"CONTEMPORARY PRACTICES OF RIBA (INTEREST) IN NIGERIA"
COMMON ASPECTS OF RIBA PRACTICE BY MUSLIMS IN THE CONTEMPORARY NIGERIA (A CASE STUDY OF SOKOTO STATE CENTRAL MARKET) BY ABDULMALIK YAHAYA 1 TABLE OF CONTENTS Title page---------------------------------------------------i Approval page----------------------------------------------ii Dedication----------------------------------------------------iii Acknowledgement-------------------------------------------iv List of tables---------------------------------------------------vii Table of contents----------------------------------------------viii CHAPTER ONE: GENERAL INTRODUCTION 1.1 Background to the Study 1.2 Scope and Limitation 1.3 Significance of the Study 1.4 Statement of the research problem 1.5 Aim and Objectives of the Study 1.6 methodology 1.7 structure 1.8 Literature Review End Note 2 CHAPTER TWO: CONCEPTUAL FRAMEWORK OF THE STUDY 2.1 Defination of term -Riba 2.2 Understanding the prohibition of Riba 2.3 Types and Classification of Riba 2.4 Western Theories of Riba 2.5 Qur’an Hadith and Biblical Justification on the Prohibition of Riba End Note CHAPTER THREE: OVERVIEW OF AREA OF STUDY AND CONTEMPORARY PRACTICES 3.1 Historical Background of Sokoto Central Market 3.2 Riba Practices on Business Activities in Sokoto Central Market 3.3 Contemporary practice of Riba in Nigeria End Note CHAPTER FOUR: SOCIO-ECONOMIC ILLS OF RIBA PRACTICE 4.1 Values Inherent I Islamic Economics 4.2 Socio-Economic Evils Inherent in Riba 3 4.3 Impact of Interest (RIBA) on Sokoto State Populace End Note CHAPTER FIVE: SUMMARY, CONCLUSION AND RECOMMENDATIONS 5.1 Summary 5.2 Conclusion 5.3 Recommendations Oral Informants Bibliography 4 CHAPTER ONE INTRODUCTION 1.1 BACKGROUND OF THE STUDY The institution of interest riba (interest) has been a controversial issue throughout history and continues to be so; this is because in it is evil from which power to domineer others comes. The question of riba is prominent in our society because it involves exchange of goods and services which enhances stability among the society. A man has a commodity and wants to trade it for what he or she lacks is accepted in Islam but that which has been forbidding by Allah is riba. Riba (interest) is the practice of lending money or good at an exorbitant interest rate specifically at a higher interest than is allowed by law. The term riba literally means (addition) or an increase over and above the original sides or amount it also refers to the practice lending money for a prefixed rate of return of interest. Historically, in the pre-Islamic period, capital owners used to lend money having no legal concern for the purpose for which it was lent or the manner in which it was used but remained 5 contractually assured of gain irrespective of any loses which the borrower may have suffered in consequence of this transaction.1 Islam caters for both mundane and spiritual aspects of human life and the glorious Qur’an have stricture against that which is prohibited in the sight of Allah, injustice to fellow human beings and even animals being one of them. Thus riba refers to the practice in excess of the amount due from the debtor which was prevalent amongst the Arabs in the pre-Islamic period.2 under the Islamic law (shariah), interest is defined to represent the excess (i.e.) premium that must be paid by the borrower to the lender along with the principal amount as a condition for the loan or an extension of its maturity3. With this Islam totally prohibits usury and considers it unjust because it is detrimental to societal unity and economic stability. Islamic law has placed emphasis on the approach to commercial transaction based on values of justice, equity, fairness and evenly distribution of resources. In the world of commerce these values takes the form of prohibition of riba (interest), that is transactions involving excessive gain or profit at the expense of another, uncertain insurance contracts and business 6 involving gambling, alcohol, consumption of pork, pornography and many more.4 Islamic law has traditionally sought to achieve fairness and certainty in contractual obligations by requiring precise definitions, providing clear terms and conditions and equalizing the roles of contracting parties. Allah says in the Glorious Qur’an: “And Allah has made business transaction permissible and forbidden riba” (Q2: 275). Thus riba is viewed as exploitation of those in weaker bargaining position, permitting unjustified profit and enrichment and encouraging speculative or risky transactions.5 it is perhaps not surprising that the sunnah prescribed strict rules regulating partnership, leases, currency exchange and speculative trading prohibitions against transactions that are uncertain which are viewed as similar to gambling and the prohibition of insurance contracts since they too are viewed as involving future events that are not known to man except Allah alone. Islamic commercial law contains some provisions that are generally unfamiliar to lawyers in other legal systems and that are designed to protect contracting 7 parties. For example, even after a contract is legally concluded, it remains subject to rescission or cancellation in the event that the latent defects unknown to the buyer at the time of purchase arise. Although western contract laws binds parties to long term contracts unless unforeseeable circumstance render performance impossible. Islamic law releases parties if they simply become dissatisfied with the contract thus relieving both parties of the burden thereby not allowing one party to commit injustice against the other. 1.2 SCOPE AND LIMITATION The research majorly covers the scope of some aspects of riba practice by Muslims in Nigeria though is restricted to a particular portion of Sokoto state which is the central market. Similarly the limitations connected in the conduct of this project was particularly due to the time factor as the researcher had to rally round to ascertain things and more so was engaged with mid-semester examinations and concentration on final year lectures and examinations. 8 1.3 SIGNIFICANCE OF THE STUDY The research work is carried out in other to understand the meaning of riba, check the excesses in the conduct of practices of unlawful matters as regards Muslims in carrying out business transactions. It’s of another important significance because it guards Muslims in their conduct day to day commercial activities through the strictures of the glorious Qur’an and sunnah and the preceding consequence of any defaulter. Another important significance is that it aids to reduce oppression amongst people and helps sanctify the environment through purity of thought and equality of rights in brotherhood. 1.4 STATEMENT OF THE RESEARCH PROBLEM It is finite natural that people should deal among themselves to satisfy their daily needs. While so dealing they enter into different transactions which involves exchange of good for goods or goods for money. In the contemporary world of ours today, humans wants are insatiable and the quest to acquire wealth by all means becomes undoubtedly untamed therefore human greed overrides the better part of them and thus they contract illegal transactions in other to 9 satisfy their wants;-here riba (interest) comes whereby the one to whom money is borrowed has to pay interest on the principal item which is prohibited in the glorious Qur’an. Thus the greed resulting to riba needs to be totally curbed or reduced to its barest minimal resulting in a free interest economy. RESEARCH QUESTIONS 1. Is the concept of riba misunderstood? 2. What are the factors that account for the prohibition of riba in Islam? 3. In what ways has banking institutions contributed to the widespread of riba practice? 4. What measures should be taking in eradicating riba? 1.5 AIMS AND OBJECTIVES The general objective of the course as an integral part of the B.A Islamic studies is to provide Muslims with the basic knowledge of the growth and development of Islamic economics or transactions amongst Muslims and values inherent in this system, it would also 10 expose Muslims to the evils inherent in riba based system of transactions and thus they would be able to identify the following: 1. Identify the strictures, injunctions and consequences of the practice of riba. 2. To enlighten them more on the virtues in carrying out transactions in conformity with the dictates of the Qur’an an sunnah. 3. To throw more light on the difference between islamic commercial law as opposed to interest and the conventional one as a proponent of interest (riba). 4. To shed more light on the socio-economic evils inherent in the practice of riba. 1.6 METHODOLOGY The descriptive survey type was used in the conduct of this research work. This type of survey method elicited information from respondents on matters relating to riba. Both primary and secondary data were utilized, secondary data was obtained from relevant documents and it provides background information of riba and other related issues. Primary data on the other hand constitute 11 of the bulk inputs used on the empirical analysis of the study. It is obtained through interview to confirm respondent’s knowledge, practices and views on riba. 1.7 STRUCTURE The project is divided into five chapters, chapter one is the introductory chapter which gives an insight on the background, scope, aims and objectives of the research topic. Chapter two deals with the analytical and synhetical survey of riba, its classifications, theories and justification for its prohibitions, it also gives an elaborate theory of interest. Chapter three of this research work gives a general background, activities and riba practices of the place in which the research work is been carried out. Chapter four is an assessment of the values inherent in Islamic economics, it also gives an evaluation of the effects of riba which connotes the socio- economic ills of riba based economy and transactions. Chapter five which is the concluding chapter gives a general summary of the research work and recommendation. 12 1.8 LITERATURE REVIEW Islam is more than just a religion of rituals and worship, it permeates all affairs of its adherents. Many verses of the Qur’an as well as the sayings of Prophet Muhammad (S.A.W) contain injunctions on commercial activities the resultant effect of which trading becomes imperative. Muslims have no option than to use the medium of trade, banking etc to facilitate and enhance their business activities.6 Following are material reviews relevant to the research area. Mika’il (1989, pp 48-54), examined the theory of interest from the perspective of conventional economic thinking and from an Islamic view point. He also analyses the philosophy Islam total prohibition of interest in business dealings- Mika’il examines the implications of such prohibitions for optimum economic welfare.7 Iqbal (1946, pp 35-66) sought to explain the concept of usury and analyzed the prohibition of usury as stated by imam Razi in his book titled “Mafatihul Ghaib”. Iqbal also explained the difference and ideologies of western and Islamic theories of interest, Qur’anic 13 and ahadith of the Prophet (S.A.W) as well as the analogous reasoning were quoted concerning the illegality of interest.8 Mahmoud (1989) outlined the focal point of the economic principles in Islam he vividly explain the principles of “istikhalf”, law of depreciation.9 etc. Adebayo (2010) expounded the position of riba in Islam, its classes- riba al-nasa’I and riba al-fadl, he further elaborated on the socio-economic evils inherent in riba based economics system and thus stated that it compromised the state of the economy; he further elaborated more on the contemporary issues as regard riba in Nigeria, most prevalent of them being the conventional banking system;- he further stated that they are grossly based on riba and are unfit places for Muslims to conduct transactions.10 Ibrahim (2003, pp 106-124) sought to give a comparative analysis of conventional and Islamic banking and economics in Sulaiman and Galadanci (eds), Islamic banking and finance: general frame work and case studies.11 14 Monzer (2006), gave an analysis of the success of Islamic economics and values inherent in its system.12 Abdul-Rahman (2003), expounded on the stand of riba in Islam, its Qur’anic and fiqhu meanings, legal injunctions. He also sought to expose the refusal of some Islamic bodies to accept external forces who attempted to justify interest or separate it from riba using Qur’anic and sunnatic perspectives.13 Paramole (2000), described riba as an unlawful means of wealth acquisition and distribution in Islam, he termed it as misappropriation of ones property and considers it hazardous to the principle of social equity an justice.14 Bello (2003), stated emphatically the biblical injunctions on the prohibition of interest (riba), he also gave an overview of commercial regulatory framework in Islamic economics .15 Orisanko (2009) discussed extensively on the practices of riba in contemporary Nigeria, particularly as regard banking services- loans and interest rates.16 15 END NOTE 1. Irfan Ulhaq, Economic Doctrines of Islam, international institute of islamic thought, Herndon, 1996, Pp.117-119. 2. Muhammad A. Mannan, Islamic Economic: Theory and Practice, Cambridge, the islamic academy, london, 1986, P.118. 3. Aminu Salihu Mika’il, Ethics and Business Performance, M.S.S.N, Nigeria, 1989, P.53. 4. Aminu Salihu Mika’il, Op Cit, Pp. 48-54. 5. Ashraf kashmiri Bazar, Law Guiding Business Transactions in Islam, Lahore, Pakistan, 1946, Pp.35-66. 6. Adebayo Rafiu, Islamic Banking, Islamic Publication Limited, Ilorin, 2011, P.15. 7. Aminu Salihu Mika’il, Op Cit, pp.22-30. 8. Anwar Iqbal, Islam and the Theory of Interest, Islamic Research Institute, Pakistan, 2006, pp.43-56. 9. Mahmoud Abu-Saud, Towards Islamic Economics in the Islamization of Disciplines, International institute of islamic thought, herndron, Pp. 273-292. 16 10. Adebayo R.I, The Motivating Factor for the Viability of Islamic Banking and Finance, Vol.27, No.2, Pp.93-109. 11. Ibrahim Rakiya, Islamic Banking and Conventional Banking: A Comparative Study in Sulaiman S and Galadanci B.S. (eds), Islamic Banking and Finance: General framework and case studies, IIIT, Kano. Pp. 106-124. 12. Monzer Khaf, Islamic Banking and Finance: Fundamentals and Contemporary Issues, Islamic Research Training Institute, Jeddah, Pp. 121-167. 13. Abdul-Rahman Yousri Ahmed, The Prohibition of Riba in Islam: its economic rationale and implications, IIIT. Kano, Pp. 4-30. 14. Paramole K.O, Riba (usury): An unlawful means of wealth acquisition and distribution in islam in Al-Hadaarah, LASU, Vol.5, No.3, Pp. 67-82. 15. Bello A.F, Devine Banking In Nigeria: The Qur’an, Biblical Injunctions; An overview and regulatory framework in S. Sulayman and B.S Galadanci (eds), IIIT Publication, Nigeria, Pp. 24-30. 16. Orisankoko A.S, An Appraisal of Unethical Practice in the Contemporary Nigeria, University of Ilorin, Ilorin Nigeria, Pp.15. 17 CHAPTER TWO 2.1 DEFINATION OF RIBA Literally riba means increase, addition, expansion or growth. It is to be noted however that not every increase or growth is prohibited in Islam, the basis of the prohibition is related to the manner through which an addition is gained therefore, it was the task of the prophet (PBUH) to explain how riba could take place in commercial matters because otherwise the Qur’anic injunctions that were that were previously quoted would be meaningless as the explanation of riba was never provided in the Qur’an. Most books or articles simply defined riba as the premium that must be paid by the borrower to the lender along with the principal amount as a condition for the loan or for the extension of its maturity. Finally popular is an attempt to define riba as an excessive rate of premium imposed on the borrower in loan transaction. The above attempts are not totally wrong but they lack the precise definition of riba, a fact that might likely mislead readers to infer something which is baseless from Islamic law perspective. For example one may induce that riba is only limited or confined to loan transaction i.e. money 18 which is exchanged for money for an extra counter value or consideration. Likewise, one may infer from the qualification of “an excessive rate that a fair or a reasonable increase rate of premium or additional payment may be deemed lawful because it is not excessive.1 The right approach is to however, look at the source from which riba originated as riba was widely practiced in the time of the prophet (PBUH). The explanatory reports of the prophet (PBUH) will be of paramount importance and relevance. The most comprehensive report on this matter is the hadith of the prophet (S.A.W) reported on the authority of Ubaidah b. Al-Samit, that is “gold for gold, silver for silver, wheat for wheat, barley for barley, dates for dates and salt, like for like, equal to equal and hand to hand, if the commodities differ, then you may sell as you wish provided that the exchange is hand to hand.” This hadith offers a very precise and accurate definition of riba that is easy to understand and appreciate. The above hadith introduces two elements which from Islamic perspective qualify to constitute the ilah i.e. cause or reason of a ruling. These two elements are gap 19 or deferment in the time of exchange and different counter values in the exchange of two similar ribawi items. Put it differently, these two elements are time factor as well as quantity factor.2 The explanation of the above theory is as follows. The Islamic law defines riba in two perspectives that are riba by virtue of deferment in time of exchange known as riba al-nasi’ah and riba by virtue of excess in terms of quantity of one of the counter values, known as riba al-fadl. If gold is exchanged for gold, then the exchange must comply with these two factors, namely it must be of spot exchange and of equal quantity. Should the exchange lack the first element, it amounts to riba al-nai’ah. However, if it lacks the second element, it falls under the category of riba al-fadl. Should the above transaction be lacking those two elements, then both riba al-nasi’ah and riba al-fadl would be jointly applicable. Therefore the most comprehensive definition is that of Nabil Salih, he notes that riba in its shariah context can be defined as generally agreed as an unlawful gain derived from the quantitative inequality of the counter values in any transaction purporting to affect the exchange of two or more species which belong to the same 20 genus and are governed by the same legal cause. Differed completion of the exchange by such species, or even species which belong to different genera but are governed by the same ilah (legal cause) is also riba whether or not the deferment is accompanied by an increase in any one of the exchange counter values. We may add that riba also includes both inequality of the counter values and deferment in exchange together as in the case of modern riba. In modern time, loan is lent out for an extra repayment to be settled sometime in the future, thus it involves both quantity and time transfer.3 2.2 UNDERSTANDING THE PROHIBITION OF RIBA The question of the rationale of the prohibition of riba is a very delicate and complicated topic as people are already accustomed to the practice of riba. Furthermore, no one can easily and simply deny the remarkable contribution of riba based banking system to the development of our modern society. Development can not be achieved as it has been widely propagated without the role of financial intermediaries i.e. banks. On the other hand, banking institutions have been solely established on the principle and 21 doctrine of riba, namely paying interest to depositors and charging interest on borrowers. The banks profit are mainly attributed to the difference between interest expended (paid) to depositors and interest earned (received) from borrowers. It is in the light of the damaging effect of riba, Allah Almighty has already warned the people to avoid practicing riba because the opposite attitude has been described by Allah as declaring war against Allah and his messenger. Obviously the outcome and aftermath of this phenomenon would be unimaginable and beyond repair. Before we proceed to discuss the rationale behind the prohibition of riba, it is interesting to understand the philosophy of Islamic law with regard to the criterion of considering a particular practice lawful or otherwise. Al-Shatibi, a great Muslim jurist has observed through induction process that the status of prohibition given to a particular does not necessarily imply that the said practice is void of any good and meaningful elements that are beneficial to mankind. Likewise, what is permitted or made obligatory in the eyes of the religion does not necessarily suggest 22 that the permitted or obligatory practice is free from any bad things that might be harmful to mankind. However the ultimate criterion is the degree of each of good and bad elements embodied in a particular practice. Should the good elements supersede and overwhelm the bad elements, the practice of qualified as permitted or obligatory as the case may be. The reverse phenomenon would render the practice to be deemed as either disliked or forbidden as the case may be. An excellent example could be found in one of the Qur’anic verses pertaining to the prohibition of wine drinking i.e. at an early stage of its prohibition. The verses (Al-Baqarah: 219) reads to that effect. “They ask you concerning wine and gambling. Say: in them are a great sin and some benefit but the sin is greater than the benefit”. The wine was ultimately prohibited although the wine up to modern time might have contained some benefits for people as normally discussed in the discipline of modern medicine. At this point, one may have a valid reason to question the logic of this philosophy upheld by Islamic law. However it is sufficient to note one interesting response given by Al-Shatibi himself. He emphasized on 23 the fact that people are created by Allah Almighty to be tested whether they are obedient to Him or otherwise. The meaning of this test can not be achieved if all the practices are either good or bad completely because people would be naturally inclined to observe what is good and to avoid what is bad.4 In other words, as there is no conflict of desire and inclination, one can not be tested. However, once a practice contains both good and bad elements, one can now be tested whether to follow what is already prescribed upon oneself or what is more appealing to one’s whims and desire and therefore rejecting the divine order. This fact is relevant to all prescriptions in Islamic law irrespective of whether they are of prohibitive or obligatory in nature. As for interest, it contains both bad and good elements otherwise nobody would be willing to practice riba. Obviously, it is gives an advantage to people with surplus of money to receive the premium on their money lent out to people faced with deficit of money. In a more specific financial analysis, interest has been deemed as the most powerful factor in the process of flow of fund. It lubricates financial intermediation in the process of flow of fund. It 24 is the interest rate that attracts and encourages financially surplus units to hold their excess funds in the form of financial instruments. Therefore the interest rate is the primary incentive that encourages savings with financial institutions. It is against this backdrop that we shall now present the islamic perspective on why riba is prohibited once and for all. Allah Almighty has commanded the riba receivers upon their repentance, to take back the principal and to do away with the interest or additional charges on the principal. By so doing, neither they inflict injustice on riba payers nor riba payers being oppressed. This is the very essence of (Al-Baqarah: 279) that is: “But if you repent, you can have your principal. Neither should you commit injustice nor should you be subjected to it”. Therefore the central theme and rationale of the prohibition of riba is injustice. 2.2 TYPES AND CLASSIFICATION OF RIBA Classifications and types of riba could be inferred from the hadith reported on the authority of Ubaidah b. Al-Samith that is 25 “gold for gold, silver for silver, wheat for wheat, barley for barley, dates for dates, and salt for salt- like for like, equal for equal, hand to hand, if the commodities differ, then you may sell as you wish, provided that the exchange is hand to hand”. In this hadith the prophet (PBUH) has indirectly classified riba into two classifications. The first riba is known as riba al-fadl i.e. riba by excess, and this has been represented by the prophetic wording of “sawaan bi sawain” that is like for like, equal for equal. This type of riba is alternatively or interchangeably known as riba al-buyu (riba in barter trading) and riba al- sunnah respectively. There are two questions that arise from this hadith. The first is about why only six commodities have been specified; and the second is why exactly the same reciprocal payment is required. Of the six commodities specified in the hadith about riba al-fadl, two unmistakably represents commodity money whereas the other four represent staple food items. The scholars have agreed that all commodities that are used as money i.e. acts as medium of exchange store and measure of value are to be treated as ribawi or usurious items. Therefore they must be treated on the basis of equal to equal and hand to hand when they are exchanged for each other. As for the 26 last four items, the scholars have disagreed on the legal cause underlying these commodities. Briefly, the Shafi’is maintains that the last four items are usurious items because they are edible. Unlike the Shafi’is , the Hanafi’s contend that the legal cause is the equality of these articles as being saleable by measurement of weight or capacity. Yet another view belongs to the Malikis suggest that the legal cause is the fact that those items are main food and preservable. By applying analogy, the coverage of usurious items will be extended to cover other items that share the common legal cause according to respective schools of law. The second question that is more interesting is the logic of the requirement of equal to equal in exchange of two similar ribawi counter values. On the surface it appears hard to understand why anyone would want to exchange a given quantity of gold or silver or any other commodity against its own counterpart and that too will be transacted on spot basis. What is essentially being required is justice and fair play in spot transactions involving barter trading. Anything that is received an extra by one of the two parties to the transaction is riba al-fadl i.e. all excess in barter trading over what 27 is justified by the counter value. To ensure justice, the Prophet (PBUH) even discouraged barter transactions and asked that a commodity meant for an exchange of the same commodity to be exchanged first against cash and the proceeds be used later to buy the needed commodity. This is because in a barter transaction the equivalents may be established only approximately thus leading to some injustice to one or the other party. The second classification refers to the riba al-nasi’ah. The term nasi’ah comes from the root nasa’a which means to postpone, defer or wait. It is also known as riba al-Qur’an respectively. It might be for this reason that many scholars have wrongfully defined riba al- nasi’ah as fixing in advance of a positive return on a loan as a reward for waiting or postponement of repayment time. Riba al- nasi’ah does not necessarily involve any additional payment in lieu with the postponement of repayment of loan. This in fact, refers to a case which comprises of both riba al-fadl arising from extra payment and riba al-nasi’ah caused by deferment given to borrower to repay the loan. Riba al-nasi’ah takes place when the exchange of two similar ribawi items is effected not simultaneously even for 28 equal counter value. E.g. 1kg of wheat for 1kg of wheat but not simultaneously transferred.5 2.4 WESTERN THEORY OF RIBA Throughout the past history of mankind, prophets and philosophers have unanimously condemned the institution of interest and declared it unjust. All the famous religions of the world have condemned and forbidden it. Western scholars such as Plato, Aristotle, the two Castos, Cicero, Seneca and Plautus etc were strongly against the institution of interest. They believe in the doctrine of the unproductivity of money that led to the conclusion that interest was unjust.6 However, some western scholars argue that capital is a factor of production and like any other factor it service. They consider productivity as an inherent property of capital renders production services for which the owner must be paid, and that payment is interest. The following are different views held by theorists. 29 TIME PREFERENCE THEORY The most formidable treatment of the theory of interest has been given by Austrian economist Bohn-Wawerk. He explains the rationale of interest from the concept of technical superiority of present over future as well as time value of money. Because an average person prefers present over future and if he is required to forego the present comfort or use of his funds, he is entitled to have remuneration known as interest.7 In this case time is treated as a type of commodity which has a price. ABSTINENCE THEORY This is based on monetary incentives and reward for abstinence on savings. Although in the practical life today, we do not see any abstinence on the part of those who provide bulk of the capital or funds. Perhaps, this can be possible in a very primitive society where the government may force people to save thus causing an abstinence or the sacrifice on the part of those who save (depositor) providing for the abstinence or the sacrifice in the form of an interest payment.8 30 LIQUIDITY THEORY The third reason for charging interest relates liquidity. The lender of money sacrifices his liquidity and must be duly compensated for this which comes in the form of interest paid to him by the borrower.9 2.5 QUR’AN, HADITH, BIBLICAL JUSTIFICATION ON THE PROHIBITION OF RIBA The Glorious Qur’an stands as the basic primary source of law followed by the hadith of Rasullillah (S.A.W), it also a notable factor that the previous scriptures revealed to various Prophets also strictures against usurious transactions. The following are the provisions of these divine scriptures beginning with the glorious Qur’an: “Those who eat riba (usury) will not stand on the day of resurrection except like the standing of a person beaten by shaitan (Satan) leading him to insanity. That is because they say; trading is like riba whereas Allah has permitted trading and forbidden riba. So whoever receives and admonition from his Lord and stops eating riba shall not be punished for the past, his case is for Allah to judge; but whoever 31 returns to riba, such are the dwellers of the fire, they will abide therein”. (Al- Baqarah: 276). “Allah will destroy riba and will give increase for sadaqat (deeds of charity, alms) and Allah likes not the disbelievers, sinners” (Al-Baqarah: 276). “O you who believe! Be afraid of Allah and give up what remains (due to you from riba from now onward), if you are really believers” (Al-Baqarah: 278). “And if you do not, take notice of war from Allah and his messenger but if you repent, then you have your principal (without interest), wrong not and you shall not be wronged” (Al-Baqarah: 279).10 The hadith provisions are as follows: “Jabir reported: “the apostle of Allah cursed the one who accepted usury, the one who paid it, the one who recorded it and two witnesses to it; saying that they are all alike”. It has come down from Abu Hurairah may Allah be pleased with him that the Prophet (S.A.W) said: 32 “On the night of elevation, I passed by a people whoose stomachs resembled houses full of snakes from which snakes could be seen coming out. I inquired who they were. Jabir said: these are devourers of usury”. Yet in another hadith of the Prophet Muhammad (S.A.W), Abdullah bin Hanzala, narrated that the messenger of Allah said: “A dirham which a man knowingly receives in usury is more serious (a sin) than thirty six acts of adultery”. Then the Nobel Prophet (S.A.W), on his last pilgrimage and in his last address said: “Every form of interest (riba) is cancelled; capital indeed is yours which you shall have, wrong not and you shall not be wronged. Allah has given His injunctions that interest is totally forbidden. I first start with the amount of interest which people owe to Abbas and declare it cancelled. He then on behalf of his uncle ‘Abbas, cancelled the total amount due on his loan capital from his debtors”. The biblical provisions are as follows: Deuteronomy 23, verse 19: “you shall not charge your interest to your brother, interest on money or food or anything that is lent out o interest”. Ezekiel 18, verse 8: “if he has not exacted usury nor taken increase but has withdrawn his hand from iniquity and 33 executed true judgment between man and man”. Verse 13: “if he has executed usury or taken increase, shall he then live? He shall not live! If he has done any of the abominations, he shall surely die; his blood shall be upon him”. Verse 17: “who has withdrawn his hand from the poor and not receive usury or increase, but he has executed my judgments and walk in my statues, he shall not die for the iniquity of his father; he shall surely live”. Luke 6, verse 34: “and if you lend to those from whom you hope to receive back, what credit is that to you? For even sinners lend to sinners to receive as much back”. Psalm 15, verse 5: “he who dare not put out his money at usury, nor does he take a bribe against the innocent, he who does these things shall never be moved”.11 From the above chapters and verses of the Qur’an, hadith, and the bible, it is discernable that the common ground shared is the prohibition of usury (riba), therefore they all strictures against it as it is unjustifiable. 34 END NOTE 1. Sa’adu Alanamu, Islamic Banking: Theory and practice , Abnour international, Ilorin, 2003, p.21. 2. Mohammed Daud Bakar, Riba and Islamic Banking and Finance, international islamic university, malaysia, 2010, pp. 10-19. 3. Afzal –ur –Rahman, Op Cit, p. 72. 4. Ibid, p.73. 5. Ibid, p.74. 6. Ibid, p.125. 7. Ibid. 8. Sa’adu Alanamu, Op Cit, p. 24. 9. Ibid, pp.24-25. 10. Al-Hilali M.T, the noble Qur’an (translation), Dar-us-Salam publications, Riyadh Saudi Arabia. 11. Bible, King James Version. 35 CHAPTER THREE 3.1 HISTORICAL BACKROUND OF SOKOTO CENTRAL MARKET The new Sokoto central market is situated at the western part of Sokoto metropolis, it covers a total area of 0.5 kilometers which is equivalent to 500,000 square kilometers.1 The old city of Sokoto consist of seven historical gates namely Kofar Kade, Kofar Dundaye, Kofar Taraniya, Kofar Kware, Kofar Marke, Kofar Atiku and Kofar Aliyu Jedo. The market is also called Gandu market, it inherited thae name from the land or farm called Gandu Sarki (sultan farm) owned and donated by the late sultan Alhaji Sir Abubakar 3.2 The Sokoto central market which was established or located to the west between Kofar Karde and Kofar Aliyu Jedo was established mainly to avoid previous experiences on frequent fire outbreaks in the old market. The incident of 16th January 1972 when the Sokoto central market went on fire resulting to loss of lives and properties worth millions of naira, the sad episode brought devastating economic setbacks on the innocent citizens of Sokoto state. Barely 36 two years later when the victims of this fire outbreak were beginning to recover from their losses, another fire outbreak of no less magnitude struck again on the 6th of June 1974 at the same place with similar serious consequences. This was the time when the government felt it really expedient to find a lasting solution to the problem of these seemingly reoccurring fire incidents and at the same time to present its citizens a suitable forum for social and economic interactions. In a move to implement this decision, the government immediately made available the sum of N14 million as loan to SUDU for this project and directed the agency to seek additional loans from commercial banks. This was done in other to ensure that the project suffer no financial setbacks. The project therefore had its capital from the following financial institutions N14 million from the state government as grant, N10 million from the government as loan, N6 million naira loan from First Bank of Nigeria, N4 million naira loan from Bank of the North, N2 million naira from United Bank for Africa, giving a total sum of N36 million naira. 37 The state government wasted no time in awarding the contract to Messr Kneppers, a German company for the construction of the new Sokoto central market. Although building commenced in 1978, the foundation was laid down on 19th August 1979 and was commissioned by the committee chairman but then in his capacity as a president and commander- in- chief of the armed forces of the federal republic of Nigeria Alhaji Shehu Usman Shagari.3 The market covers an area of 24 hecters of land; it has four major gates, namely, the main gate by the south named after Shehu Shagari, Abdun Zagi gate to the east, Gawo gate to the north and Shehu Kamba gate to the west. There are also several mini gates later provided in other to give room to the influx of people into the market from various angles. The market initially contained 5585 shops before the fire disaster that occurred on the 13th of April 2006 but during the process of reconstruction of the market, 1028 additional shops were added to 5855 shops that were already available in the market making a total of 6613 shops. These shops or stalls were in blocks serially arranged. They were numbered from 38 letter A to T and each letter representing a particular set of traders. For example line D is for plastic sellers, line H for textile materials, K for electronics etc. The market also consists of an administrative arrangement and houses other social amenities and a sixteen kilometer road network.4 NATURE OF BUSINESS ACTIVITIES IN THE MARKET Sokoto central market is divided into different sections each section or area is allocated to certain categories of items of trade. The shops were numbered from letters A to T and each letter representing a particular set of trades. The first line which is line A is allocated to a particular set of traders called ‘yan koli’ in Hausa; their items of trade include jewelries. Line B is allocated to shoes and leather accessories while line C is for articles of varieties etc. most of the traders found on line D deals with plastic materials. Line E covers provisions while line F covers textile materials. Others include electronics, household items, meat sellers and food items which are found on line P. 39 The mode of transacting business in the market is purely Hausa and English to an extent. While business activities are conducted on daily basis. 3.2 RIBA PRACTICE ON BUSINESS ACTIVITIES IN SOKOTO CENTRAL MARKET In our contemporary world were commercial transaction is a necessary for fair distribution of goods and services, Sokoto state is no doubt left out in the commercial exchange of services and goods as this is the major occupation of its inhabitants aside farming. Sokoto central market houses several business owners and as such their primary motive is to come to trade with the aim of making profit. For most of its inhabitants, profit motive is the sole aim of commencing any business. Mallam Aliyu Yaro who is a dealer in wheat, rice, beans, majorly grains says that there are times he gives out his goods to borrowers on credit for a certain period of time in return of the principal amount in cash worth of the goods given with an interest rate charged for the deferment period. That this is the way he and 40 his family survive and also a means of expanding his business and sending his children to school. When confronted on the issues of the strictures against riba, he aggressively withdrew from answering further questions and concluded it was not riba.5 Alhaji Sani Mai’yadi who sells textile materials concluded he buy textile materials from Kano at the rate of N3500 naira although they vary in prices, bringing it to Sokoto, he sells for more depending on the quality of the materials and considering transport fares which are all included in the costing. This is interest doubled.6 Mallam Ibrahim who is also a dealer on grains particularly beans and rice says that his business nearly collapsed when he was due to repay a loan he borrowed in form of goods and was unable to regain the principal amount on the good, therefore he had to distribute his goods for sale in which they were under priced in other to repay the loan together with the interest.7 Another man who is presently a tailor said he was formerly a trader in jewelry and grains but couldn’t cope with the excessive rate of interest charged on borrowing goods from large scale retailers therefore he had to swap line of business were he needn’t 41 borrow a dime or goods to sell, hence business would be strictly between him and his customers.8 Amongst the buyers interviewed at the market place, all of them were of the view that they are aware or had little knowledge on the prohibition of riba but can’t do anything to change the situation as they are in the weaker position of bargaining, thus the gross misconduct is widely entertained. In summary, riba is in existence in the economic or commercial transaction in Sokoto central market. The most affected areas of trade are on grains, etc. but however it is to note that while most of the traders lack awareness on the Qur’anic strictures against riba some of them compromise and have conducted their transaction in accordance to the injunctions of the glorious Qur’an, although there are still some elements or traces of riba practices in the market which have left some in disarray. 3.3 CONTEMPORARY PRACTICE OF RIBA IN NIGERIA The most contemporary or common aspect of riba in our modern society is the conventional practice of riba in our banking 42 system as it is the sole or major instruments through which individuals sought to engage in commercial or financial transaction. The conventional banking system has no basis in Islam as it is grossly based on riba the resultant effect of the controversial institutionalization of Islamic banking in Nigeria. Conventional banking system has its roots in Nigeria since early this century, by now it has captured most of the markets both in deposit and in financing side, it covers all types of loan, trade, financing, over draft, share financing and so forth. As for deposit, it has peculiar accounts of savings accounts, current account as well as fixed deposit. Although the number of banking services is many, they all operate on one simple mechanism that is interest based. The entire activities is to advance loan to qualified customers to satisfy their financial needs whether to purchase a house, car or import goods and the likes. The bankers are credit analyst experts and their task is simply to ascertain the financial ability of the customers to repay the principal plus the stipulated interest. The documentation drafted by the banks is then tailored made to suit the loan advancement and perhaps the security as collateral. 43 Therefore conventional banking system in Nigeria is overtly based on riba although several attempts to institutionalize Islamic banking have been made which has proved abortive. 44 END NOTE 1. Oral interview with Mallam Yahayya Wurno, deputy market manager, Sokoto central market, aged 56 years. 2. Oral interview with Alhaji Hamza Dukamje, revenue collector, Sokoto central market, aged 68 years. 3. Muhammed Hassan Maiyam, the history of Sokoto central market from its inception to present day, C.O.E, Sokoto, 1983, pp. 24-38. 4. Alanamu A.S, islamic banking: benefits, problems, and prospects in Nigeria, alore, ilorin, 2007, pp.107-121. 5. Mallam Aliyu Yaro, trader, Sokoto central market, aged 56 years. 6. Alhaji Sani Mai’yadi, trader, Sokoto central market, aged 48 years. 7. Mallam Ibrahim, tailor, Sokoto central market, aged 62 years. 8. The respondent I have interviewed asked me to quote him not (name withheld). 45 CHAPTER FOUR 4.1 VALUES INHERENT IN ISLAMIC ECONOMICS According to Islam, there are five basic values of humanity, which are supposed to be protected every time. Depending on circumstances to build up harmony and universal peace, these basic values must be preserved at the lowest level or the barest minimum for an acceptable level of living these basic values includes the ability to perform moral responsibilities, protection of live, securing food and shelter, education, the right to earn a living etc. In other to achieve the optimally, Islam sets forth some indispensable norms or means for its followers to use as fundamental guides. As the ‘ad-deen’ or way of life, Islam offers mankind a law applicable for all times, provided these elementary principles are internalized in our daily dealings with others, be it personal or official reasons. i. JUSTICE:- No society can survive for long if this basic precondition is not met, without justice there would be 46 no security, impartiality and fairness in our dealings help us remain focused towards our objectives without getting deeply caught with petty squabbles. The biggest benefit of justice is that it not just provides security to individuals but businesses as will and reflects in all facets of our social dealings. ii. EQUALITY:- It may be considered a subject of justice and it refers to eliminating all social prejudices in other to promote complete fairness and regard everyone with mutual respect and given them an equal opportunity. iii. BROTHERHOOD:- Peaceful coexistence and tolerance towards others regardless of belief and ideologies. iv. BENEVOLENCE AND EMPHATHY:- We know that selfishness and greed can be detrimental to a community’s social order. For a fair and sustainable economic system, it is essential that we contribute equally to the society. The modern economic models are suggestive of that too that wealth concentrated in one hand leads to negative results and inflation within an economy.1 47 The economic system prescribed in Islam is unique since it differs fundamentally from man made laws and systems in defining economic problems. In general an economic system is referred to the structure of production, allocation of economic inputs, distribution of economic outputs and consumption of goods and services in an economy. It is a set of institutions and their social relations. Alternatively, it is a set of principles by which problems of economics are addressed.2 The Islamic economics system aims to achieve five objectives in general; a) Provisions of basic needs: the state is entrusted to guarantee a smooth supply of all basic necessities of life all the citizens via regulation or enforcement. b) Fairness and equitable distribution: Islam discourages concentration of wealth in few hands and ensures it circulation among all sections of the society. Allah says “That which Allah giveth as spoil unto his messenger from the people of the township, it is for Allah and his messenger and for the near of kin and the orphans, needy and the wayfarer, that it 48 becomes not a commodity between the rich among you” (Q 59: 7). c) Promotion of brotherhood and unity: in a truly Islamic society, there exist an antagonist classes of have and have not’s which are set against each other. Despite the existence of inequalities of wealth, the Islamic society is not divided into conflicting classes due to differences in social ranks. “it is not righteous that ye turn your faces away to the east and west, but righteous is he who believe in Allah and the last day and the Angels and the scriptures and the prophets; and gives his wealth for the love of Him, to kin-folk, orphans, needy, wayfarer and those who ask and to set slaves free and to observe proper worship and payment of Zakat” (Q2: 177). d) The achievement of moral and material development views growth and development as two sides of a coin and considers the needs of tangible and intangible resources as equally important. The socio-economic progress of a person is usually in aspects of life and has spillover effects. Good conducts are believed to be contagious and in totality. e) Elimination of exploitation: any form of activity meant to take advantages of another either physically or mentally some 49 effective measures adopted by Islam are the prohibition of riba based lending. 4.2 SOCIO-ECONOMIC EVILS INHERENT IN RIBA From a legal perspective of Islamic commercial law, riba is deemed as wrongful appropriation of others property. The basis of this ruling is taken from the theory of transfer of property in Islamic commercial law. It has been observed that a property be it cash or capital, tangible asset, services and the like that belong to one party cannot be transferred to another except following one of the contracts below: i. Property earned by one party as a result of the combination of one’s individual creative labour and entrepreneurship or natural resources or capital as the case may be. This could be partly seen in various forms of partnership in Islamic law. ii. Property whose title has been transferred by its owner as a result of bilateral exchange such as in contracts exchange e.g. sale, debt settlement by contra transaction (Muqasah) etc. iii. Property whose title has been transferred by its owner by virtue of remittance of rights of others in the owner’s property 50 such as in the case of rebate granted for early settlement of any financial obligation (Ibra) etc. iv. Property whose title has been transferred by virtue of donation and grants by the owner or donor such as in the contract of gratuity e.g. gift (hibah), endowment (wakaf), will (wasiyyat) etc. v. Property transferred from one hand to another following the law of inheritance. This theory of transfer of property in Islamic law provides no room for lending activities based on interest because interest is an income claimed outside the legitimate framework of the Islamic theory of transfer of property from one hand to another. Therefore income yield or earned from riba activities is non-halal because Islamic law does not approve the mechanism of earning this income.3 Generally riba is forbidden because of the harmful effects that result from it as follow: 51 ECONOMIC EFFECTS/IMPACT OF RIBA 1. Keeping money idle and unproductive and swelling the ranks of the poor and hinders the flow economic saving and formation of capital. 2. Discourages the amount of investment. 3. Riba creates deficit of capital. 4. Diverts investments in speculative sectors. 5. Riba is against the efficient distribution of capital. 6. It causes inflation. 7. Induces destruction of wealth. 8. Constitute a major factor of unemployment.4 SOCIAL EFFECTS 1. Among these are cutting ties, creating hostility between the rich and the poor, spreading corruption, moral decay and promiscuity caused by need. 2. Increment in the exploitation of labor. 3. Creates monopolistic opportunity for the capitalist. 4. Imposes unnecessary burdens at organizational levels. 52 5. Concentrates wealth I the hands of few and reduce number of entrepreneurs. On the state level, countries are weakened, their resources fall under the control of others, they end up following the desires of their enemy and they are robbed of their natural wealth which compounds their problems the more.5 4.3 IMPACT OF INTEREST ON SOKOTO STATE POPULACE Having examined the socio-economic effects of riba, it is to note that these has undoubtedly contributed in no small measure to the underdevelopment of the state as it contributed to the plague of poverty in the state. For those who have entertained the act of usurious transactions, it has left them in hardship and to an extent has caused loss of live and properties as well. Some debtors in the area have encountered losses and were unable to repay even the principal, let alone the interest. The gross misconduct of this practice has generally led to the exploitation of the poor and destitute and also results in moral decay among the youths and 53 promiscuity among the females caused by certain needs. Generally it has concentrated wealth in the hand of few whose sole aim is the expansion of wealth at the expense of the poor thereby creating a wide gap between the rich and the poor from which hostility arises. 54 END NOTE 1. Dr. Muhammed Daud Bakar, riba and Islamic banking and finance, international Islamic university, Malaysia. 2. www.scribd.com/islamic commerce/values/effects. 3. Ibid, p. 79. 4. Ibid, pp. 82-91. 5. Ibid, p. 128. 55 CHAPTER FIVE 5.1 SUMMARY The concept of riba which refers to all forms of usurious transaction, that is transaction that require interest on differed payment and the likes, have been utterly prohibited in the glorious Qur’an and those who engage in it are said to be inviting the wrath of Allah (SWT). Islam is more than just a religion of ritual, which permeates all affairs of its adherents. Many verses of the Qur’an as well as the sayings of the prophet Muhammad (S.A.W) contain injunctions on commercial and economic activities the result being why exchange service becomes imperative for Allah has permitted trade and forbidden riba. Sokoto central market serves as the nerve centre of goods exchange and trade services, therefore it is undoubtedly true that riba has taken form or is existence in the their activities which has brought losses and hostility between traders at the market place and have induced the exploitation of the end consumers. 56 5.2 CONCLUSION The reason why Islam prohibits all forms of riba from all forms of transaction is Islam whishes to establish an economic system where all forms of exploitation and injustice are eliminated. Islam wishes to establish justice between the financier and the entrepreneur. It has been mentioned that prohibition of interest in an economy and replacing it with profit-sharing system will increase the level of savings and investment able to combat unemployment and inflation simultaneously since interest rate will no more enter into the profit calculation in the investment. The Islamic economic system is profitable and productive than the conventional one were wealth is concentrated in the hand of few. The consequences of the prohibition of interest are, among others, to promote the distributive justice, economic growth and stability, encourage innovation and profitability and allocation of resources efficiently. 5.3 RECOMMENDATION At this stage it is relevant to note that every system is influenced by its own worldview which in turn is based on a set 57 of implicit and explicit assumptions about topical issues as the case of riba and the nature and purpose of life. However Islam which has been perfected by Allah (SWT) have prohibited riba, thus it is the general duty of Muslims to conduct their day to day activities, transactions in accordance to the dictates of the glorious Qur’an and on state levels, there should be institutions guiding aspects of trade and banking activities such as interest or price regulatory committee and a stiff penalty be awarded to any defaulter thereafter in conformity with the dictates of the Shariah. 58 LIST OF ORAL INFORMANTS 1. Mallam Yahayya Wurno, (56years), Deputy Market manager, Sokoto central market, 5th of October 2012. 2. Alhaji Hamza Dukamaje, (68years), Revenue collector, Sokoto central market, 5th of October, 2012. 59 BIBLIOGRAPHY Orisankoko A.S (2009), “An Appraisal of Unethical practices in the Contemporary Nigeria banks system vis-à-vis recourse to Islamic panacea”. A conference paper presented at the 1st international conference on Islamic banking and economics reform, jointly organized by the department of Islamic law, university of Ilorin, Nigeria, and IRTI of the international development bank Jeddah, October 6th -8th 2009. Manzoor Ali (1992), ‘Islamic Banking and Finance in Theory and Practice’, in centers of Islamic economics; Jeddah, IDB, Islamic research and training institute. Paramole K.O (1999), ‘Mudarabah: A lawful business transaction in Islam’ in the Muslim world league journal, Saudi Arabia, vol.24, no.4. Paramole K.O (2000), ‘Riba (usury): An unlawful means of wealth Acquisition and distribution in Islam’, in Al-Hadaarah, LASU, vol.5, no.3. 60 R.I. Adebayo (2010), ‘The motivating Factor for the Viability of Islamic Banking in Nigeria’, being a paper presented at the international conference on Islamic banking and finance, held at crescent university, Abeokuta, between 19th and 22nd march 2010. Bello A.S (2009), ‘Devine Banking in Nigeria’ The Qur’an and Biblical injunction, an overview and regulatory framework in Islamic banking and finance; in S. Sulayman and B.S Galadanci (eds), IIIT publication, Nigeria office Kano. Afzal-ur-Rahman (1976), ‘Economic Doctrines of Islam’, vol.3, Lahore, Islamic publication limited. Usman A. (2004), ‘B.A Project: Hoarding and Inflation in Islam’, Sokoto, department of Islamic studies, UDU. Sokoto. irfan Ulhaq (2010), ‘Economic Doctrines of Islam’, Herndon international institute of Islamic thought. Muhammad A.M (1989), ‘Islamic Economics: Theory and Practice, London, Cambridge the islamic academy. 61 INTERNET Biblehistory.com, international standard bible encyclopedia www.bible-history.com. Accesed on the 2nd, October, 2012. SCRIPTURES The Noble Qur’an, (translated by) Al-Hilali M.T, Dar-us-Salam publications, Riyadh Saudi Arabia. Bible, King James Version. 62