Dr. A Q Khan
Mohsin e Pakistan

The curse of borrowing and interest

Posted in English Articles  by draqkadmin
April 19th, 2010

Random thoughts
By Dr A Q Khan

The word “borrowing” in itself looks so simple, but it has been responsible for untold and unimaginable hardship and misery to many. Only someone who has been a victim of this curse, whether lender or borrower, knows the consequences.

Almighty Allah has clearly warned against it in the Quran:

1. As for those who devour interest, they behave as the one whom Satan has confounded with his touch. Seized in this state, they say: Buying and selling is but a kind of interest, even though Allah has made buying and selling lawful, but interest unlawful (haram). (2:275-276)

2. Believers! Have fear of Allah and give up all outstanding interest if you do truly believe. But if you fail to do so, then be warned of war (chastisement) from Allah and His Prophet. If you repent even now, you have the right of the return of your capital; neither will you do wrong nor will you be wronged. But if the debtor is in difficult circumstances, let him have respite until the time of ease, and whatever you remit by way of charity is better for you. If only you know. (2:278-280)

3. Believers! Do not devour interest, double and redoubled, and be mindful of Allah, so that you may attain true success. (3:130)

4. Whatever you pay as interest so that it may increase the wealth of people does not increase in the sight of Allah. As for the Zakat that you give, seeking with it Allah’s good pleasure, that is multiplied manifold. (3:39)

5. And for their taking interest which had been prohibited to them, and for their consuming the wealth of others wrongfully, and for the unbelievers among them, we have prepared a painful chastisement. (4:161)

Borrowing is easy, but the problems start when the time comes for repayment. We are all aware of the negative effects of borrowing and even a beggar, upon receiving alms, will pray for you by saying: “May Allah protect you from borrowing and from dependent on others.”

Despite these warnings, some people (rarely are they genuinely needy people) still buy on loan. Contrary to organised lending facilities, shopkeepers often hesitate to do so, as they usually end up losing their money. For them, lending is easier that recovering. In larger setups, thugs are hired to coerce lenders to return what they had borrowed. We have recently tried following the Indian practice of hiring khwaja saras to sit and sing in front of the houses/offices of loan defaulters in an effort to shame them into repaying their debts.

We often see that banks and other lending institutions are ruthless and harsh in recovering loans from the financially underprivileged while at the same time writing off billions of rupees in loans from the influential. The poor are often forced to sell property and or belongings to pay off Rs50,000 or so while the wealthy go off scot-free. Sometimes it even leads to suicide due to inability to repay.

There are many different kinds of borrowing, some of which can be summarised as follows:

Between shopkeeper and customer. The “borrower” here usually belongs to the low-income group. They buy at deferred payment and then pay when they receive their salaries. This kind of lending usually takes place between people who are known to each other and hinges on mutual agreement.

Between landlord and peasant. The peasant pays back the amount borrowed after selling his crop. However, here the rate of interest is always high and often not covered by the sale of crops. Often the peasant is forced to mortgage his land and ends up losing it. The entire peasant family then ends up being servants (read slaves) of the landlord. Unfortunately, this curse is quite common in Pakistan. It is not unusual to see a cruel landlord chaining the entire family and treating them as slaves. Thanks to the activities of the judiciary, such cases are now being exposed and are being dealt with severely and many families have been liberated.

• Between friends and family members. Here the victim is usually the lender, not the borrower. The borrower uses reasons of medical treatment, marriage of children, repayment of loans, etc., and promises to return the money as soon as possible. This “as soon as possible” often never materialises and the lender, poor fellow, due to many considerations, never presses the matter, thus losing his money. The borrower may then move on to his next victim.

• Between businessmen/industrialists and lending institutions. This type of borrowing is usually done very cunningly by using connections and influence and with the connivance of the lending institution. The value of the mortgaged property is estimated exorbitantly high or with insufficient collateral coverage in order to obtain a large loan. It is this abhorrent practice that is one of the main factors in breaking the back of our economy. Corrupt bankers and cunning industrialists/businessmen swallow billions of rupees every year, the latest example being that of Bank of Punjab losing almost Rs10 billion. Recently published statistics show that almost Rs100 billion was written of as “bad loans” during the Musharraf era. Over the last few decades, bad loans worth more than Rs250 billion have been written off. Ours is the only country where the writing off of loans is common practice. While the defaulters are still billionaires owning huge villas and expensive cars, the country suffers. Recently the Supreme Court has taken notice of this menace and is trying to have the money recovered. The amounts written off are from the taxpayers’ money and while the already rich benefit, the ordinary citizen gets very little return on his deposits/savings. This curse started with the nationalisation of banks and industries and the rulers appointing their relatives/friends as heads of these institutions. Now it became simply a matter of easy mutual connivance.

• Between Pakistani governments and international lending institutions. Corruption, mismanagement, the writing off of huge sums of money as bad loans, etc., has resulted in the country having to borrow billions of dollars from international institutions and foreign countries. The annual rate on these loans alone exceeds one billion dollar annually. The various institutions have a hold on us like an octopus holds its prey. We have to comply with their conditions and obey their dictates, often to the detriment of the national interest and the common man. Then there is no other option than to raise the prices of essential utilities/commodities, thus increasing the stranglehold on the poor. But then, as beggars, one can’t be choosers.

Every rational thinking Pakistani is worried. One wonders why a country with 180 million people, with many natural resources and with a reasonable number of educated and talented people should find itself in this situation. We are plagued by bad governance, corruption, nepotism, dishonesty, hoarding, adulteration, etc. In my personal opinion there are two main causes for this malady. 1) Our selfish, corrupt, bad administration, and 2) the poor performance of our financial managers. Bad governance and corruption lead to the break-up of all institutions and because of mal intent, the blessing (barkat) of Almighty Allah has disappeared. The progress, prosperity and development of a country depend on the performance of its financial institutions. In our case, both the leaders and the financial institutions have failed to deliver the desired results. All we can do is pray for a miracle, but miracles don’t happen when people indulge in wrongdoing and disobey the clear edicts of Allah.

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One Response to “The curse of borrowing and interest”

  1. sara Says:

    espected sir I did not find any other option to contact you so tried this way thanks.
    although I have a story behind my name but I belong to a remote area of ziarat kaka sahib, a land of those brains who served for Pakistan in every field of life army,navy, scientific education etc.but unfortunate for the village no one try to change the fate of this remote village. I personally think as Pakistani every inch of the land has a right to be flourished.I have heard about your school network but still searching on net for it.The main theme of my mail is that I want to shower the lights of modern education on my fellow villager but the problem is that neither I have the financial capacity to start a school nor the settler of the village .They are mostly blue collar job bearer.I have a house there .The women of my village are hard-workers and devoted.With your kind advice it may possible to build so many Dr Qadeer for the future.ameen

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