Report & Proposal
arising out of
The First World
Conference on Riba
1st & 2nd November, 2010, Kuala Lumpur
& Sofyan S. Harahap
The Conference had a confluence
of forces resulting in a new situation with massive potential.
Forces Present in the Conference
Firstly, the Malaysian political
party UMNO was not only substantially present but was asking
for new policy that addresses the real economy and is capable
of replacing a corrupted and failing åfree market¯ finance capitalism.
Moreover, the new policy must be distinctively Islamic and
serve the Malaysian nation while, at the same time, being universal.
It should also be capable of addressing poverty and rich-poor
division and, in particular, be genuinely free from riba/interest.
Secondly, financial resources
are available if efforts are directed at removing poverty and
forwarding religious education while other resources allow for
more overtly political research, policy and action. In these respects,
the Kuala Lumpur Council for Monetary
Justice has already been established with adequate resources for the immediate
future. Crucially, care has been taken to ensure that the
Institute is free from institutional ådrag¯ and is capable of
acting quickly and effectively. Moreover, the words åMonetary
Justice¯ are indicative of the desire to find policy of universal
appeal and capability for solving the world¯s problems.
Thirdly, the Conference was remarkable
for the way in which, through submitted papers, presentation speeches
and informal conversation, academics and others (whose past positions
have been clearly set out) are now focusing on the urgent need
for new political, financial and economic policy. In practical
terms, that means they are seeing the best aspects of the
work of others and are patently co-operating with each other (when,
previously, that had not always been the case).
Fourthly, the Conference had a
sense of urgency reflecting not only the needs of UMNO and associated
parties but also an awareness that if, major new thinking is not
quickly established and spread, the global economy could be in
a state of disorder, even collapse. In the event of
disorder or collapse, political possibilities include fascism
and widespread war would be possible, even likely. Perhaps
above all, new political, economic and financial thinking could
still come to nought if major environmental problems are not specifically,
and practically, addressed.
Fifthly, speakers, formally and
informally, indicated a strong sense of hurt that Western media
and politicians often label all Muslims as åal qaeda¯ or återrorist¯.
Moreover, the question did arise as to whether the USA has, in practice, declared war
on Islam. War or not, the feeling is that Islam is
certainly being belittled and it is time that Islam reveals its
huge potential for giving a political, economic and moral lead
to a world sorely in need of such a lead.
The Mahathir Speech
An important development took
place a week or so before the Conference. Ex-Prime Minister
Mahathir made a speech and then essentially repeated it in his
Conference Keynote Speech. While recognising that gold had
a role, even an expanding one, in trade settlements between nations,
he pointed out that gold as a national commodity currency
was not practical when a tiny, easily lost, sliver of gold would
buy a burger. Furthermore, he indicated that a modern
economy needed a substantial money supply if it is to develop
properly, and that the use of gold certainly did not mean that,
in some magic way, riba had been abolished.
To which can be added, of course,
that all responsible people wish to avoid inflation. However,
a narrow supply of commodty money would, in practice,
mean that the rich remain rich and increase their wealth while
there would be an increased necessity for zakah (which
is only a palliative rather than a structured solution to poverty).
Ex-Prime Minister Mahathir then
recommended a gold-backed money supply and stated what is dear
to the hearts of all Conference members ¡ that the real economy
should be addressed ¡ and that participation and co-operation
in the real economy should be encouraged.
However, all Conference members
also recognised that respect for Islamic tradition is essential
and, as in Malaysia, there is no objection to people using
gold coinage for purchases (should the seller be willing) and,
in any case, there is no reason why ordinary people should not
be able to put their savings into something which, certainly at
the moment, is not losing value.
The Conference therefore welcomed
the activities of those who promote gold barter and savings.
Further Implications of the Mahathir
The Conference furthermore realized
that the Mahathir speech had implications going far beyond the
Firstly, once a complete commodity
money supply is rejected, then some form of created ¯fiat¯ money
supply is inevitable.
Whereon, secondly, the key questions
include, amongst others:-
creates that money supply?
free markets forwarded?
private property forwarded and spread?
the development and spreading of the real economy forwarded?
effort being made to make producers ansd consumers the same people
(as is required by true market theory)?
Thirdly, the present fractional
reserve banking system endlessly creates money out of nothing,
adds compound riba/interest (in addition to a necessary
administration cost), and does NOT put the money towards the development
and spreading of the real economy.
Indeed, so ingrained is the practice
of creating money and adding interest that it becomes necessary
to restrict the banks to lending their own money and, with permission,
that of depositors (the restriction being done by a gradual rise
to 100% banking reserves). It should also be noted that
Islamic Banking, whether it realises it or not, is part of the
fractional reserve banking system which endlessly creates money
out of nothing
The national money supply would
then arise easily and naturally from the national bank which would
issue it interest-free although the actual administration would
be done by the commercial banks and Islamic Banks which would
make a genuine administration charge but NOT be allowed to add
. All the time, of
course, the interest-free money supply would be directed at the
development and spreading of the real economy. This is because
an interest-free loan is a huge advantage to borrowers so that,
if existing owners of capital were to have interest-free loans,
rich-poor divisions would be quickly accentuated and that is politcally,
morally and economically unacceptable. The use of an interest-free loan
supply therefore requires that, if justice is to be furthered
and rich-poor division not accentuated, the loans must be used
to spread productive capacity throughout the population so that
the justice creates the efficiency and the efficiency creates
the justice. This is the great underlying principle
of the new economics and more detail on the principles and mechanisms
for spreading can be found at www.binaryeconomics.net and within binary textbooks.
As is usual, a proper business
plan would be required and collateral be made available ¡ exactly
as at present, but with one addional requirment, namely, that
the lending should be seen in some way to forward the development,
AND the spreading, to all people in society, of the real economy
The loan money would be repaid
to the commercial bank as it is repaid today, but without interest
with the bank then repaying the national bank which would cancel
the money. Thus, with the money cancelled, the physical
productive (and associated consuming) capacity would be left behind
in existence whilst the money which created it would have disappeared.
The result is a counter-inflation (which is not
Please note that, since no compounding
riba/interest is involved, borrowers are not losing a substantial
part of their consuming capacity; debt does not need to be endlessly
increased (as happens today); the poor are not being expropriated;
and, for the first time in human history, not only efficiency
but social and economic justice are being forwarded at the same
Policy for the Here and Now
The above matters constitute the
basis for a major economic, even political, programme but the
creation of such a thing takes time to achieve. The conference
therefore considered what could be done in the immediate present
and discovered that :-
State banks (åstate¯ as in the state of Perak or Kansas, USA)
are practical, indeed, there is one remarkable example in North
Whereas most of the USA States are bankrupt or in considerable
difficulty as a result of excessive debt, North Dakota has a solid
financial account and low unemployment -- all of which appears
to be the result of having a State bank. As Ellen Brown
is successfully pointing out, the State bank is really a normal
commercial bank but one with the State as its shareholder. It
can therefore give interest-free loans and does, for example,
for start-up farmers who have land as collateral. If interest
is charged, it goes to the State so that it can lower taxes.
b. Complementary currencies.
Around three thousand complementary currencies exist in the
world. They are local and allow people to exchange a good
or service for another without the use of conventional money.
Obviously, when a conventional economy collapses,
complementary currencies can be vital in reviving the local economy
and enabling people, particularly poor people, to survive.
c. Debt relief
Debt relief is highly desirable but it is probably not wise
to ask for what cannot be achieved. Western bankers are
unlikely to heed a call to give relief and have only done so to
date when the relief is such as to allow a debtor to be able to
continue to pay. In other words, the purpose of the relief
is not the cancellation of debt but rather the aiding of the ability
of the debtor to keep paying (probably for ever).
Necessity for Agreement
It is pointless having conferences
in which there is no clear main theme, greatly disparate views
and no general agreement. Such conferences are mere talking
shops of no practical import.
Agreement on the main principles
of policy is essential if fast progress is to be made but the
agreement can be broad ¡ as it has to be in any movement or cause.
Thus, whilst gold-backed currency can be promoted because
it controls inflation and forces more responsible lending, the
same result (no inflation and responsible lending) can also be
achieved if all of the new money supply is directed at the development
and spreading of the real economy with the interest-free loans
being repaid to the national bank and cancelled. In such
circumstances there is also a counter-inflation and thus gold
backing for the currency is not necessary.
In order to get agreement, groups
and mvoements etc mus be canvassed to see whether they are able
to give support in principle.
It would also be wise not to declare
war unnecessarily on existing banking including Islamic Banking.
Moreover, if banks are prevented
from creating new money it would not be necessary to nationalise
them. The money supply would be the nation¯s with the banks
being allowed to administer it on RibaFree-Econ principles. Any
bank abusing the principles, of course, would lose the privilege
of being able to administer the loans (and so make a reasonable
Name of the Movement ¡ Riba-free
Existing names and titles have
connotations and implications and it is thus important that the
name of the movement be not only distinct but also indicative
of what is new. åIslamic Economics¯, åIslamic Finance¯,
and åIslamic Banking¯ are all unacceptable because they are not
new and reflect matters which are not part of the new thinking.
However, at the same time, it is desirable that the name have
an Islamic connotation if only because Muslims have objection
to riba at the centre of their faith whereas, in practice,
members of other faiths (or of no faith) do not. Thus Riba-free
Economics seems a good solution with a shortening to RIBAFREE-ECON.
NB RIBAFREECON might not be wise
because the ending (åCON¯) could cause puerile jokes.
Next conference and centre of
Clear, cohesive commitment to
policy must be obtained before the movement attempts to go wider.
It seems sensible that first effort be centred on the place
of origin ¡ Malaysia ¡ with Indonesia (and Trisakti University)
coming next if obvious support for the principles of RIBAFREE-ECON
can be obtained from political, business, union and religious
Recommended Action and Suggested
Policy for the Future
1. The name of the movement should be Riba-Free
2. A short, clear Manifesto should be written
and support for it canvassed.
3. Exising banking, which includes Islamic Banking,
may continue its present practices (including those for depositors)
subject to paragraph 4 below.
4. Because the banking system endlessly imposes
riba (or its equivalent) and has failed to address properly
the development and spreading of the real economy, the banking
system should be constrained from creating new money (by a gradual
rise to 100% banking reserves). Banks may lend their own
money and, with permission, that of depositors.
5. The money supply should emanate as interest-free
loans from the national bank. It can be gold-backed but
this may not be necessary if all of the new money supply is directed
at the development and spreading of the real economy and the money
is eventually repaid to the national bank and cancelled.
6. Generally, however, the administration
of the money supply can be done by the banking system (which may
charge genuine administration fees, but not riba) with the banking
system then repaying the national bank.
7. Whereas the national bank is the main source
of the new money supply, another source could be zakah
money because zakah has the alleviation of poverty as its
purpose and such alleviation is one of the main aims of RIBAFREE-ECON.
8. Interest-free loan money should be available
capital projects e.g. roads, bridges, waterworks, sewage systems,
schools, hospitals etc. The effect of eliminating riba
is to halve, even quarter, the usual cost.
capital projects e.g. mangrove-crested sea barrages. Again,
cost is halved or quartered
electricity generation. It is extraordinary how riba prevents
the construction of technically feasible clean electricity generation.
A good example is the Severn River barrage (or lagoons)
project in the UK which could cleanly generate 10%
of the nation¯s electrcity supply using old techology. But,
because of the long period of construction, riba-financing
makes the project completely unviable whereas RIBAFREE-ECON financing
Every year tousands of Indian farmers commit suicide or
are forced to sell a kidney because of outrageous riba.
RIBAFREE-ECON could diminish, even solve, the problem.
businesses and farms. The spreading of capital ownership
to every individual in society.
businesses IF the loan is associated with a widening of ownership.
businesses. All such businesses should be forced to pay
out all their earnings all the time (with exception for research,
maintenance and replacement). Therefore any business wanting
to expand would have the choice of interest-free money (with a
required widening of ownership); or new share capital or interest-bearing
widening of ownership in the large coporations is potentially
capable of ensuring an income for every individual in society
¡ see www.binaryeconomics.net
RIBA is an enormously important issue
affecting humankind today. The struggle against Riba is
necessary to establish just, stable and sustainable economicsystems
that contributes towards peace and prosperity of the humankind.
The issue of RIBA needs to be continuously
deliberated upon - Call for papers for the second conference.
A network of NGOs, religious organizations,
academic institutions, government institutions and individuals
with common interest must be established to address and find solutions
to the issue of Riba.
Systematic and effective ways must
be established to educate the public , from the primary level,
on the issue of Riba.
People be given the freedom to choose
their medium of exchange.
Establishment of Kuala Lumpur Council
for Monetary Justice
Center for Research on Riba - dedicated
to the establishment of RIFCON
Journal of Ethical Finance
International Network of People against
Lobbying for the peoples¯ freedom to choose
between gold (or other commodities) and national currencies as
medium of exchange.
Establishment of a web-resource on Riba
- www.worldribaconference.org will be continued for this purpose.
Articles, videos, continuous forum, links and other resources
on Riba will be placed there for the benefit of the world.
section in the web-resource on How to Avoid Riba ¡ Kuttu System,
Rent home first for about 10 years while you save money to buy
[ Show numerical numbers ]. If this money is put into Kuttu or
Islamic housing cooperatives it is even better.
section on How I Avoided Riba ¡ stories from individuals from
7. Creation of
a facebook community that is against Riba and that supports this