Financial Offences in Islam – by Muhammad Ibn Wazir

Islam has laid down a number of laws governing human conduct to ensure the wellbeing of society. A good part of these rules are of a financial nature, governing financial transactions and prohibiting certain undesirable practices such as usury, hoarding and bribery which militate against economic justice and fairplay.

Needless to say, Islam envisages a just economic order where all members of society have a fair share in the resources of a nation and are given ample opportunities to seek wealth by lawful means. In fact, wealth is regarded as an amanah or trust from Allah which could be spent one’s needs and for the good of society but should not be misused for frivolous or unproductive ends.

The payment of zakatA tax that is the duty and social obligation of every Muslim. This as the fourth Pillar of Islam. or the alms tax which the Qur’an enjoins on the wealthier sections of society and which amounts to as much as a fortieth of one’s capital, saved and invested, over a given year, could also be regarded as a means of redistribution of wealth from the wealthier to the less fortunate sections of society. It may also be perceived as a mechanism against the accumulation of wealth, prompting those who possess it to put it to good use in productive undertakings which are likely to create more wealth.
That the Qur’an itself envisages a society in which there is continuous redistribution of wealth is seen in the statement “ What Allah has bestowed on His Prophet (and taken away) from the people of the townships, belongs to Allah, to His Apostle and to the kindred and orphans, the needy and the wayfarer; in order that it may not make a circuit between the wealthy among you” (Qur’an 59:7). Once, when the Prophet was asked by a companion: “Has Allah ordered you to take ZakatA tax that is the duty and social obligation of every Muslim. This as the fourth Pillar of Islam. from our rich people and distribute it among our poor people ?”. he replied “By Allah, yes” (Bukhari)

The economic world envisioned by Islam is one of free enterprise. The Qur’an expressly permits trading (2:275) and trading is therefore regarded as a legitimate means of earning income. Agricultural and industrial activity are likewise permitted. The ideal economic system conceived by Islam is a vibrant one and this is borne out by numerous passages in the Qur’an. For instance, consider the verse: “Believe in Allah and His Messenger and spend of that whereof He has made you trustees” (57:7). We further find the Qur’an clearly enjoining on the believers to spend of what has been bestowed on them, secretly and openly (13:22) and warning that those who are niggardly are so at the expense of their own souls (47:38).

Thus it could be seen that Islam advocates an economic order where wealth is in constant circulation and that ample opportunities are afforded for wealth creation among all sections of society. As such, accumulation and stagnation of wealth is condemned in clear terms and justly so since wealth which is not put to good use by investing or spending on oneself or on the welfare of others ultimately benefits nobody.

At the same time this does not mean that squandering one’s wealth is allowed for the Qur’an condemns in no uncertain terms spendthrifts as ‘brothers of the devils’ (17:27). What all this shows is that while spending on one’s needs and to meet the needs of others is allowed, wasting one’s monies by indulging in useless or unproductive activities is not. Not only does it deprive one of the opportunity to employ such wealth for one’s own good and that of the larger society, but could also be regarded as a betrayal of the trust which God has vested in such an individual.

We will here deal with a few financial sins in Islam that ought to be avoided at any cost.

Usury

Usury or the taking of interest on a loaned sum is a great sin in Islam and is condemned in the Qur’an in no uncertain terms. Thus those who do not give it up are warned in the Holy Book (2:279) to take “notice of war from God and His Messenger”. They are however told: “If you repent you shall have your capital sum. Deal not unjustly and you shall not be dealt with unjustly”.

We are also told of the dangers of usury in very telling terms in 2:275-276: “Those who take usury shall rise up before Allah like men whom Satan has demented by his touch; for they claim that usury is like trading. But Allah has permitted trading and forbidden usury. He that receives an admonition from his Lord and mends his ways, may keep what he has already earned; his fate is in the Hands of Allah. But he that pays no heed shall be among the people of the Fire and shall remain in it. Allah has laid His curse on usury and blessed almsgiving with increase. He bears no love for the ungrateful sinner”.

In the Sunnah or Prophetic tradition which supplements the Qur’an as a source of Islamic jurisprudence, we find the Prophet (Upon Whom Be Peace) elaborating on this prohibition to the extent of categorizing those who receive, pay, record and witness interest payments as all alike. Jabir has reported that the Prophet cursed “the one who consumes riba, the one who gives it to others, the one who writes it down and the one who witnesses it. They are all the same”. (Sahih Muslim).

Now we may ask Why did Islam prohibit interest ? The answer is not a difficult one, for when we consider the ill-effects of interest on human society, we can only agree with the Divine Wisdom behind its prohibition. Needless to say, interest is ethically and morally wrong. It leads to a situation where the one possessed of wealth, instead of working and putting his monies into productive use by his own mental or physical exertion, chooses to live a life without labour, drawing on the efforts of others to increase his wealth, or to put it more metaphorically “suck the blood” of his less fortunate fellows.

It could thus be seen that dependence on interest discourages holders of wealth from exerting themselves or engaging themselves in some productive venture to earn money. Rather what they choose to do is to place this ‘burden’, so to say, on others and let them persevere and bear the risks all by themselves. These moneylenders could simply rest contented, knowing very well that the borrower would have to pay them the capital lent,  plus a substantial additional amount that increases over times euphemistically known as ‘interest’ whatever the outcome of the money lent, whether profit or loss. It is this element of a guaranteed payment without taking onto oneself the associated risks that militates against economic fairplay.

One must also bear in mind that those who seek monies from others usually do so for a good reason, such as to meet the basic needs of themselves or their families, or if they have reached a higher level of subsistence, for some productive venture that could contribute to the good of society as a whole. As such, demanding for a payment on top of the capital lent could be said to lack goodwill, but rather be regarded as a tool for exploitation. This is all the more so if the borrower is needy and he is borrowing either to meet his needs or to uplift himself. To put a further burden on him by stipulating that he repay his loan with an additional amount is grossly unjust to say the least. To add to this exploitative nature of interest must be mentioned its cumulative effect over time. In other words, it amounts to selling time which is God’s alone.

As such, interest could be regarded as an oppressive tool that seeks to make the rich richer at the expense of the poor, in the process increasing the gap between the haves and the have-nots. Not only will such a situation lead to greater poverty, but could also breed contempt and hatred towards the rich by the less fortunate sections of society, resulting in considerable social conflict that could eventually take a violent turn and harm society as a whole.

From an economic viewpoint too interest does not measure up as a productive economic agent, but rather yields significant negative consequences since it simply seeks to make money with money, giving nothing in return, unlike when money is out to good use in trading and manufacturing activities, thereby realizing through the input of labour, products of real economic value.

Recent economic studies have also shown how interest contributes to continuous inflation unlike seasonal inflation that depends on the scarcity of goods at given times, since borrowers who have borrowed on interest would have to adjust their accounting books for increased liability resulting in increased prices of saleable assets, whether goods or services. In an economy running on this basis, prices will increase with each cycle of lending thereby leading to a continuous trend of increase in prices which in turn reduces the purchasing power of people. Needless to say, it is mostly the poor and needy who are affected by rising prices, showing again the great harm that interest afflicts on society.

The solution therefore lies in the possessors of wealth coming in as real economic players, investing their monies in viable and Islamically permissible ventures and as partners providing capital to such ventures while at the same time taking the risks involved, a solution which is an equitable one to all concerned. The task has very much been simplified today since Islamic financial institutions have come in as intermediaries, mobilizing funds from depositors for investing and distributing the dividend on a profit and loss-sharing basis to the satisfaction of all concerned.

Theft

Theft is a very serious offence in Islam and harsh punishments prescribed for it. Theft is an extremely offensive financial crime as it deprives another of his rightful possessions which are very often earned by hard labour. The thief on the other hand seeks to thrive on another’s misery by depriving one of one’s property merely by stealthily removing it and taking it under his possession and later often disposing it for a trifling price.  Thus a thief is one who thrives at the expense of another. The victim is often left helpless by this inconsiderate act as he would not know where to look to for recovering his property.

Theft also has other implications. For instance, it affects the mentality of the victim and one can only imagine the mental trauma a victim of theft undergoes, especially if the item he has been so unfairly deprived of  has value (such as sentimental value) or is of great necessity (such as for one’s education or medical treatment) to that particular person. Moreover, theft creates suspicion which has to be shunned at all costs, but which nevertheless cannot be easily erased from one’s mind when one has been subjected to such a malicious act. Needless to say, suspicion creates considerable unpleasantness in society and tends to harm its moral fabric.

Says the Qur’an (5:38): “Cut off the hands of the thief, male or female, as a recompense for that which they committed, a punishment by way of example from Allah. And Allah is All-Powerful, All-Wise”.

It is however established in the Sunnah that only the right hand from the wrist joint would be removed for the first offence, the left foot for the second, the left hand for the third and the right foot for the fourth. It is no doubt a harsh punishment, but one that is also necessary given the seriousness of the offence. The severity of the punishment is evident from the fact that the one so punished undergoes not only the pain of the punishment, but also the handicap it inevitable leads to and the social stigma that he or she may have to subsequently endure given the irreversibility of the amputation. As such, it is an extremely strong deterrent for real and potential thieves. Indeed, the very fact that the Qur’an prescribes such a harsh punishment for the crime is in itself a psychological deterrent to any Muslim who – God forbid- may think of committing theft, even in societies that do not actually implement the punishment. Little wonder then that theft is hardly known in Islamic societies.

As always, Islam is very considerate when prescribing such punishments. Thus a minor, insane or sleeping (sleepwalking) person cannot be subjected to the punishment, nor can it be applied in a time of famine or war. The intention of stealing should also be clearly established. The item stolen must also have a significant value, which is to say that it should be worth over three silver dirhams, in other words the equivalent of 1.6 grammes of gold which in today’s context would be an item worth over USD 40 or its equivalent in other currencies.

Further, the stolen item should have been removed from the safe custody of its owner, which is to say a place which is meant for safeguarding it such as a safe or cupboard in the protection of one’s home. For instance, a cupboard is an appropriate place to keep jewellery while an enclosure is an appropriate place to keep livestock. Thus one who steals jewellery left unprotected in a public place or an animal straying out of its pen cannot be subjected to the punishment. Thus it could be seen that the punishment of amputation would only be applicable when the owner of the item has taken every possible step to protect his property and is not guilty of its negligence by leaving it in an area that is easily accessible to the public. By extension, those who share a common residence thereby having access to an item of value such as family members whether they be one’s child or spouse or even a servant or guest will not be liable to the punishment.

Furthermore, the theft should have been committed by stealth when no one was around. As such, thefts in public places in broad daylight even when no one is looking around will not incur the punishment. Nor will appropriating an item by force, except in cases of armed robbery in which case the perpetrator will be treated as a rebel and subjected to cross amputation (Amputation of the right hand and left foot which is prescribed in the Qur’an for such criminals). Although this might strike one as surprising, the fact is that the one who seizes an item forcibly could be identified and the item recovered either by enlisting the help of others in the vicinity or by resorting to the strong arm of the law. The point here is that the perpetrator can be identified and the goods recovered without much difficulty unlike in the case of a thief who steals by stealth and whose identity remains unknown.

In addition, to prove the theft, two witnesses are required, though a confession from the thief would suffice. Even at this stage, the victim could pardon the thief by gifting the stolen item to him or her before he or she is taken to the judge or legal authorities for redress.

However, this does not mean that thieves who don’t meet the criteria for the application of the prescribed punishment such as petty thieves, pickpockets or shoplifters should be allowed to get away. They could be punished by discretionary punishment known as ta’zir at the instance of the courts which usually takes the form of corporal punishment which could serve as a deterrent for the commission of any more offences of this nature.

Fraud

Fraud or the act of deceiving people in business dealings is a great sin in Islam. Such fraud can take various forms such as cheating in weighing to selling inferior goods by passing them off as superior quality by concealing its defects to more complex transactions involving embezzlement or depriving others of their property by unlawful means. Unlike the thief, however, the fraudster is usually known, so that action such as litigation could be taken against him to restore the property in question. Thus there is no prescribed punishment for fraud, though the courts are free to mete out justice to the culprit by application of ta’zir which could take the form of imprisonment.

The Qur’an (133: 1-6) delivers a severe warning to those engaged in fraud in the following verses: “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. Do they not think that they will be called to account- on a Mighty Day when (all) mankind will stand before the Lord of the Worlds.”

The Prophet (Peace Be Upon Him) is  known to have declared:” The signs of a hypocrite are three: when he speaks, he lies, when he promises, he, breaks his promise; and when he is entrusted, he betrays the trust” (Bukhari) He is also known to have condemned those who deceived in very strong terms. The Prophet once came upon a heap of corn in the market of Medina and thrust his hand into it whereupon his fingers felt some dampness. Upon being questioned about it, the trader replied that rain had fallen upon it. The Prophet then observed “Why did you not then keep (the wet portion of) it above the dry corn, so that people could see it? He who deceives, is not one of us” (Sahih Muslim).

This hadith clearly implies that those who engage in fraud and deceit are not true believers as they have no consideration for their fellow humans or brother Muslims.  Honesty after all is a trait of every true believer in Islam.

Another very serious offence is the usurpation of another’s property by force or fraud or by means of dishonest litigation.

Says the Qur’an (4:29): “Oh ye who believe! Eat not up each other’s property by unfair and dishonest means.”

We also have the Prophet declaring that: “He who acquires the property of a Muslim unjustly by taking a false oath, Allah has made the Hell his abode and forbidden him Paradise” On hearing it a Companion is reported to have asked “Even if it is an insignificant thing ?” The Prophet replied, “ Even if it be a twig of arak (a plant from which sticks for cleaning the teeth are made)” (Muslim)

Bribery

Bribery is the act of paying one a consideration with a view to influencing his actions in the discharge of a public or legal duty in a manner that is inconsistent with his duties or in breach of the law. In other words, it may be defined as a payment made to an official that prevents him from doing that which he is obliged to do in the normal course of his duties or alternately a payment made in exchange for not performing an action which one is obliged to perform.

Although bribery has become a common practice today in all or most parts of the world, in some places even reaching epidemic proportions, it must be borne in mind that it is strictly prohibited in Islam. The Prophet is known to have declared: “Allah cursed the briber and the bribe-taker” (Abu Dawud, Tirmidhi and Ibn Majah) while Tawbah has narrated “The Messenger of Allah (Peace Be Upon Him) cursed the briber, bribe-taker and the mediator meaning the one who walks between the two”.

What becomes clear from these ahadith is that bribery is forbidden as a general rule, regardless of whether it is meant for a good or evil purpose, that is in seeking a right or seeking something that is wrong. Although this might strike one as unreasonable, what must always be borne in mind is that one’s gain might be another’s loss. Consider for example the case of one bribing a government official to get some administrative matters sorted out sooner. This could well be to the detriment of another who has made an application earlier. Similarly, when one bribes a policeman to hide some facts detrimental to oneself or one’s aides, it would infringe on the rights of the victim to seek redress and when one bribes a judge to give a favourable judgement it is certainly bound to impact on the rights of one’s adversary to get a fair hearing.
There are however those who opine that bribes given to take back what rightfully belongs to oneself or to undo an injustice, which could not be accomplished by any other means, are permissible. This is however only an opinion and it is best to avoid bribery at any cost and instead have patience which is bound to have its reward from the Almighty.

Hoarding

Stocking of goods in order to increase their prices in times of scarcity is a serious offence in Islam and severely condemned. It has been the practice since ages past for unscrupulous individuals such as food producers and traders to withhold releasing their goods into the open market where they could be purchased at fair market rates with a view to creating an artificial scarcity that could drive prices upwards and bring them better returns.

Thus it is evident that it is the hoarding itself which results in the non-availability in the market of goods and the concomitant increase in the prices of such goods. Such artificial manipulation of prices goes against the public interest. Not only does such an action lead to severe shortages of goods, including essential goods, thus causing the public great hardship, but also seeks to deprive the public of the true value for their money, in other words, theft in another form. The Prophet clearly included the hoarders in the category of misled elements when he declared “No one hoards but one who is in error” (Muslim). On another occasion, he declared: “If anyone withholds grain for forty days out of a desire of high price Allah will renounce him” (Ahmad) and on another: “He who brings goods to the market is blessed with bounty, but he who withholds them is cursed” (Ibn Majah)

Gambling

Gambling or speculation which is known as gharar is strictly prohibited in Islam. The Qur’an (5:90-94) calls gambling “an abomination of Satan’s handiwork” and urges the believers to avoid it that they may be successful. It adds that Satan by this means desires to sow enmity and hatred amongst the believers and hinder them from the remembrance of Allah and from prayer. This statement of the Qur’an warns us why we should desist from gambling. For one thing, gambling causes enmity between men, since it is always a zero-sum game with a winner and a loser. Although the winner gets away with a fortune, he does so at the expense of the loser who would not only be frustrated that he had lost the game but also regret that he had played the game in the first place. Such anger could lead to enmity between these men.

For another, games of chance tend to be compulsive, not only prompting the losers to try their hand again in regaining their lost monies and the winners to yearn for more impelled by the greed that goes with it, but also leads to the neglect of one’s obligations to the Creator such as the prayer.

Gambling also has other ill-effects. It makes one dependent on chance or ‘luck’ thus diverting him from engaging in honest and productive labour to earn a living. It does not lead to wealth creation, but rather to a transfer of wealth from one party to another to the total detriment of the affected party. Besides gamblers in their pursuit of ‘luck’ tend to neglect their duties to society and to their families. The toll of such gambling on human society can be painful, particularly where families with a sole breadwinner are concerned.

Gambling can take many forms. This includes playing at casinos, taking part in lotteries or betting on horses or games, all of which contain an element of risk and speculation.

However, speculation can also take other forms. For instance entering into transactions where there is no guarantee that the seller could deliver the goods in good condition to the buyer who makes a payment in consideration of it. Thus buying fish in the sea, or livestock while in the womb or fruits in a tree while yet unripe all belong to this prohibited category. The rationale here is that there is an element of uncertainty as to the outcome of such transactions. For instance, a blight or some natural disaster could affect the crop, thereby leading to a great loss for the buyer. It could also cause quarrels between the buyer and seller even to the extent of leading to litigation, thereby sowing the seeds of discord in society.

Miserliness

Miserliness or the act of hoarding wealth out of a desire of keeping it for oneself without any purpose is deemed a sin in Islam. The Qu’ran repeatedly enjoins the believers to spend of what they have been bestowed with, as for example in the verse “Believe in Allah and His Messenger and spend of that whereof He has made you trustees” (57:7). We also find the Qur’an clearly instructing the believers to spend of what has been bestowed on them, secretly and openly (13:22) and warning that those who are niggardly are so at the expense of their own souls (47:38).

More telling however is the following verse of the Qur’an which warns of a severe Divine punishment for those who hoard: “Those who hoard up gold and silver and spend it not in the way of Allah, unto them give tidings of a painful doom. On the day when it will be heated in the fire of hell, and their foreheads and their flanks and their backs will be branded therewith (and it will be said unto them) “Here is that which ye hoarded for yourselves. Now taste of what ye used to hoard” (9:34-35). In the olden days such as when these verses were revealed, gold and silver constituted standard currency or in other words, money, which was used as a medium of exchange. In today’s context, paper money serves the same purpose and it is evident that hoarding any form of currency, be it gold, silver or paper money, is strictly prohibited in Islam.

Here, however, a clear distinction has to be drawn between saving and hoarding wealth. While hoarding wealth means accumulating money for no purpose but greed, savings comprises money saved for a purpose such as for constructing a house or setting up a business. Thus unlike hoarding where money is prevented from entering the market and contributing to economic development, savings are monies that are intended to be spent at a later date at an appropriate time, thereby ensuring its entry into the market with a definite goal and purpose, which needless to say, could contribute to an economy in a significant manner.

Squandering

Islam does not condone extravagance, for all resources have to be employed for meeting one’s needs and for the good of one’s family and welfare of the community at large. Wasting one’s monies by indulging in useless or unproductive activities is therefore deemed a sin in Islam, so much so indeed that the Qur’an calls spendthrifts ‘brothers of the devils’ (17:27). The Holy Book further addresses man as follows: “Eat and drink, but waste not by excess, for Allah loves not the prodigals” (7:31). Not only does squandering one’s wealth deprive one of the opportunity to employ such wealth for one’s own good and that of the larger society, but could also be regarded as a betrayal of the trust which God has vested in such an individual.

Willful default

Islam does not condone one being in debt for too long, for this would naturally affect his relationship with the creditor who had been kind enough to give him a loan. A debtor may also be tempted to resort to lies in order to explain why he has not been able to repay his debt and even to break the promises he gives. Debts should therefore be settled as soon as one is able to repay them. The Prophet is reported to have said: “The best among you are those best in paying off debt” (Muslim) and “Procrastination in repaying debts by a wealthy person is injustice” (Bukhari). Another hadith tells us: “Whoever contracts a debt intending to repay it, Allah will repay it on his behalf, and whoever contracts a debt intending to waste it, Allah will bring him to ruin” (Bukhari).

Indeed, according to Islam, the debt is a ransom by which the soul of a believer is held hostage once he departs from this world, for the Prophet stated in no uncertain terms that “The soul of the believer is held hostage by his debt in his grave until it is paid off” (Tirmidhi). What this hadith suggests is that a debtor would be in a state of limbo until such time the debt is settled by his offspring. The Prophet is also reported to have said: “Whoever dies free from three things –arrogance, cheating and debt- will enter paradise” (Tirmidhi), thus demonstrating how important the settling of one’s debts is considered in Islam.

© Islamic Finance Today – Pioneer Publications (Pvt) Ltd