As per Dr. Zaki Ejaz latest research on Islamic Banking, Pakistan's most of the Islamic Banks are not following the true sharia principles, there is a gap between theory and practice, therefore, Un-Islamic. As per the sharia law no interest or mark up in any shape or design can be charged on an Islamic Loan (see Quran and Hadiths) references below), therefore, legally the Islamic Banks cannot recover any money charged over the Islamic Loan even through the court. We can always get a order for you from the Federal Shariat Court on this behalf.

 

 

Sharia Based Riba/Interest Meaning/Definition (Research Copy Rights ;  Dr. Zaki Ejaz, although definition can be quoted by reference) ;

 

 

‘’Riba is an excess[1] on loans[2] in any shape or design[3] in consideration of time gained[4]’’

 

 

 

References ;

 

 

 

[1] The Prophet Muhammad (PBUH) said: "When one of you grants a loan and the borrower offers him a dish, he should not accept it; and if the borrower offers him a ride on an animal, he should not ride, unless the two of them  have been previously accustomed to exchanging such favors mutually." (Ibne Majah 2423), And The Prophet said: "If one of you extends loan to another fellow, the former should not accept any gift from the latter." (Mishkat on the authority of Bukhari's Tarikh and Ibn Taymiyyah's al-Muntaqa), The Prophet Muhammad (PBUH) said: "A loan from which some benefits accrue to the creditor is one of the many different forms of riba." (al-Bayhaqi), see Iqbal M.M, A Broader Definition of Riba, available at   www.pide.org.pk  as of 11:52 on 17/11/2010, From Abu Sa'id al-khudri : The Prophet Muhammad (PBUH) said: "Gold for gold, silver for silver, wheat for wheat, barley for barley, dates for dates, and salt for salt - like for like, and hand-to-hand. Whoever pays more or takes more has indulged in riba. The taker and the giver are alike [in guilt]" (Sahih Muslim, 3854). The Prophet Muhammad (PBUH) said: “If anyone intercedes for his brother and he presents a gift to him for it and he accepts it, he approaches a great door of the doors of riba.” (Sunan Abu Dawood, Book 23, # 3534).

 

[2] The Prophet said: "Verily riba is in loaning" (Muslim 2991).

 

[3] The Prophet said: "A loan from which some benefits accrue to the creditor is one of the many different forms of riba." (al-Bayhaqi), see Iqbal M.M, A Broader Definition of Riba, available at   www.pide.org.pk  as of 11:52 on 17/11/2010.

 

[4] Usamah ibn Zayd quoted, The Prophet, peace be on him, said: "There is no riba except in nasi'ah [waiting]." (Bukhari, Kitab al-Buyu, Bab Bay al-dinari bi al-dinar nasa'an, #386; also Muslim and Musnad Ahmad), Ubida b. al-Simit (Allah be pleased with him) reported Allah's  Messenger as saying: Gold is to be paid for by gold, silver by silver, wheat by wheat, barley by barley, dates by dates, and salt by salt, like for like and equal for equal, payment being made hand to hand. If these classes differ, then sell as you wish if payment is made hand to hand. (Sahih Muslim, Book 10, Number 3853).

 

 

 

 

Some Insight on Riba ;

 

 

 

The interpertaion of word riba is described in Quran[1] and Hadiths[2] in clear words. In Quran God prohibited riba in very strict words[3]. God declared war against the person who deals in riba[4]. This reflects that ; the principles of riba is inviolate-able in any circumstances, as God in Quran prescribed the most stricter punishment[5]. The explanation and interpretation of riba can be found in hadiths[6] (the sayings of Prophet Muhammad PBUH) in elaborative and explanatory manner. Whereas in Quran the meaning of riba is not explained in clear words but its boundaries are mentioned[7].

 

 

 

Explanation of riba as detailed and explained in hadiths[8] is the most important foundation in forming a sharia Compliant loan product, as the full observance of principles of Quran[9] and hadiths[10] are required in this most delicate area. The great assurance is needed to certificate a Banking Product as Islamic where the financing and loaning is offered to public in the understanding/offer of riba free. As the customers are acquiring the financial services in pursuance of their belief, and violations attract the legal applications in contract[11], criminal law[12] and as well such practice is prohibited by God[13].

 

 

 

 

 

Refrences ;

 

[1]  Quran, 2 : 276 [Al-Baqarah] ‘’Allah does not bless usury, and He causes charitable deeds to prosper, and Allah does not love any ungrateful sinner’’, And Quran, 2 : 278 [Al-Baqarah] O you who believe! Be careful of (your duty to) Allah and relinquish what remains (due) from usury, if you are believers’’, And Quran, 3 : 39 [Ar-Rom].

 

[2] The Prophet Muhammad (PBUH) said: "When one of you grants a loan and the borrower offers him a dish, he should not accept it; and if the borrower offers him a ride on an animal, he should not ride, unless the two of them  have been previously accustomed to exchanging such favors mutually." (Ibne Majah 2423), And The Prophet said: "If one of you extends loan to another fellow, the former should not accept any gift from the latter." (Mishkat on the authority of Bukhari's Tarikh and Ibn Taymiyyah's al-Muntaqa), The Prophet Muhammad (PBUH) said: "A loan from which some benefits accrue to the creditor is one of the many different forms of riba." (al-Bayhaqi), see Iqbal M.M, A Broader Definition of Riba, available at   www.pide.org.pk  as of 11:52 on 17/11/2010, From Abu Sa'id al-khudri : The Prophet Muhammad (PBUH) said: "Gold for gold, silver for silver, wheat for wheat, barley for barley, dates for dates, and salt for salt - like for like, and hand-to-hand. Whoever pays more or takes more has indulged in riba. The taker and the giver are alike [in guilt]" (Sahih Muslim, 3854). The Prophet Muhammad (PBUH) said: “If anyone intercedes for his brother and he presents a gift to him for it and he accepts it, he approaches a great door of the doors of riba.” (Sunan Abu Dawood, Book 23, # 3534). The Prophet said: "Verily riba is in loaning" (Muslim 2991). The Prophet said: "A loan from which some benefits accrue to the creditor is one of the many different forms of riba." (al-Bayhaqi), see Iqbal M.M, A Broader Definition of Riba, available at   www.pide.org.pk  as of 11:52 on 17/11/2010. Usamah ibn Zayd quoted, The Prophet, peace be on him, said: "There is no riba except in nasi'ah [waiting]." (Bukhari, Kitab al-Buyu, Bab Bay al-dinari bi al-dinar nasa'an, #386; also Muslim and Musnad Ahmad), Ubida b. al-Simit (Allah be pleased with him) reported Allah's  Messenger as saying: Gold is to be paid for by gold, silver by silver, wheat by wheat, barley by barley, dates by dates, and salt by salt, like for like and equal for equal, payment being made hand to hand. If these classes differ, then sell as you wish if payment is made hand to hand. (Sahih Muslim, Book 10, Number 3853).

 

[3]Quran 3:130 [Ale-Imran], 4:161 [An-Nisa], 2:278 [Al-Baqarah], and Siddiqi, M N, Riba, Bank Interest  and the Rationale of its Prohibition, Islamic Development Bank Islamic Research and Training Institute, Jeddah, Saudi Arabia, p. 35.

 

[4] Quran 2:278 and 2 :279 [al-Baqarah].

 

[5] Ibid.

 

[6] Supra 2

 

[7] Quran, 2 : 276 [Al-Baqarah] ‘’Allah does not bless usury, and He causes charitable deeds to prosper, and Allah does not love any ungrateful sinner’’, And Quran, 2 : 278 [Al-Baqarah] O you who believe! Be careful of (your duty to) Allah and relinquish what remains (due) from usury, if you are believers’’, And Quran, 3 : 39 [Ar-Rom].

 

[8] Supra 2.

 

[9] Supra 4

 

[10] Supra 2.

 

[11] See section 2(1) Misrepresentation Act, 1967, And Unfair Contract Terms Act, 1977 (UCTA), And Unfair Terms in Consumer Contracts Regulation 1999 (UTCCR), And Derry v Peek (1889) 5 T.L.R. 625.

 

[12] See section 2, 3 and 4 of The Fraud Act, 2006.           

 

[13] Supra 5.

 

 

 

 

Primary Sources ;

 

Quaran-Al-Kareem

 

Authentic Hadiths of the Greatest Prophet of All times, Prophet Muhammad (SAWS),