Is Riba Present When the Government & Its Agencies are Involved?

There are those who have come to me and asked whether if a government agency invests in riba-based instruments, it is still halal because the profit, despite being from riba, will be used for the public good, making it neutral again. They also said:

"Isn't there no riba between a nation or government and its people, just as there is no riba between a master and his servant?"

Is riba indeed permissible when it involves a servant and his master? So, does the same apply to a government and its people?

Before I briefly discuss the extent to which the view that riba is permissible between the government and the people, as claimed, it is better for us to examine the foundation they are trying to use, which is riba between a servant and his master.

RIBA BETWEEN A MASTER AND A SERVANT

Indeed, one school of thought holds that riba is not prohibited if the transaction is between a servant and his master. This view is evident in their fatwa:

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"The condition for riba to occur is that the exchanged items must not be solely owned by one of the transacting parties, and if they are owned by only one party, then there is no riba, and thus the servant is excluded..." (Badai As-Sonai'ie, Al-Kasani, 7/3129)

In essence, the basis of the Hanafi opinion is that the servant cannot truly own anything, as all the possessions they have are, in reality, owned by their master.

Therefore, there is no riba between them because the servant's wealth is actually the master's, and likewise, the master's wealth is also his own. Hence, there is no riba when it comes to the wealth of only one party (i.e., the master).

MAJORITY OF SCHOOLS DISAGREE

However, this view contradicts the opinions of other schools, which maintain the prohibition of riba remains the same. Imam Ibn Hazm categorically rejects the Hanafi view and cites an incident involving Sayyidina Hussain bin Ali. Sayyidina Hussain once received a goat as a gift from a servant, but when he discovered it was from a servant, he returned it. However, the servant explicitly said:

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"It belongs to me."

Upon this clarification, Sayyidina Hussain accepted the gift of the goat. This clearly demonstrates that the servant can still own property, engage in buying, selling, and giving gifts. If the servant couldn't own anything, Sayyidina Hussain would have still rejected the gift. (Al-Muhalla, 8/515)

When a servant is recognized as having the capacity to own property separately from their master, it follows that riba can still occur between the servant and their master.

This is further reinforced by Imam An-Nawawi, who states:

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"The prohibition of riba is the same for men and women, servants, and mukatab by consensus." (Al-Majmu' Sharh Al-Muhazzab, 9/442)

WHAT ABOUT RIBA BETWEEN THE GOVERNMENT AND THE PEOPLE?

Based on the discussions above, it is evident that the Hanafi school of thought differs in its fatwa on riba from the majority of other schools concerning riba between a master and a servant.

Nonetheless, the stronger opinion is that riba still applies between them, which is also the view of the majority of scholars and schools.

However, in modern times, some individuals attempt to justify the riba imposed by the government on the people by referring to the Hanafi school's argument about a master and a servant.

Their objective is to justify a government-owned bank or ministry providing loans to the people with riba or borrowing money from the public and giving them returns with riba. They argue that this is permissible, as it can be likened to the Hanafi fatwa on riba between a master and a servant.

They also attempt to argue that the government is not an individual and provides benefits to specific individuals; hence, riba only exists in transactions between specific individuals, such as Ahmad and Ali, but not between Government Agency A and the people.

However, the fact remains that riba still exists, and the Prophet said:

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"Every one of you is a guardian and is responsible for his subjects. The ruler who has authority over people is a guardian and is responsible for them." (Sahih Bukhari)

Also, the Prophet said:

??? ???? ?????? ???????????? ??????? ????????? ?????? ????????? ??????????? ?????? ???? ?????? ????????? ??????????

There is no servant whom Allah has entrusted with leadership, but he does not advise his subjects (including making good decisions on policies and principles), except that he will not smell the fragrance of Paradise." (Sahih Al-Bukhari)

Clearly, although the government by itself is not held accountable for sins, but individuals making decisions and determining policies will be responsible for riba investments and loans carried out by government agencies under their jurisdiction.

IMPROPER ANALOGY BETWEEN A MASTER AND A SERVANT

Is this analogy correct?

Certainly not. The Hanafi view is based on the premise that a servant cannot truly own property because all their possessions belong to their master.

This characteristic is not applicable to the people; they are not servants. The property of the people cannot be arbitrarily interfered with by the government. Every individual has a distinct capacity recognized by Islam to buy, sell, rent, invest, and so on with their property. Without any interference from the government. The government's role is to establish laws and infrastructure to ensure that transactions are safeguarded against exploitation and fraud.

The government cannot simply interfere when individuals want to buy houses in Kajang, Damansara, and elsewhere. This is entirely different from a servant who cannot purchase a house without their master's instruction.

In conclusion, the view that seeks to justify riba between the government and the people is rejected and without any basis.

Dr Zaharuddin Abdul Rahman

www.elzarshariah.com