Islamic Perspectives

Riba: From words to deeds

Dr. Phiroz A. Poonawalla

“Debt is the slavery of the free” said a philosopher a century before Christ. And also: “Debt is an inexhaustible fountain of dishonesty”. It has been observed that once a borrower always a borrower as if it is free money.

Let me share experience of Hadapsar industrial estate, Pune. Years back, when the industrial estate was established to promote small and medium-scale enterprises, lots of small and medium units came up. This was promoted by Pune municipal corporation in order to encourage entrepreneurship, create employment and make Pune a manufacturing hub. Later on, similar industrial estates came up in different parts of the city where large industries were established and Pune became an automobile manufacturing hub. Over the years, in our Hadapsar industrial estate, we noticed that some of the units became sick, went into liquidation, many of them sold their units, some of them had labour problems and resorted to non-cooperation to give the productivity, that was also on account of non-payment of timely salaries. Banks took over some of the units because of non payment of quarterly loan installments and interest on money borrowed by these units. To add to these problems, there used to be power cuts, recession and other environmental problems that led to slow down in manufacturing activities.

Ours was also the same case, in Union Steel Industries, situated at Pune, where we initially started with six people and we realised and found that we were financially streamlined to meet the payment of wages, salaries as well as obtaining of right quality raw materials. It was realised that in all circumstances our bank interest ran 24x7, round-the-clock, without any break. Soon servicing of debts passed shivers down our spine all the time and we were worried as to what would be our fate if borrowings and servicing of it surpassed our assets. We had manipulated often and had given wrong information to borrow money from nationalised banks. Not only that, we also borrowed money on interest from individuals to meet our requirements. The overall effect was that we were always under minor depression. After a few months it led to deep depression, lost sleep and loss of confidence. We did realise that the element of interest would create a havoc in our life. However, our problem was of meeting payment of salary, finding more work and obtain parts and components to keep the show going.

It was during this period we decided that whether the Qur’anic message of “showing us the straight path” and solution would work. This was the only ayat we knew and understood. Frankly speaking, we did not know how to go about. Everybody was of the opinion that it was not a practical proposition to do away with bank borrowings. We were searching for examples and found none. No advice or consultancy was available to solve our problems. Finally, we built up the courage to write and ask our bankers, Central Bank of India, to freeze all our financial limits. Our company was operating accounts under different heads such as open-loan, key-loan, development fund, against export orders, for defence prototype etc. which, in fact, we had manipulated to obtain more and more money from Central Bank of India.

 Our company resorted to all kinds of dishonest practices to obtain more and more financial assistance from the bank. We were behaving as if whatever we have borrowed was a grant and we had not bothered about the cost of capital. We were swindling our future until one day there was an awakening. We became more and more realistic as to how long this would continue and were getting into a debt trap. Revealed messages of the Prophets, sages and philosophers came to our rescue. No doubt, the Qur’an has said “Allah has permitted trade and has forbidden interest”. Our final decision was to eliminate the element of interest from our manufacturing activities. A three year plan was drawn to do away with the entire bank liability. All the extra material on the floor was disposed of. Just in time policy was adopted to buy and keep minimum required material which too was bought in cash in order to get price advantage. Did away with less paying parts and components. In fact we did away with some of the components to save on wages, cost of inputs and above all requirement of working capital. We sold off cars and used public transport. Decided not to undertake any new product development from our pocket. Requested for advance from our buyers where ever possible, resorted to bill discounting and brought down rejection completely. Since then, for more than two decades, our company has divorced bank for any kind of bank borrowings. There is financial growth, efficiency, productivity of money and above all profitability and prosperity. The fact that saving on interest and taking cost reduction measure brought about a complete turnaround. No doubt, we agree to people who say that the Qur’an is a book of guidance and a miracle. We can vouch that it was true in our case.

Let us end up with the letter from the Poona City branch manager of the Central Bank of India: “We hereby certify that total outstanding debit balance of Rs,10,47,035 as on 1.4.81 of all the accounts of M/s Union Steel Industries stand fully paid while there is a credit balance of Rs.1434 as on 11.11.83.

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