Debt: Islamic Perspectives & Views

1. Keep on asking forgiveness from Allah, "Istighfar". "And said, 'Ask forgiveness of your Lord. Indeed, He is ever a Perpetual Forgiver. He will send [rain from] the sky upon you in [continuing] showers. And give you increase in wealth and children and provide for you gardens and provide for you rivers." (71:10-12) 2. Consistently performing congregation prayer 5 times a day in the mosque. "O son of Adam, spend your time to worship me as I would enrich your heart and shut the door to poverty" (Ahmad, Tirmizi, Ibnu Majah, dan al-Hakim dari Abu Hurairah r.a.) 3. Give charity and alms. The practice of charity was one of the wonders that God has given them to us. Those who give alms, their wealth will not decrease, instead it will increase their wealth. Then, the only thing we need to do is to make sure our intention is pure and do not expect anything in return. "The example of those who spend their wealth in the way of Allah is like a seed [of g...

1. Consistently pay back the debt. The best way for all those PTPTN borrowers to pay their debt is by consistently deposit some amount of money to the PTPTN authority. Either you like it or not, you will be listed in CCRIS if you did not pay it. You can do this to make sure you pay the debt consistently. First, put aside special funds every month to repay the debt. Do not mix the fund with other cash. It will be much easier if you setup a different account, specifically for the repayment of the debt. 2. Negotiate with the officer. As we all know, the debt payment will be started after 3 month of graduation. But, not all of us are can get a great job immediately after graduation and if the period to pay the debt kicks in, what you can do? This is your alternative, you can go to any PTPTN offices, branches or kiosks across the country for negotiation. Provide all the necessary documents and proof that showed you are struggling to find a job and to repay the debt. Moreover...

Supposely, when we do not have money, we will find a bank to get some loans and other loan institutions. Maybe some of us will ask from our relatives. But that only will cause harm to your relationship (if you cannot commit to pay it back) But here is the great news. In this present year and with such a great technology provided to us, now you do not have to borrow money from them anymore. With condition that, you are willing to do these 3 things, consistently. 1. Online business. Nowadays, there are a lot of small businesses that started through internet. This is a big opportunity for those who in need of money. The big mistake that people do right now is, they think that if they want to do online business, they need a lot of money. No. You can start by doing website or video in Youtube. You can get revenue through advertisement. And of course, it needs time for you to establish that profitable base. If you hate to do video or writing a blog, then maybe you can be a re-s...

1. The interest rates are endless. Have you ever heard the term 'ten-three'? It refers to the interest rate charged to the borrower. The interest rate on ten-three means that for every RM10 borrowed, the interest will be charged RM3. In other words, the amount of money you borrow will be charged with interest of 30% in just one month! To give you a clearer picture about the amount of money you need to pay back if you make a loan from loan sharks, let's see the example below: The amount borrowed: RM1,000 Interest payable (per month): RM300 Interest for loans 12 months: RM3,600 The total amount to be paid: RM4,600 Are you still interested in making financial loans from loan sharks? Ten -three is not a sole interest rates offered although obviously it is very high. The interest rates offered by loan sharks also includes a ten-four and ten-five, depending on the amount of the loan or the borrower's credit situation. Imagine how high the interest you have t...

1. Credit Card. Keep away from using credit cards. In addition to the issues that are so close to usury with a credit card, it's encouraging people to the excessive debt. Even if someone wants to use it, it is advised to be used to facilitate the moments that really desperate for them. Avoid from using it because it is addictive and bring harm more than interest to us. 2. Personal Loans. This is another type of product that can cause money-disaster-situation among us. We need to start realizing that all types of conventional personal loans are forbidden by Islam and has been agreed by all scholars. But, today, since there are a quite number of Islamic banks that offering loans (financing) for personal use there has been 'khilaf'. For the record, not all Islamic banks offer it because it is based on the concept of sale and buy back between the two sides of the same party. This concept is very controversial and has been rejected by most scholars in the Middle Ea...

1. In Islamic perspective, regarding to the debt transaction, we must pay it back as soon as possible to get blessing from Allah. "Allah pardoned all the sins of the dead who died a martyr, unless he has a debt (to humans)" (Muslim, 6/28) 2.   Debt from an Islamic perspective is a bad thing and should be avoided, except in cases of extreme hardship. "O God, I seek refuge in You from sin and debt, and then he asked: Why are you always asking for protection from debt, Messenger of Allah? He said: "If someone in debt, when he speaks, he will not tell the truth, when he promises, he will not fulfill it." (al-Bukhari, 1/214) 3. Our intention in lending and borrowing money is crucial. "Those who borrow from other people's property with the intention of returning it, GOD will repay it, but whoever lent it with the intention of harm, GOD will harm them "  (al-Bukhari, 2/83)

1. Your deeds in this world will be used to pay the debt. "Those who die in a state still has debts of one dinar or dirham, then the debt will be repaid with kindness (on the Day of Judgment) because there (the Hereafter) no longer dinar and dirham. " ( Ibnu Majah no. 2414.) 2. Your soul will trapped in this world. "The soul of a believer is still dependent on his debt until he pay it off." ( Tirmidzi no. 1078.) 3.  You are a thief. "Anyone who does not want to pay back what they owe from others, then he will meet Allah (on the Day of Judgment) in status as a thief." ( Ibnu Majah no. 2410.) 4. You will not be prayed by other Muslims. Narrated by Salamah ibn al-Akwa 'radi' anhu, he said: "We sat on the side of the Prophet p.b.u.h. Then one body of corpse was put infront of him . Then he asked, "Is he in debt?" They (the Companions) said, "No." Then he said, "Did he leave anything?". So they (t...

The current financial crisis, paving the way for an alternative economic system emerged, among them is the Islamic finance and economics. However, rather than simply reacting to the crisis, scholars of Islamic economics ought to explain the concept and principles of Islamic financial and economic system and present a reference and its application to a wider audience. Islamic economic and financial system is based on a set of values, ideals, and morals, such as honesty, credibility, transparency, clear evidence, facilitation, cooperation, complementarity, and solidarity. This moral and ideals are fundamental because they ensure stability, safety, and security for all those involved in financial transactions. Furthermore, Islam prohibits Shari`ah economic and financial transactions that involve lying, gambling, cheating, gharar (risk-taking), gahalah (unawareness), monopoly, exploitation, greed, unfairness, and taking people's money unjustly. In addition, the Islamic econ...

All we Muslims should know that, in Quran, there are few verses that mention by Allah pertaining to the phases in prohibiting riba'. In brief, there are a total of 4 phases: 1. Ar-Rum, (30:39) "And that which you give in riba for increase through the property of [other] people, will have no increase with Allah. But that which you give in charity seeking the countenance of Allah, it is these who will get a  recompense multiplied."    This verse was revealed in Makkah. In this step, the riba' was not prohibitive in nature. It is refers to the avoidance of usury in life to seek the blessing of Allah. 2. An-Nisa, (4:161) " That they took riba, though they were forbidden …" This verse was revealed in Medina and described about the behavior of Jews who took usury, and then punished by God. This verse is a warning to the perpetrators of usury. Behind this verse, there is a story that explains that there is indeed a group of Jews that practice us...

Briefly, riba' is prohibited in Islam. There are a lot of evidences that mention about the illegality of riba' in Islam, such as; "And that which you give in riba for increase through the property of [other] people, will have no increase with Allah. But that which you give in charity seeking the countenance of Allah, it is these who will get a recompense multiplied." (30:39) “And because of their charging riba while they were prohibited from it.” (4:161) “O those who believe do not eat up riba doubled and redoubled.” (3:130) The issue here is, what is riba' and how many type of riba' are there? These are the information that you're looking for: Basically,  Quran and the Hadith have forbidden usury and all usurious transactions in the strongest terms.  Riba' can be defined as,  excess, increase or additional  compensation without due consideration made conditional for either party to a   contract. Simple example, car loans by conventio...

First of all, let us see, what is Riba' Al-Nasai'e (riba' on credit) and Riba' Al-Fadhl (riba' on cash). Firstly, Riba' al-Nasai'e. It refers to a stipulated increase over the loan which a debtor agrees to pay to his creditor in relation of a specific period of time. The charge payable are fixed by the borrower to the lender depends on how many the loan money produces. Thus, any gain that comes from a loan transaction is usurious. This type of riba is prohibited by the Quran (30:39; 4: 160-1; 3: 130; and 2: 275-281). The hadith of the Prophet p.b.u.h. states: “Jabir said that Allah's Messenger (may peace be upon him) cursed the receiver of interest and its payer, and one who records it, and the two witnesses, and he said: They are all equal (in term of sins).” (Bukhari and Muslim) Since the verses of Quran has directly rendered this type of riba' as 'haram', it is also can be called as Riba' al-Qur’an. For example, this kind ...

It is clear that in Islam, we  can apply religious thinking to the ethical  and moral issues. Thus, to control and overcome the problems arising around debt in Islam, one should encourage others to: Speak up about injustice and inequality:  Islam encourages people to reflect on their individual and global responsibilities so that ethical behaviour will create ethical political and economic systems.  Support debt cancellation : it sounds like impossible, but truthfully,  many borrowers unable to repay the interest of their loans. Let alone to repay the loan itself. Therefore, Muslims should support debt cancellation, gradually, through fair and transparent means. Support the prohibition of interest and promote risk sharing : The interest charge on loans given by conventional islamic institutions clearly had negative effects towards people, especially borrowers. In addition, any loans that are provided in the future should be done on the basis of equitabl...

Islam does not prohibit all commercial business or all loans. Instead, it encourages legitimate commerce and trade activities, undertaken on the basis of ‘equitable risk sharing.’ Equitable risk sharing means, that both parties share in the reward, or the failure, of the investment, thereby encouraging more responsible lending practices.  However, the ‘unjust’ loans provided to conventional banks, or any conventional financial institutions were not given on this basis. Therefore there was no reason for the bank to ensure that the loans were invested wisely and productively, or that the borrowers would be able to pay them back. In Islam, the responsible loans (or known as a profit) such as those that are used to finance economic activities are permitted. However, it is the obligation of the lender to provide loans in a responsible manner and also in a manner that does not overburden the borrower. Yet, the ‘unjust’ loans given by some conventional financial instituti...

In this current situation where poor countries are made to pay millions of pounds in servicing their debts but have no way of providing their citizens with basic services is clearly morally and ethically wrong. Frequently poor countries are spending more on debt repayments than on providing for their citizens’ most basic needs. The fact that these unjust debts have not been cancelled in full by fair and transparent methods means that the world’s poorest countries are trapped in a cycle of poverty unable to invest in education, child diseases, HIV, prevention and treatment, and the preservation of precious environmental resources.  Yet as well as the moral and ethical arguments, for Muslims there are also strong and clear faith-based reasons for supporting debt cancellation. Here it comes the concept of social justice is paramount in Islam. Muslim teachings advocate for a fair and equitable distribution of wealth, the protection of the weak against economic exploitation and...

Oxford English Dictionary define term 'debt' as a sum of money that is owed or due. Islam takes the matter of debt very seriously and warns against it and urges the Muslim to avoid it as much as possible. It was narrated from ‘Aa’ishah (may Allaah be pleased with her) that the Prophet (peace and blessings of Allaah be upon him) used to say in his prayer: “Allaahumma inni a’oodhi bika min al-ma’tham wa’l-maghram (O Allaah, I seek refuge with You from sin and heavy debt).” Someone said to him: “How often you seek refuge from heavy debt!” He said: “When a man gets into debt, he speak and tells lies, and he makes a promise and breaks it.” Narrated by al-Bukhaari (832) and Muslim (589).   As we all know, riba' may easily found in any transaction that related to debt. In Holy Quran, Allah said, “And whatever riba you give so that it may increase in the wealth of the people, it does not increase with Allah.” [Ar-Rum 30:39]  Debt is permissible if there are no any ad...