All praises be to Allah the Exalted, peace and prayer be upon our prophet Muhammad -peace and prayer of Allah be upon him- his family, and all of his companions.
Dear brother, Surely we still remember the terrible disaster that struck our country, on the land of Nanggroe Aceh Province in particular, several years ago; Tsunami waves that took hundreds of thousands of lives, and destroyed the results of civilization of the people there.
Some of us might said that The Tsunami is the worst disaster ever written in their life history,
However, that terrible disaster is starting to be forgotten by some other people. Moreover, some analyst argued that the disaster indeed deserves to be forgotten, since people of the world are now facing a more terrible calamity; the global crisis of economy that strikes every country’s economy, including our beloved country, Indonesia.
Some experts in economy had delivered their analysis and proposed sensible solutions, even the economic experts from across the world keep on working synergistically to find a solution and way out of this crisis. However, until today, they cannot figure out the best cure to end the current crisis.
It is not strange then that some of economy analysts stated that this global economic crisis will still occurred until some times ahead.
As it is commonly known, the crisis started from the United States of America, the reference of economy for most of the countries nowadays; a fact that makes this crisis even more bitter and harder to endure. This crisis has forced one by one of the giant companies of that superpower country to collapse, from the Lehman Brothers, the fourth biggest banking investment company, to General Motors (GM), Ford, and Chrysler, which are commonly dubbed as the ‘Big Three’ (Three biggest automotive companies in America).
Through this writing, I would like to take a little part in depicting the crisis better. And By this writing, I would like to find the real root of problems according to Islamic perspective.
The first source of crisis: Bad credit of Housing in America
Since decades ago, the United States of America (USA) has been introduced to the Act of Mortgage, an act that regulates the ownership of houses through credit payment (similar to house ownership credit or KPR in Indonesia).
Based on this act, every citizen of USA who has met certain criteria, is allowed to buy houses by using this act of mortgage.
Based on this act of mortgage, the client will have a very long period of payment (up to tens of years) to settle their credit. Not only a prolonged payment period, but the interest rate is also very low, around 6 percent.
Not feeling enough by the mortgage act, the US government also gives tax dispensation to the house creditor. Such dispensation is valid for all buyer of housing projects, without making difference between the first hand buyer from the second hand or more buyers.
By these easiness, real estate business of US was growing fast, and the price of land and housing were heavily expensive. It is not strange then that various entities centered in US or out of US were tempted to invest their money in this field.
For information, that among the consequences of this mortgage act is that: someone who got a credit to buy a house, should hand over the house to the creditor. He or she may live in that house but not yet owning it, as long as the credit has not yet been settled. If the buyer is unable to pay for his or her credit installments, he or she should leave the house and the credit agreement will be considered invalid. The house will be confiscated and become the property of the creditor (banks or crediting companies).
Because the ownerships of the houses during the credit time were still own by the bank or crediting companies that gave the loans, bank used this opportunity to insure the houses to other banks or companies. And the similar thing also done by the second hand bank, and so on, thus it formed a chain of insurances.
Amidst that situation, an unpredictable thing happened. Due to various factors, the number of clients who failed to pay their credit increased dramatically. As the effect, the number of confiscated houses increased to a number that was out-of-calculation.
The result of the numerous debtor who failed to settle their credits, was that the number of marketed houses increased double fold; the newly built houses plus the confiscated houses.
In this condition, a market law of “Increasing number of supply means decrease in price” applied. Inevitably, the prices of insured houses to the first hand creditor of bank and the next creditor decreased as well. The result was a progressive declining of the value of the insured houses, unmatched the credited fund.
This condition has dragged a giant company such as Lehman Brothers to undergo a financial crisis. Because the insuring process of the houses occurred in chain, other banking institutions that were involved in the vicious cycle of that housing credit and insurance were also crumbled.
Such practice of house confiscating that occurred in US, by invalidating the transaction agreement, is something that evidently forbidden in Islam. The Prophet -peace and prayer of Allah be upon him- said:
“A mortgage should not be considered as invalid. The mortgaged stuff is the possession of the debtor, he owns the profit that probably yielded by the stuff he mortgaged, and he is responsible to the risks.” (Narrated by Imam Ash Shafi’i, Ibn Maja, Al Hakim, and classed hasan by Al Albani).
Imam Malik interpreted this hadith by saying: “The meaning of ‘invalidating the mortgaged stuff’ is that someone who mortgaged a stuff to other person, while the value of the stuff is more than his credit. In this condition, the debtor is not allowed to make an agreement with the creditor which stated that if the debtor is unable to settle his debt, the mortgaged stuff becomes the property of the creditor.” (1)
if we take a look at the process of housing loans that runs in our society, we will find another mistake. That is because usually the bank merely serves as the creditor, and the houses still belong to the developers. Thus, the bank evidently gives some loans to it’s clients (debtor) according to the price of the house, and then it will take an usury (additional fee) from several percentages of the total loans.
This practice is forbidden in sharia, as Allah the Exalted decreed, which can be translated as:
“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 from Allah and His Messenger. 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.” (QS Al Baqarah/The Cow: 278-279)
Ibn Al Qayyim -may Allah have mercy on him- said: “Allah the Exalted has emphasized the forbidden state of usury by something which is very heavy and very hard, that is war. The consumer of usury basically is fighting Allah and His messenger. Allah the Exalted decreed, which can be translated as,
“But if you fail to do so, then be warned of war from Allah and His Messenger.”
In this threat, the usurer is claimed as people who set war against Allah and His messenger, as Allah has declared a war against him. This kind of threat is never been proclaimed but to the usurer, the burglar, and efforts to make destruction upon this earth (2). This is because each of them is creating destructions upon the earth. Burglars destruct by his power and oppression acts towards other people, while the usurer destruct by his attitude, by which he is reluctant to help the needy, but by burdening them heavier burdens. Allah revealed that the burglars are battling against Allah and His messenger, and Allah also declared to the usurer a war form Him and His messenger.” (3)
Second Source of Crisis: Bad credit of the Oil Business
Every single day we may read, hear, or even feel the fast changes of fuel prices that causes the drastic raising of other prices of basic necessities. This increase in fuel price occurred as a direct impact of the raising price of crude oil in the world market, from the previous price around $US 40 per barrel, to $US 130 for each barrel.
Some might said that this increasing price occurs along with the increasing consumption of fuel worldwide, thus there is no reason for anyone to blame the increasing of oil price.
Brother, know that some economic analysts verified that the increasing of this oil price is not due to the increasing demand of the market, but because of the unhealthy selling and buying system in this sector.
Many countries or companies who intend to buy oil or petroleum for their people consumption, due to particular factor, do not buy it directly from the producing country or company. Instead, the Consumptive countries buy the petroleum from another line, that is the “broker” companies. These broker companies buy the petroleum from the oil-producing countries, and try to sell it back to the similar companies. Thus, this selling and buying process occurred in chains for several times, before the petroleum reach the country or company as It’s end consumer.
For information, that in the world oil market -usually- the already bought oil could only received by the buyer 6 months after the buying deal. And of course, the buying process is also done by credit, not by cash (In sharia: salam transaction, an order of by advance payment in cash).
You can imagine that the broker company which bought the petroleum for $US130 per barrel, while now the true price of petroleum is $37 per barrel. This condition will surely make the companies to be unable to fulfill their payment obligation, or bad credit.
Such transaction is the type of trading that is forbidden in sharia, as declared in the hadith below:
From the authority of Ibn ‘Abbas – may Allah be pleased with him- he said: The Messenger of Allah -peace and prayer of Allah be upon him- said: “Whoever buys foodstuff, do not sell it until he accepted it completely.” Ibn ‘Abbas said: ‘And I think that the law for every other stuffs is similar to foodstuffs.” (Muttafaqun’alaih)
Ibn ‘Abbas’ comprehension was supported by a narration of Zayd Ibn Thabit below:
“From Ibn ‘Umar, he told: One day I bought some oils at the market, and when I happened to settle the transaction, a man came to me and offered me some price for the oil, then he gave me some profits, thus I intended to shake his hand (to accept his offer) but suddenly there was a man behind me who held my arm. I turned back to see him, and he was Zayd Ibn Thabit, and he said: ‘Do not buy the oil at the place where you buy it, until you move it to your own place, because Allah’s messenger -peace and prayer of Allah be upon him- prohibited us to sell back the stuffs where it is bought, until it is removed by the merchant (the buyer) to their own places.” Narrated by Abu Dawud and Al Hakim (4).
The scholars have revealed wisdoms behind this prohibition, such as: stuffs that is still not received by the buyer could have been failed to be possessed by the first buyer -due to some reasons. For example: the stuffs are burnt, damaged by water, etc. thus when the first buyer intends to sell it to the next buyer, he couldn’t hand over the stuffs.
The second wisdom from this prohibition is as stated by Ibn ‘Abbas -may Allah be pleased with him- when his student asked him about the cause of this prohibition:
“Ia asked Ibn ‘Abbas: How is that? He replied: That is because the real transaction is similar to selling dirham by dirham, while the foodstuffs are postponed (merely masking actual transaction).” (5)
Ibn Hajar explained that statement of Ibn ‘Abbas as : “If someone bought foodstuffs for 100 dinars -for example- and he had paid the price to the seller, but he had not received the stuffs yet, and then he sold it to other buyer by 120 dinars and he received the price directly, while the stuffs were still at the first seller, it seemed like he had sold/exchanged 100 dinars by 120 dinars. And based on this interpretation, this prohibition applies not only to the foodstuffs.”(6)
To be continued…
1). Muwattha’ Imam Malik 2/728.
2). As mentioned in the verse 33 of chapter Al Maidah (The Table Spread)
3). Thariqul Hijratain wa Babus Sa’adatain, by Ibn Al Qayyim, page 558-559
4). Although there is Muhammad Ibn Ishaq in it’s narrational chain, but he had confirmed that he heard the hadith directly from his teacher, as mentioned in the book titled “At Tahqiq”. Refer to Nasbur Rayah 4/43 and At Tahqiq 2/181.
5). Narrated by Bukhari and Muslim.
6). Fath al Bari, by Ibnu Hajar Al Asqalany 4/348-349.
Author: Ustadz Dr. Muhammad Arifin Badri, M.A.
Article of www.syaria.com