of riba from economic
system, not only affected the positive impact in the economic side, but also social
justice, and economic condition with good moral and ethical environment.
1
Certified Islamic Finance Professional (CIFP) Candidate. INCEIF – Kuala Lumpur – Malaysia
1
1. BACKGROUND
Business is an activity that has been being implemented since the first. Various
activities have been varies the business activities. These business activities occur
naturally in realizing the economic situation, continue growing and stable. Economics
includes labor, capital, resources, and economic actors, who participate in the
State.
Economics is divided into two branches of economic, which there are micro-
monitoring the money supply by central banks, and also interest rates. In every
activities, individual has a role through every single business transactions with one of
coming from the west, are called conventional economic. Conventional economics
has adopted capitalism theory. In the Islamic perspective, conventional economics has
many weakness, where there are many assumptions that has been proved
inconsistently, such as (1) The desire of human being in consumption can be limited;
(2) The value of a goods and services considered to have the same level of urgency;
(3) Equitable distribution will occur naturally; (4) The economy will always be in
2
equilibrium; (5) Social cost will always be counted in determining the price.2
could be limit by themselves without any rules and regulation that needs government
intervention. The actual, the consumptive level is unlimited, since human is always
However, the price is consisting of many variables that could not assume as urgency
level.
huge gap between rich people and poor people is still happened.
To help the poor, social expense assumed has been included in the price of the
goods and service, which in fact, that condition is never happen. The social expense
revealed by God as a balanced system between material needs and spiritual needs.
Some Islamic economic concepts are (1) The moral-based of economic mechanism;
(2) Strong economic motivation to direct each individual in providing the best, both
for themselves and also for the community; (3) Economic and Social restructuring by
With the economic growing in many countries today, the economic system has
2
Chapra, M Umer. The Need For A New Economic System. Review of Islamic Economics. Journal of
the Islamic Economic Association published from Leicester, UK. Vol. 1, No.1, 1991 pp.9-47
3
Ibid
3
high reliance on financial resources, economic transactions, and economic efficiency,
which are also the efficiency in financial institutions. So that every single transaction
order to distribute funds through intermediation from people who have the funds, to
the people who lack in funds, can running well-balanced. Currently, the role of
4
2. SALES TRANSACTION
There are several basic motives behind the process of making profit from
every business transaction is conducted, there are (1) There are some efforts to add
value to in the product or service (Al-Kharaj); (2) There is a risk in doing business (Al
- Ghurm); (3) and the third is the cost in selling product or service (Al-Dhaman).4
developments are accompanied by the practice of lending, where rich people lend the
money to individuals or other companies that could utilize their excess funds.
occur, which is not complying with Islamic rules. These irregularities have occurred
in many countries and have occurred since the Rasulullah saw era, which was the riba
the perception that interest in banking industry is not riba because it is not excessive.
commercial loans, and the final perception is riba allowed in dharurah conditions.
These assumptions are wrong because Islam revealed by God to manage all
affairs in the world, including the economic field. Rules about riba were governed in
4
Karim, Adiwarman. Islamic Bank: Fiqih and Financial Analysis. Rajagrafindo Persada. Third Edition.
Jakarta. 2006. Pg 38
5
3. SHARIAH RULES
Shariah is a rule in Islam, where Islam is closely associated with the concept
of Tawheed. Tawheed is a relationship between man and Allah SWT as the Creator of
the universe, where humans have a commitment to Allah SWT to follow all the rules
Islamic law (Shariah) covers all aspects of life. For clarity of understanding
one has to distinguish between laws related to ibadat (worship, prayer) and laws
Shariah that have five goals which need to be protected for the achievement of
Maslahah, ie Religion, Life, Knowledge, Inheritance, and Treasure. These goals has
In the Al-Quran, it found that 12 Quranic verses dealing with Riba, which
occurs 8 times, 3 times in 2:275 and one time each in 2:276, 2:278, 3:130, 4:161 and
30:39. Here are quotes from Qur'anic verses that had been mentioned above
Al-Baqarah (2:275) "… And Allah has justifies the trades and forbids the Riba…."
Al-Baqarah (2:276) " Allah destroy usury and cultivating charity. And Allah does not
love everyone who remain in unbelief, and always doing sin. "
Al-Baqarah (2:278) – “… and leave the rest of Riba (who have not collected)…”.
5
Siddiqi, Mohammad Nejatullah. Riba, Bank Interest And The Rationale of Its Prohibition. IDB-IRTI.
Jeddah-Saudi Arabia. 2004
6
An-Nisaa (4:161) - “and because they eat riba, but in fact they have been banned
from it, and because they eat the wealth of people with a wrong path….”
Ar-Ruum (30:39) - “… and riba (additional) that you gave to her property only grew
for human’s wealth, then the riba does not give additional value for Allah. …"
From the verses mentioned above, Islam has provided rules in transactions.
Which transaction is prohibited, and which one will be allowed. The explanation
7
4. PROHIBITED TRANSACTIONS
There are several things that must be observed to see which transaction is
prohibited or not. There are the objects in the transaction, the way we do the
transaction, and the uncomplete transaction. From the object side, some transactions
The second is the prohibition transaction from the way we do the transaction,
which is considered unlawful. Each human activity, including the economic field, it is
strongly associated with shariah laws that should not be violated. For example are
transactions were done by two people or more, based on the pleasure of each side,
that must meet the Shariah rules. A transaction can be said to be illegal or uncomplete
akad if not fulfilled the terms, there has been ta'alluq, and the last is would happen
shafqatain fi al-shafqah.
people do the transactions are carried the application of interest. Interest in Islamic
known as riba.
6
Rosly, Saiful Azhar. Critical Issues on Islamic Banking and Financial Markets. Dinamas. Malaysia.
2007. Pg 49
8
perspective, Hanafi’s School has explained, which riba is a surplus of commodity or
an excess in return without counter value. It means that riba is a predetermined excess
or surplus over and above the loan received by the creditor conditionally in relation to
a specified time period. Riba was also made forbidden in the 8th or 9th year after the
Rasulullah saw Hijrah (flight from Makkah). In the Al-Quran, it found that 12
Quranic verses dealing with Riba. The word riba occurs 8 times, 3 times in 2:275 and
9
5. THE PRACTICE OF RIBA
types include Riba Fadl, Riba Nasiah, and Riba Jahiliyah.7 Riba Fadl has also known
as Riba Buyu'. It occurs as a result of Riba from the exchange of similar goods that do
not meet several criteria. The violated criteria are the qualities of goods which are not
equal (mistlan bi mistlin), the quantity of goods exchanged are not equal (sawa-an bi-
sawa-in), and the last is, the time of delivery is not in the same time (Yadan bi Yadin).
Riba that we mentioned above can affect the oppression either for one of the
party, both parties, and possible also for other parties. In banking, Riba Fadl is found
in terms of buying and selling in a foreign exchange, which is not in cash (spot
transaction).
The next category of riba is Riba Nasi'ah. Riba Nasi’ah can be referred as
Riba Duyun. It happened as a result of debts that do not meet the criteria for taking
profits in the transaction. These criteria consist of the profit is not taken because of
the risk (al ghunmu bil ghurmi), profit is not taken because of the effort to give the
additional value, and then the criteria which is not taken align with the expense (al-
kharaj bi dhaman).
addition of goods delivered today with the goods delivered later. In every business
activity, there is always a possibility of gains and losses. So that might be happened
and it is also not certain (uncertain). But in this Riba Nasi'ah, everything is always
7
Karim, Adiwarman. Islamic Bank: Fiqih and Financial Analysis. Rajagrafindo Persada. Third Edition.
Jakarta. 2006. Pg 36
10
considered to be certain. These exchanges can cause oppression for one party, both
For the case of conventional banking, Riba Nasi’ah is found in many credit
interest payments and interest payments from deposits, savings, current accounts, and
others. The conventionalist’s opinion on the application of interest is that applies the
principle of time value of money, which is defined where "A dollar today is worth
more than a dollar in the future because a dollar today can be Invested to get a
The argument is not accurate, because in every investment there is always the
possibility to get return (positive return), loss (negative return), or zero (no return and
certainty returns. Almost no strong reason for the assumption that the prohibition is
only applies to debt for the consumptive purpose, and not for business loans.
And the last is Riba Jahiliyah, which Riba came as repayment activities
carried out by providing a greater return than the principal loan. The returns greater
than the principal because the borrower is not able to return the loan at the agreed
The violation from the Shariah rules has occurred in the case of Riba
Jahiliyah, where the loan is a transaction on the basis of goodness (tabarru '), while
there was happened that the goodness transaction intended to be a transaction for
8
Karim, Adiwarman. Islamic Bank: Fiqih and Financial Analysis. Rajagrafindo Persada. Third Edition.
Jakarta. 2006. Pg 39
9
Ibid. Pg 40
11
business purpose. In the conventional banking example, Riba Jahiliyah is found in
many loan transactions such as credit cards, loans without collateral, interest payment
Not only banks, but also in the modern financial system, it has now occurred
business activities that do not have a positive impact on the real sector. What
happened was the collection of money by the banks to open savings services, and take
When a bank provides business loans, the bank did not provide financial
advice to the borrower to increase profits. What happens is where the borrower must
pay the loan on time, regardless of ability to make payments to the borrower.
The main thing from the application of the riba from the economic side is the
exploitation of social and economic. This has violated the core of Islamic teachings in
12
6. SHARIAH COMPLIANCE SALES
“Allah has permitted trade and forbidden Riba”. In business transactions, buying and
selling is allowed since there is not any oppressed party. Sharing of risks and
uncertainty is not only for one party, but also all parties have the uncertainties. From
these uncertainties, the contract/aqad of the transaction can be categorized into two
Contracts.10
which provides certainty in the payment, both in terms of quantity and also the
beginning of the transaction between both parties. Some certainty criterias are the
certainty in terms of the object exchange, the amount, quality, price and delivery time.
As an example of these transactions, there are transactions about trade, pay-paid, and
lease transaction. From these types of contracts, business transactions are conducted,
do not have the capital to build business ventures to share profits and risks.
From the object side of the exchanged, there are two general types of
exchange. The first is the exchange with goods and services as the object ('Ayn),
which is a real asset. And the second is the exchange of money and securities, which
10
Karim, Adiwarman. Islamic Bank: Fiqih and Financial Analysis. Rajagrafindo Persada. Third
Edition. Jakarta. 2006. Pg 51
13
are financial assets (Dayn).
From those two types, there will be able to be identified for several types of
exchange. The first is the exchange of real assets ('Ayn) with real assets ('Ayn), and
the exchange of real assets ('Ayn) with financial assets (Dayn), and the last is the
In the exchange of real assets ('Ayn) with real assets ('Ayn), if the types of
asset are different, the transaction would be allowed. But if it is in the same type, it
should consider the quality of the assets exchanged. If the quality of visible asset can
For the cases where tangible assets are indistinguishable in the terms of the
quality, it must meet several criteria which the asset have same amount, and the time
For transactions that conduct the exchange in real assets ('Ayn) with financial
assets (Dayn), it needs to be identified by the asset type. When the real assets ('Ayn) is
a goods, then the exchange of real assets ('Ayn) with financial assets (Dayn) called as
a trade (Al-Bai'). Meanwhile, if the eschange asset ('Ayn) is in the form of services,
then this type of transaction can be said as the rental transaction or wage-paid (Al-
Ijarah).
assets (Dayn) can be categorized into several types of trading which comly with
Shariah rules. These types of payment include cash (now for now), Bai'Naqdan or
(Bai'Salam)
14
Bai'Muajjal category consists of two types of deffered payment. The first is a
payment made in full payment (Muajjal), and the second is how to make a payment
consists of two types. The first was carried out full payment at the beginning
(Bai'Salam), and the second is a payment made through installments, but the
payments must be paid before the goods are full delivered (Bai 'Istishna).
categorized based on the benefits gained. Ijarah to get the benefit from goods is
called lease, and Ijarah to get the benefit from the service is called the wage-paid.
From the category of wage-paid, Ijarah can be subdivided into two categories,
based on the performance of the services. For the performance that reflected to the
payment directly is called Ju'alah or success fee. However, for the performance that
In the exchange between financial assets (Dayn) and financial assets (Dayn), it
can distinguish between the Dayn in money with Dayn not in money (bonds). For
Dayn in money, the exchange is allowed to meet the criteria where the exchanged is
done for the same amount (Sawa-an bi Sawa in), and exchanges made at the same
time (Yadan bi Yadin). In Dayn in securities must meet the condition, where the
mixing theory based on the mixing object and the time of the mixing activities.
Where the real asset ('Ayn) is in goods and services, and financial assets (Dayn) is the
15
form of money or securities, as the difference in natural uncertainty contracts.
delivery, which is done at the time of the aqad, and the delivery time is done in the
future. From the grouping based on the object and the mixing time, there are three
types of mixing that can be identified. First is the mixing of real assets ('Ayn) with
real assets ('Ayn), and then mixing of real assets ('Ayn) with financial assets (Dayn),
and the last is the mixing of financial assets (Dayn) with financial assets (Dayn).
In mixing between real assets ('Ayn) with real assets ('Ayn), mixing occurs
between the two parties to mix the owned product or service in order to create a
single product or service that can be used as a source of income. It is usually called
Shirkah 'Abdan.
Next is the mixing of real assets ('Ayn) with money (Dayn), which is divided
into two kinds of contracts, namely Shirkah Mudaraba and Shirkah Wujuh. Shirkah
Mudaraba is mixing the money with the services expertise, where the money
invested by the owners of capital and services expertise by the party who will run the
business. While Shirkah Wujuh is a contract where the owners of capital invest in
For the mixing of money (Dayn) with money (Dayn), it can be grouped based
on the amount of funds. If the amount is provided by two sides equally, then the aqad
is called the Shirkah Mufawadhah. If the money by two parties is not equally, then the
(Dayn) in accordance with Shariah rules, if the transfer was made during aqad. For
16
the delayed delivery of the money would violate the rules of Shariah.
7. COMPARISON
With the availability of Shariah rules, businesses transactions are not allowed
if the transaction contains the prohibited content, such as riba, while trade is allowed
on the previous section about Riba and Shariah compliance Sales, then we can
The percentage of interest previously The profit sharing is accordance with the
determined, based on the lending amount agreed ratio
17
Tabel.7.1. Tabel perbandingan antara riba dengan jual-beli11
We can explain the above table. The first is the platform side, which the
transaction could comply with the Shariah if the platform of the transaction is coming
from Shariah Law, which Al-Quran, As-Sunnah, and also Ijma threated as the
sources.
relationship types. In interest based transaction, the relationship between both parties
is called as debtor-creditor. While the deptor is the party who borrow the modey for
rich people who lend the money, and expect get the return as an interest, which is not
with Shariah is called partnership. There are several types of partnership that has been
described in the previous section. There are Shirkah Mudaraba, Shirkah Wujuh,
Shirkah Mufawadhah, and Shirkah 'Inan as the sample aqad which comply with
Shariah rules.
business sector would not be reflected in the interest rate that used as a benchmark in
determining the profit margin. While in Shariah transaction, goods and services used
as a commodity that can implies the positive return. Money is used as a tool of
exchange. Therefore, monetary and real sector related very strong, that can encourage
11
Agustianto. Riba Empiris. Presentation Slide in Muamalah Bank. Indonesia. 2006
18
In Shariah transactions, the margin and the selling price would not be changed
as the agreed in the aqad. Whereas in interest based transaction, interest could be a
compound interest when the borrower could not pay the installment timely. It means
that higher non performing loan; the amount of interest could be higher.
In the interest based transaction, the determination of the interest rate is not
reflecting the profit and loss rate. Lender tends not to care the ability of the borrower.
Nevertheless in Shariah transaction, profit sharing was determined based on the profit
and loss.
Shariah transaction has to fulfill buying and selling (trade) principle in every
In uncertainty contracts, there are three posibilities that could happen. While
the loss happened, the loss must be covered by the borrowers, based on fixed interest
payment as promised in the agreement. And the lender still received the principal
with additional margin which called as interest. Different with Shariah contracts, if
19
8. CONCLUSION
In the business activities within an economic system nowadays, there are have
many violations occur in which each transaction contains riba, which is called the
interest. Islam has been revealed by God, with one of the purpose is to regulate
economic affairs. The prohibition of riba has been explained in Al-Quran surah Al-
Baqarah (2:275).
There are many assumptions which the interest is perceived allowed in some
cases. But in Shariah rules, the usage of interest in the transaction is not allowed.
There are several things that must be observed to know which transaction is
prohibited, and which transaction is allowed. There are the objects of the transaction,
the way we do the transaction, and the completeness of the aqad in the transaction.
Riba is part of the prohibited transaction in the terms of the way we do the
transaction. In practice of Riba, it can be categorized into several types include Riba
Fadl, Riba Nasiah, and Riba Jahiliyah. Riba could affect the oppressed for one of the
party, both parties, as well as another parties which could get the impact from the
only applies for the debt in consumptive purpose and not for commercial loan.
Therefore, there several aqads in the business transaction, which are allowed
and do not violate the Shariah rules. Those types of transactions can be categorized
into two major groups. There are Natural Certainty Contracts and Natural Uncertainty
20
Contracts. Those two major groups is described by aqad with exchange theory, and
Shariah rules and transaction with interest based, in the aspect of law, transaction
process, and also the impact after the implementation. We can see that the
accordance with the Maqasid Shariah, where protect the Religion, Life, Knowledge,
Finally, we can conclude that with the elimination of riba from economic
system, not only affected the positive impact in the economic side, but also social
justice, and economic condition with good moral and ethical environment.
21
9. REFERENCE
Chapra, M Umer. The Need For A New Economic System. Review of Islamic
Jakarta. 2008
Dusuki, Asyraf Wajdi. Islamic Banking System and Operation. Lecture Material.
Rosly, Saiful Azhar. Critical Issues on Islamic Banking and Financial Markets.
Siddiqi, Mohammad Nejatullah. Riba, Bank Interest And The Rationale of Its
22