Iana Financial Revives the Tradition of the Benevolent LoanWritten by Sawitri Mardyani
It's not often that God and financial services are mentioned together in one sentence but Iana Financial's mission statement is an exception: "Towards God-centred community financial services, for the common good." Since 2009, the Edmonton, Alberta based organization has provided interest-free loans across Canada and the world to relieve people of the burden of usury and to help them pursue their goals.
Living in a society where interest-based loans are the norm, the response to Islam’s prohibition of interest is often, "What’s the alternative?" Where else can people go when they’re trying to finance post-secondary education, pay unexpected expenses or get out of a difficult situation if credit cards, lines of credit or any other interest-based loans are off-limits?
One Islamic alternative is qard hasan, or a benevolent (lit. beautiful), interest-free loan. This is what Iana Financial is putting into practice. The name, Iana, is an Arabic word meaning “help” or “assistance”.
What is qard hasan?
Qard hasan is a loan which is provided without charging any interest or any expectation of benefit to the lender. While it’s permissible for the borrower to return more than what was borrowed as a gesture of thanks (which was often the practice of the Prophet Muhammad, God's Peace and Blessings upon him), this cannot be an explicit or implicit condition of the loan. Qard hasan is a loan with no strings attached. At the end of the agreed upon loan period, the borrower is only obliged to pay back exactly what was originally borrowed.
Why give qard hasan?
Interest serves as a financial incentive for lenders to give loans. Lending out $10,000 at a 5% annual interest rate will give a return of $10,500 one year later. After two years, that $10,000 has grown to $11,025; and in five years $12,762.82. In 15 years, the lender’s interest-based investment would have more than doubled. From the opposite perspective, the borrower’s debt would have more than doubled.
Without the promise of a positive return on investment, the incentive for giving qard hasan is not economic self-interest. Instead, qard hasan is a highly encouraged form of charity. In the six occasions where the Qur'an mentions it, qard hasan is described as a loan, not to another individual, but to God Himself.
God promises multiplied rewards and forgiveness for those who give qard hasan. In Surah Baqarah, it says “Who is he that will lend to God a qard hasan so that He may multiply it for him many times? And it is God that decreases or increases (your provisions), and unto Him you shall return.” (2:245), in Surah Taghabun, “If you give God qard hasan, He will double it to your credit and He will grant you forgiveness.” (64:17). Indicating its importance, qard hasan is mentioned in Surah Al Muzammil alongside prayer and giving charity, “Establish regular prayer and give regular charity and give God qard hasan” (73:20).
A lifeline for people in need
In a hadith from the collections of Ibn Majah & Ibn Hisham, Abu Amama, God be pleased with him, said that the Prophet, God's Peace and Blessings upon him, said: "In the night of the journey (Isra and Mi’raj -- the miraculous night journey and ascension to heaven), I saw on the gate of heaven written, 'reward for sadaqah (charity) is ten times and reward for qard hasan is eighteen times'. So, I asked the angel, how is it possible? The angel replied, ‘Because a beggar who asked might have already had something but a loanee did not ask for loan unless he was in need.’"
Interest-free loans can be a lifeline for individuals who are not willing to accept charity or in need of a large amount of financial aid for a limited time. For example, a student who needs tens of thousands of dollars for tuition may be more willing to take a loan than to accept the amount as charity. At the same time, it may be easier for donors to provide a larger amount as a loan than as a donation.
Multiplied benefits of qard hasan
While an interest-free loan does not offer any financial profit to the lender, it has the potential to multiply benefits in other ways. Once a loan is returned, it can be recycled and lent out again. When $1,000 is lent to and returned by five people, it results in $5,000 worth of loans. Although the lender’s initial investment has not grown financially, the benefit gained by the community has multiplied.
In fact, it was through a recycled lending scenario that Iana Financial began. It started when a few elders in Edmonton gave a young woman an interest-free loan to help her pay off her student loan debt so she would avoid falling into paying interest. When she came to return the interest-free loan, the lenders didn’t want the money back. Instead, they wanted to re-lend it privately to help others. People who witnessed this beautiful act of kindness helped form Iana Financial to help expand this service to help many more.
In developing and carrying out its vision, systems, philosophy and educational programs, Iana works under the guidance of scholars of Islamic Sacred Sciences. With an emphasis on the Letter of Islamic law (i.e. fiqh or Islamic jurisprudence, usul or the roots of law, etc.) they strive to determine the best policies in light of classical manuals and contemporary circumstances. At the same time, they aim to maintain an equal emphasis on the Spirit of Islamic law through the works of many scholars, including Imam Al-Ghazali and others referenced in the Journal of Islamic Sciences. These works serve as reminders for Iana’s team to continuously renew their intention and focus on the core purpose of what they are doing and why.
Since its inception, Iana Financial has provided over 50 interest-free loans to-date worth over $500,000. The demand, however, is far greater. In 2018 alone, Iana has received dozens of applications worth over $1.5M. Still, loan applications continue to come in and generous supporters continue to lend Iana money or donate to Iana to try to help ever more people.
Saving people from usury and its repercussions
The benefit of providing interest-free loans goes beyond lifting financial burdens. The repercussions of having interest-based debt often spill into other aspects life. A recent survey of 800 divorced Americans with student loans revealed that one in three claim that debt and other money factors contributed to their divorce. One in eight specifically blamed student loans for their divorce.
Studies have shown that high amounts of debt are associated with higher rates of anxiety, stress and depression. Because interest-based debt grows relentlessly over time, it breeds an insidious type of worry. Time itself becomes an enemy to the borrower, as described by St. Basil almost 17 centuries ago, “Now night brings him no rest; no day is joyous; no sun is bright; he is weary of his life; he hates the days that are hurrying on to the appointed period; he is afraid of the months, for they are parents of interest. Even if he sleeps, he sees the lender in his slumbers—a bad dream—standing by his pillow. If he wakes up, there is the anxiety and dread of the interest.”
Run by volunteers, funded by donations and loans
Completely run by volunteers donating their time, Iana Financial is supported by donations and loans. To provide a loan, lenders contact Iana and specify a loan amount and duration, based on which Iana creates and signs a loan agreement. Lenders send the amount to Iana and at the end of the agreed upon duration, the specified amount is returned. In this way, instead of keeping savings in the bank, which the bank uses to give interest-based loans, the lender and the community can now reap the rewards of qard hasan.
Against interest-based transactions — even donations
In facilitating interest-free loans, Iana also stands against interest-based transactions. As a result they don’t accept donations via credit cards. They say on their website:
“If we are serious about grassroots economic reform to get us out of this modern financial catastrophe, we need to take the inconvenient steps that such a principled approach demands. Each year the Muslim community, and the broader community, of North America literally throw away millions of dollars to credit card companies and banks rather than to the good causes they intend to help simply for the convenience of paying by credit. Our entire society suffers as a result. Let us take the extra effort and discipline to save our money and pay by cash or check or debit or direct deposit – not only is this the better thing to do financially, more importantly, God will appreciate our efforts to avoid supporting a corrupt system that impoverishes countless people around the world. The blessings of such actions will more than compensate for the inconvenience.”
Funding students, the disadvantaged and visionaries
While working towards grassroots economic reform, Iana Financial has a broader vision of economics intertwined with community. This is apparent in their criteria for selecting loan recipients. Aside from students and those in difficult financial circumstances, Iana also prioritizes "visionaries who see the pitfalls in our times and are helping us redefine the way we look at the world to develop more meaningful, purposeful, and harmonious lives and communities."
This includes individuals working in the areas of community, education, agriculture and food, environment, economics and other areas such as law, human rights, animal rights, politics, pro-peace / anti-war. Their website is filled with links to resources about current alternative solutions to current problems.
According to Sharafe Elladen, Iana’s Founding Director, Iana's work is part of a communal obligation with significant worldly and spiritual consequences. "Anyone who objectively studies the modern economic system will quickly see that, from an ethical perspective, it is a colossal failure," he says, "Iana hopes to help right the wrongs of the current system and develop pure and simple solutions that are ethical - true to the letter and the spirit of Islamic Law and its aims - a return of Sacred Economics, where money is something that is carefully and meaningfully earned and spent in preparation for the Day when we will be asked about how it was earned and where it was spent.”
Iana also kindly requests your prayers for continued guidance, help and success from God.
For more information about Iana Financial, including how to contribute or apply for a loan, go to http://ianafinancial.org/.
This is Part 4 in a series on Riba in Islam. Here are Part 1 - What's Wrong With Interest?, Part 2 - Beneficent: Empowerment Through Interest-Free Debt Relief, Part 3 - Ijara CDC's Halal Mortgage - How Does it Work?
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