Aisha's Interest-ing Discovery of Riba

From classroom to boardroom: How one girl's project on Islamic finance is changing minds and opening doors.

Aisha's Interest-ing Discovery of Riba
Photo by Ali Arif Soydaş / Unsplash

Aisha Zahra stared at the flyer in her hands, her brow furrowed in concentration. The colourful paper advertised a new youth savings account at the local bank, promising a "high interest rate" for teenagers. As she walked home from school through the bustling streets, the words on the flyer seemed to dance before her eyes.

"5% interest... guaranteed returns... watch your money grow!" The offers sounded tempting, but something nagged at the back of Aisha's mind. She remembered her grandfather's teachings about Islamic finance, but the details were fuzzy.

As she pushed open the door to her family's modest apartment, the aroma of her mother's cooking filled the air. "Assalamu alaikum, Mama!" Aisha called out, dropping her backpack by the door.

Her mother, peeked out from the kitchen, a warm smile on her face. "Wa alaikum assalam, my love. How was school?"

Aisha held up the flyer. "It was good, but I have a question. The bank is offering this new savings account for teenagers. It sounds great, but... isn't there something in Islam about interest?"

Her mother's expression turned thoughtful as she wiped her hands on her apron. "Ah, you're asking about interest also known as riba. Why don't you talk to your father about this when he gets home? He will be very excited to discuss with you about it."

Later that evening, as the family sat around the dinner table, Aisha brought the subject again. "Baba, what exactly is interest or riba? And why is it forbidden in Islam?"

Her father set down his fork. "That's an excellent question, Aisha. Riba is often translated as usury or interest. It's any predetermined, guaranteed increase on a loan or investment."

Aisha frowned. "But isn't that how banks work? How should anyone save money or start a business without loans?"

Her father nodded, understanding her confusion. "It's a complex issue, my dear. Allah and His Messenger, peace be upon him, have forbidden riba in the strongest terms. The Quran warns that those who practice usury are at war with Allah and His Prophet."

Seeing Aisha's wide-eyed expression, her father continued, "Let me explain why it's considered unjust. Imagine you lend your friend Fatima 100 dollars, but you tell her she has to pay you back 110 dollars in a year, no matter what happens. Is that fair if Fatima uses that money to start a small business selling hijabs, but it fails due to circumstances beyond her control?"

Aisha shook her head slowly. "I guess not. She'd be in debt and worse off than before."

"Exactly," her father said. "Now, what if Fatima's business is wildly successful, and she makes 1000 dollars profit? Is it fair that you only get 10 dirhams while she keeps the rest?"

"I see," Aisha mused. "It doesn't seem fair to either person in different situations."

"That's where Islamic finance offers alternatives," Omar explained. "Instead of interest-based loans, we have profit-and-loss sharing agreements, buy and sale as well as renting. Both parties share both the risks and the rewards."

As the discussion continued, Aisha's mind whirled with new concepts. Over the next few days, she found herself paying more attention to the economic life of her community. She noticed the "interest-free" signs in some store windows and overheard discussions about "halal investments" at the mosque.

Determined to learn more, Aisha approached her Islamic Studies teacher, Ustadha Amina, after class. "I'm interested in learning more about Islamic finance," Aisha explained. "How does it work in the real world?"

Ustadha Amina smiled encouragingly. "Masha'Allah, Aisha. Your interest in this topic is commendable. Why don't you consider doing a project on it for the upcoming school fair? You could compare conventional and Islamic banking systems."

Excited by the idea, Aisha threw herself into research. She interviewed her uncle, who worked at an Islamic bank, and visited both conventional and Islamic financial institutions in her city. As she delved deeper, she began to understand the principles behind the prohibition of riba.

One afternoon, while volunteering at a local community centre, Aisha overheard a heated discussion between two young entrepreneurs, Yasin and Layla.

"I'm telling you, Layla, we need that loan to expand the business," Yasin insisted. "The interest rate isn't even that high!"

Layla shook her head firmly. "But it goes against our principles, Yasin. There has to be another way. We can't build our business on something haram."

Aisha hesitated for a moment before approaching them. "Assalamu alaikum," she said politely. "I couldn't help overhearing. Have you considered Islamic financing options?"

The pair looked at her curiously, and Aisha felt a surge of confidence. She explained what she had learned about profit-and-loss sharing agreements and how they differed from conventional loans.

"Instead of paying a fixed interest rate, you could partner with an investor who shares the risks and rewards of your business," Aisha suggested. "It's more equitable and aligns with Islamic principles."

Yasin and Layla exchanged thoughtful glances. "That's... actually a really interesting idea," Layla said slowly. "Do you know where we could learn more about this?"

Aisha's face lit up. "I'm doing a project on Islamic finance for my school fair next week. Why don't you come? I'll have information on local Islamic financial institutions and how their systems work."

As she worked on her project, Aisha's understanding deepened. She created colourful posters explaining the concepts of riba, mudarabah (profit-sharing), and musharakah (joint venture) using simple analogies and real-world examples.

The day of the school fair arrived, and Aisha stood nervously behind her booth. To her surprise, her presentation drew quite a crowd. Students, parents, and even a few local business owners listened intently as she explained the principles of Islamic finance.

"Think of it this way," Aisha said, pointing to a diagram. "In a conventional loan, the bank is like a spectator watching a football match from the sidelines. They'll get paid no matter who wins or loses. But in Islamic finance, the bank is more like a team player. They succeed when you succeed, and they share the risk if things don't go well."

She went on to explain how Islamic banks use contracts like mudarabah and musharakah to finance businesses. "In mudarabah, the bank provides the capital, and the entrepreneur provides the work. Profits are shared according to a pre-agreed ratio, but if there's a loss, the bank bears the financial loss while the entrepreneur loses their time and effort."

As the fair wound down, Aisha spotted Yasin and Layla approaching her booth, accompanied by an older man in a sharp business suit.

Assalamu alaikum, Aisha!" Layla exclaimed. "Masha'Allah, this is incredible! We wanted you to meet Mr. Abdul Rahman. He's from the Islamic Business Development Center."

Mr. Abdur Rahman said "I'm impressed by your knowledge and passion, young lady. We're always looking for fresh perspectives in our internship program. Would you be interested in learning more?"

Aisha's eyes widened in excitement. "Really? I'd love to!"

As she walked home that evening, the setting sun painting the city sky in vibrant hues, Aisha felt a sense of accomplishment and purpose. She had not only deepened her own understanding of Islamic finance but had also helped others in her community.

Her phone buzzed with a message from Yasin: "Alhamdulillah, great news! Thanks to your advice, we're meeting with an Islamic bank tomorrow to discuss a musharakah agreement for our expansion!"

Aisha smiled, realizing that her journey into the world of Islamic finance was just beginning. She had discovered that economic principles could align with ethical and religious values, creating a system that prioritized justice, shared prosperity, and spiritual well-being.

As she entered her family's apartment, her parents were waiting with proud smiles. "So, how did it go?" her father asked.

Aisha's eyes sparkled with enthusiasm. "Alhamdulillah, you won't believe it, Baba! Let me tell you all about it..."

That night, as Aisha prepared for bed, she reflected on her journey. She realized that Islamic finance was more than just avoiding interest – it was a comprehensive system that aimed to create a just and ethical economy. From profit-sharing agreements to the importance of zakat in wealth redistribution, every aspect was designed to bring people closer to Allah and to each other.

As she drifted off to sleep, Aisha felt a renewed sense of purpose. She knew that her exploration of Islamic finance was not just about personal financial decisions, but about contributing to a more equitable and compassionate society. With a smile on her face, she looked forward to the opportunities and challenges that lay ahead, confident that the principles of her faith would guide her in navigating the complex world of finance and economics.

Disclaimer: The views expressed in this blog are not necessarily those of the blog writer and his affiliations and are for informational purposes only.

If you found this blog post insightful, don’t forget to subscribe to our website for more updates. Your subscription will help us continue to bring you the latest insights. And if you think this post could benefit others, please feel free to share it. Let’s spread the knowledge together!

Islamic Commercial Law by Muhammad Yusuf Saleem

Don’t be left behind! Sign up for FinFormed and start growing!