“Islamic” predatory lending
Hood Bradford has some thoughts on predatory lending from “Islamic Finance” companies. He also touches on the subject here.
Should a Muslim pay more for trying to be pious? Must an “Islamic” deal be a bad deal that does not stand up to good economics?
Mahmoud Elgamal has been on this mantra for months on his blog and thinks that Muslims who are trying to avoid interest are in many cases paying more than they would have paid in a conventional mortgage in the name of piety. He writes:
Much of “Islamic economics” is just bad economics, relying implicitly on the reader’s piety to forgive lack of rigor. That which is good economics is not in need of the “Islamic” label, since it should stand on its own validity. Of course, the practical consequence of “islamic economics” has been the current field of Islamic finance, which — despite its fast growth — I consider to have been an utter failure in addressing the needs of Muslims or even adhering to the Canonical texts of Islam
We have been so trained to look the other way or ignore reality on issues that we hurt ourselves in the process
Article: The Cost of Being Muslim
Filed under: Sloganism over Reality
Assalamu Alaikum, brother Tariq :
Al hamdulillah, you always bring up interesting topics, and your posts do make me think along different directions. However, on this topic, I must say that I disagree with some of the views in the blogs you linked very strongly.
There is undoubtedly a very steep cost of being a Muslim in the modern world we live in, and this isn’t something that should be a surprise to us. So, I don’t find it far-fetched that taking conventional loans is yet another “sacrifice” we have to make (such as eating only halal, or abstaining from zina, and so forth). That the Islamic alternatives are not as economical as conventional loans is a very poor argument, in my opinion. One could use that logic against, say, paying Zakat. Upon first sight, paying zakat out of one’s wealth seems to be a very “foolish” act (using conventional, secular logic), but as Muslims know, Zakat and Sadaqah does not diminish wealth. On the contrary, is purifies and increases wealth. Al hamdulillah, our religion is replete with examples like this, we all know the generosity of our Prophet (peace be upon him).
For example, the story of Aisha (Allah be pleased with her) who donated all the meat in the house, except for a small part. When he asked her how much of the meat is left, she said nothing but the shank, upon which he replied, Al hamdulillah, everything remains, except for the shank (i.e. wa lal aakhiratu khayrun-laka minal ula).
So, whether these Islamic alternatives are permissible or not is a separate issue, upon which I’m not qualified to comment upon (I haven’t studied Islamic economics, nor secular economics in depth), but the fact that it creates a “cost of being Muslim” should not even be a consideration in this debate, in my opinion. Islam teaches us a lot of things that, upon first sight, seem counter-intuitive (charity increases your wealth, whereas riba decreases your wealth).
It seems to me to be a very slippery slope to follow, that line of logic, and in fact, one of the bloggers you linked even advocates eating non-halal meat as a result. Here it is :
“Of course, there are Muslims who insist on halal dhabiha, and would pay extra for its meat. That is their choice, but they shouldn’t call that meat “Islamic” (implying that other meat is haram or un-Islamic). Likewise, I may be willing to buy financial products and services from Muslims, even if they cost more, just to support their businesses, in the same way that I support Muslim food stores that sell “halal meat”, even though I consider the other meat halal as well (either as food of “people of the book”, or as properly slaughtered meat on which no names of deities were invoked, thus allowing me to say the basmala). If they call it “Islamic meat”, however, I would probably be just as offended as I am by the cheap marketing brand name “Islamic finance”, which insults the name of my religion.”
So, to answer your questions; certainly, a Muslim is already constantly paying more for being pious in a lot of ways. But no, an Islamic deal does not necessarily have to be a bad deal, but it may well be in some cases.
For example (not to beat this analogy/example to death), a strong Islamic argument may well be made for zuhd/abstinence and cutting down on one’s expenditures and saving up, until one has enough money to pay in full (cash) for the car/house one wants to purchase. It just struck me that some of the bloggers you linked seemed too eager to brush aside Islamic restrictions if they were an obstacle to their embracing consumerism, and I felt I needed to comment on that.
Wassalam,
Saif.
Brother Saif:
Wa alaykum as-salaam
Here is the general crux of what the brothers and I are saying… Do I as a Muslim have to pay more for poorer or the same service for the “Islamic” label.
Since you brought the meat issue, I will use it as an example.
A very good friend of mine, in my former city, and I used to talk about the “blue meat” (yes it was blue sometimes) that was sold at a premium price at one of the halal meat stores in that city. Not many stores in that city mind you, so there was not much of a choice if one was only going to eat Muslim slaughtered meat.
We found it to be an insult to have to pay premium price for poor quality meat just because it had the “Islamic” label. Indeed after I left town, the local news did an expose on this outfit for selling bad food.
How does this happen? The owner of the store relies upon the piety of his customers to ignore the bad quality of his product. The simlitude of your argument is that the people in that city must put up with that and continue to get their meat from him in the name of Islam. This is not correct.
The same with “Islamic” finance. Personally, I don’t see how renting a car while buying it at the same time is a good deal. You will end up paying twice as much. There is a need to go back to the drawing board on Islamic finance.
Assalamu Alaikum.
About the meat issue, you’re absolutely right… We had to recommend a halal meat store to a non Muslim friend of ours, because they wanted to have us over for dinner, and we were ashamed to recommend the only halal store in the area, because it was so smelly and dirty.
But that is the only store we went to for meat, obviously, while we were in the area. So you are right, this is a fair criticism to make. However (and I know you are not saying this at all, but some of the bloggers you linked to seemed to be leading to this), it is completely inappropriate to say, “Well, since the halal meat store is so bad, let’s just go to a regular supermarket for our meat, it’s ok.” It’s not ok.
On the other hand though, I think finance is a totally different animal. Right off the bat, when you prohibit interest, the lender is already at a disadvantage (in the economic system we operate in today). What incentive do you have to loan me a large sum of money, with no interest? None at all, unless you are running a charitable organization, which Guidance I assume is not (I don’t know much about Guidance, just using it as an example). It is not useful to malign Guidance for using secular criteria to determine creditworthiness either, and resort to, “Come on, you can trust me, I’m your Muslim brother. Sure I’ll pay you back. And if you don’t trust me… Then you’re just using the (credit) standards of the kuffar, how dare you.” I just thought that some of the criticisms levelled at them by other bloggers too, was going a bit too far perhaps. I mean, we don’t accuse secular banks of nifaq and what not, just because they use our credit report to judge our creditworthiness.
So, we have to admit this “handicap” with interest, in the realm of finance, but no such handicap exists with halal meat. On the contrary, true halal meat should taste better (and be healthier) than regular supermarket meat. I always ask halal meat stores, when I first start buying from them, if they carry organic meat. I would like nothing better than halal meat to be synonymous with top quality meat, Insha-Allah. “We answer to a higher authority”, after all.
But we have to accept that hand-slaughtered zabiha meat will always be more expensive than regular machine-slaughtered store meat. This price differential exists, because hand slaughter requires more labor, etc. So I would answer, yes, we as Muslims should be prepared to pay more for the same service, if it is Islamic. Poor service is a different issue though, and I think with time, the service will improve, Insha-Allah, because of people like you that are bringing this issue to light, al-hamdulillah, and complaining. But we should be careful to complain about legitimate problems. Complaining about having to pay more for Islamic services (where the vendor is really having to incur greater costs to make it Islamic) might well discredit your (very legimitate) grievances against poor service.
Wassalam,
Saif.
AssalamuAlikum,
Dear Brother Tariq,
Although i enjoy your blog much, i have to sincerly advice you and myself about things i constantly see on your blog. If you only look for evil you will see evil, and the good thats right infront of you will look misty. This is how i see your blog, always focusing on the negative aspects of African American/Muslim community. While doing this you negate the huge efforts of brothers/sisters who have been laying foundations and working on bettering themselves and the muslim community. It is funny you call something predetory lending but you of all the people should know how hard it is to set up something halal in a largely haram surroundings. Isnt it possible you could give your brothers a benifit of doubt. And also regarding “blue meat”, we all know it exisits but what about the gazzalion clean/friendly halal meat stores that exist. What about their services, or is it too hard for you to see good. Let me tell you something Akh, i have been involved in catering to the Muslims for a while in a Muslim buissness, and i know how difficult it is since the market is always small and believe me the costs are always greater. So for you to come along and just negate everything. You brothers always talk about muslims selling liqour etc, what about muslim groceries that dont sell liqour/pork. why not mention them. You know what let me mention them to you, i know of yemeni grocries that dont have lotto, pork, liqour (they do have smokes), and how people get angry when the see no liqour their. why dont u give credit to those brothers for holding on to the principles of the deen in a largely hostile enviornment. why, cause you are only looking for the evil. You and me are not the only ones who see the wrongs in our communities, others see it too, but they are trying to do something positive instead of just whining day in and day out.
And you just definetly know that, communities etc.. dont get built overnight. If people from all sorts of backgrounds come together and many of them have no solid knowledge and practice of the deen, things are bound to derail… be patient, i am not saying dont take talk abou the evil in our communties. But at the same time after you address the evil show us what concrete steps have you taken to address it, other than making complaints on the blog, and let us know how the guilty have responded. i am pretty sure out of 100 guilty muslims, 1 will atleast listen. I think you should start with the “:blue meat” man, if u still know him and see how he responds.
Aboo Talha
wa alaykum as-salaam
Thank you for the advice. I am actually working on something about ’solutions’ that I will post in the near future, Insha Allah.
I’m afraid you missed the point on the other issue. I know there are plenty of good businessmen and I am certainly not saying that all of them are bad. If you read Brother Mahmoud’s blog on islamic finance, you will see what I am talking about.
The brother with the “blue meat” was basically the only show in his town.
Solutions is a good idea. Actually there seems to be a need for good halal stores and banks and mortgage brokers that are Islamic and have a differnt set of rules. And when there is a niche to be filled, someone, inshallah, will fill it.
Ya Haqq,
as salaam alaikum,
I just wanted to say I agree 100% with brother Saif’s post. We should differentiate between the “cost of piety” and high cost for poor service.
as-Salamu `alaykum wa raHmatu Allahi wa barakatuh
Since I am the person who wrote the passage quoted by Brother Saif, I would like to say a word or two. With regards to the meat issue, there is a difference in juristic opinion: I choose one, but fully respect that you may choose another. My problem is with any party choosing to label one choice “Islamic”, by implication negating 1400+ years of solid jurisprudence that supports my valid choice (although, I freely admit that, other things equal, I choose dhabiha when available and of acceptable quality).
The issue in “Islamic finance” is more serious: The bankers get to choose whom to ask and what to ask. Thus, even if there are only five fuqaha among the hundreds of thousands who agree with the banks’ view, they will be the ones who are asked, issue fatwas, and get their fatwas disseminated as “Islamic financial solutions”. In essence, we thus leave the job of codification of Islamic jurisprudence for future generations to bankers and the jurists on their payrolls. If, in the process, Muslim customers end up paying more for the same or inferior products (I have written at length on this topic), only to pad the pockets of the banks and their lawyers and fuqaha, then that is a disgraceful abuse of the name of our great religion.
wa s-salam,
Mahmoud.
Assalamu Alaikum, brother Mahmoud :
We don’t have any “central authority” or “pope” in Islam, so it depends who you consider to be a legitimate scholar. I think the root of these questions is, “Who do you consider to be a legitimate authority?”
Things have deteriorated so much lately, that issues over which there was no debate in the past, are being debated today. Issues such as the legitimacy of suicide bombing, women needing to wear hijab, on the permissibility of commercial interest, among others. From what I have read, unslaughtered meat is haram, by all legitimate scholars. But again, how do you determine who/what is legitimate. I think this is what the main question is. I haven’t heard anything otherwise, maybe you can correct me, and give me some more information on this.
The disagreements I have heard of are whether the basmalah is obligatory, or recommended. And I have heard is that some scholars rule that chickens whose heads have been cut off with a hatchet or some other object, are makruh, and not haram (this doesn’t apply to cows, goats, etc). But neither of these apply to what you were arguing is halal (McDonald’s food, for instance), on your blog.
I’m not saying that there is no room for diasagreement within Islam, just that there are legitimate disagreements (for example, the various slightly different forms of salah), and illegitimate disagreements (such as the need for women to observe hijab or not). If you search hard enough, you can probably find a scholar today on any side of any issue.
About Islamic finance, yes, the bankers get to choose who they ask, but if they just ask obscure, unknown “scholars”, who tell them whatever they want to hear, most Muslims are probably not going to go to them anyway, as they don’t trust them. For example, Guidance’s website says their chairman is Mufti Taqi Usmani, a pretty big name in the Muslim world. Someone that most Muslims would consider “legitimate”, for sure.
There does indeed exist legitimate authority still in our religion, and making the argument that “Well, you can find a scholar to issue a fatwa any way you want, so why bother following their verdicts anyway” is not a very good argument, and a very slippery slope to follow. One may end up following one’s nafs in every matter in the end, and simply doing whatever one feels like.
I don’t think, brother Mahmoud, our disagreement is on whether we should be following our nafs or not (I know you don’t say this, I was just showing you that this is a very common outcome of this “philosophy” of do-it-yourself Islam I see among many Muslims today), or even whether we can eat unslaughtered meat or not, I think it just boils down to who you consider to be a legitimate authority.
Saif.
wa `alaykumu s-Salamu wa raHmatu Allahi wa barakatuh
I follow mainly the Shafi`i school, as interpreted and elaborated by Azhari scholars over the centuries. I recognize that the majority of pious Muslims today get their information from Saudi variants on the Hanbali school and Pakistani variants of the Hanafi school, which is perfectly legitimate.
I differ with you on the issue of fuqaha. I think that the problem is our cult of personalities. I have the utmost respect for Justice Usmani, and find many of his opinions worthy of acceptance. On the other hand, and despite the utmost respect that I hold for him, and my admission that he is much more knowledgeable than me in almost all aspects of the religion, I find his opinions in matters of finance ill-informed, and hence useless. A faqih who does not properly understand the problem on which he issues an opinion has the wrong takyif fiqhi (juristic understanding of the problem), and hence his stature and knowledge do not add any credibility to rulings based on such misconceptions, and lack of understanding of the consequences of various fatwas in the age of financial engineering. I think that it would be much better for those fuqaha not to rule on things that they do not understand well, as it was stated of all the great Imams that they refrained from issuing fatwas most of the time (some said as frequently as 90% of the time).
Best regards, wa s-salam,
Mahmoud.
When God prohibited interest, for sure He created many other easier ways to handle our financial affairs in life. God does not want to make hard to people. People make it hard for themselves.
Also, we have to realize that interest is prohobited in other religions as well ( Christianity and Judaism) Records warning against interest date 4000 years back. Hinduism and Bhudism also prohibit interest.
One of the simple proven, affordable alternative to mortgage is presented on my website : http://www.notomortgage.com
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This no mortgage thing seems to be a pyramid scheme. Anyway the real Islamic finance is the market rate cooperative housing scheme. This is an example of some Muslims practicing this model.
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