A sheykh from Uzbekistan, living in West, has made a distinction between 'halal mortgage' and 'haram interest'. Although I am not a muslim in the formal sense but a believer, the distinction the sheykh did attracted my attention, it was worth some consideration. The outer scenario is the same in the both cases in his comparision. You buy a house (or someting else) for money you did not previously own. That money sets you in a position to move into a house - and to use it. You have to pay back the money and a little extra. In both cases you pay the same amount of money. The money that made it possible for you to move into the house. In both cases you pay the same amount as an extra. Is it important what that amount is called? We call it 'interest' when we lend money from a bank. But what we call a thing cannot be the essential. The essential has to be what a thing is.
If you voluntarily have agreed to pay a small amount as an extra, the terminology is not the important thing. The important thing is your legal position. Strong or weak? We can agree that the principle behind the islamic concept of riba is a sound one. The purpose is to support the weaker part in the transaction. A rich person or a bank is guaranteed a success by the interest you pay for the loan you use in your business activities but you take the risk and may bear the burden of a loss all by your self. But is it better if you have to involve someone else in the decisions you have to make? Is that something that makes you weaker or stronger?
The difference between 'halal mortgage' and 'haram interest' is a legal one: When you loan money to buy a house, or a car, for example, you own that thing you bought with the money. In The mortgage case you became not the owner but are buying the thing bit by bit when you are giving the buyer (the bank) of the house the money they used to buy the house and that little extra not considered as riba, because you did not own the house - or the money. The bank is the owner. Legally it is the bank that buys the house and you buy the house from the bank in several small portions. This remindes me of situation were people have exclaimed that 'It is not you that own your house, it is the bank!' This because of the fact that the bank has the right to sell your house at an executive auction if you do not pay back the loan with interest.
It seems that the two cases are very similar. If you buy a house and are not able to pay for it, you have become insolvent and have to sell what you can to solve your financial problems. If it is the mortgage case or the interest case. Practically speaking there is no difference at all. It seems as if the distinction ought to be done in another way to give us the possibility of a well functioning society without the risk of the richer and stronger misusing their strength against the weaker and poorer.
Consider a case mentioned by the famous J H L Hart: A person is drivning a car and suddenly he looses controll over the vehicle due to a swarm of bee attacking his head. He cannot see and cannot stop the car. He causes a child to die since he could not stop the car. It is not murder and it is not dangerous drivning.
If you take a loan to buy a car with the intention that your career as a taxi driver may benefit from this and you have no possibility of taking a loan without interest and a great chanse to get more passangers and money. And you are allowed to reduce your taxes with the amount you pay in interest, then this must be described as a case of 'not riba' since the lack of intention.
The banks reduce the poverty in the society. Without them there would be a far lesser amount of tax payers and each of them poorer.
