Muslims have long been warned of such detrimental spending habits, referenced in part 1. Prior to the immigration of the Prophet (S) to Madinah. A series of verses in Surah Al Isra [17:23- 39, labelled by some as the 10 commandments] were revealed. They were meant to be amongst the cumulative wisdom revealed to formulate an Islamic community and society.
The verses begin with the hierarchy of rights upon an individual that are due; from Allah (SWT) down to the wayfarer. A stern warning is given regarding squandering wealth; ‘and do not squander recklessly. Surely, squanderers are the brothers of satans.’
Alluded is the correlation between squandering of wealth and the antithesis of such; the fulfillment of the rights of others. From a practical view, the verse begs the question, ‘how could one spend in the way Allah ,or give to the needy (or fulfill any others due right), if the very custodial provisions that one handles, are being directed elsewhere or, more strongly put, being mishandled?’
Further clarification is given; ‘And do not keep your hand tied to your neck, nor extend it to the full extent, lest [avoid the risk] you should be sitting reproached [disappointed], empty-handed.’ Reaffirming that misappropriating your financial resources by either being overly greedy and/or conversely overly superfluous will put one at risk of sitting empty-handed; financially and spiritually.
The relationship between (burdensome) debt and worry, grief and stinginess is brought to life in this context the dua of the Prophet(S)
اللهم إني أعوذ بك من الهم والحزن وأعوذ بك من العجز والكسل وأعوذ نك من الجبن والبخل وأعوذ بك من الغلبة الدين وقهر الرجال
O Allah, I take refuge in You from anxiety and sorrow, weakness and laziness, miserliness and cowardice, the burden of debts and from being overpowered by men
The fact that such negative qualities are linked with the burden of debt, and subsequently being overpowered my men, in one dua is not alarming. In a recent study by the American Psychological Association, the primary stressor for Americans is money. The leading manifestation of given stress is fatigue, anxiousness, the feeling of being overwhelmed, lack of motivation/energy and feeling depressed.
[https://www.apa.org/news/press/releases/stress/2012/full-report.pdf]
The pinnacle of these verses from Surah Al Isra (17:30) revolves around the simple understanding that not only does sustenance come from your Lord, but it is also restricted from your Lord; ‘Indeed, your Lord expands sustenance for whomsoever He wills, and constricts (for whomsoever He wills). Surely, He is All-Aware of His servants, All-Seeing.’
In his tafseer of these verses, Mawdudi comments that attempting to upset this balance, set by the creator, by the influx or redistributing of provisions is a direct contradiction to this verse, as Allah (SWT) is All-Aware and All-Seeing of His servants.
This direct contradiction is demonstrated with the ease of availability of funds, and its attributes of a large liability relative to income and length of term. In essence, the big box method of the home loan is the epitome of what the Quran warns again; and do not squander your wealth recklessly.
وَلَا تُبَذِّرۡ تَبۡذِيرًا
The correlation between reckless financial habits and fulfilment of the established rights of others are further present in the Quran.
In Surah Al Baqarah, spanning nearly 3 pages (lines 2:261-281) the etiquette and reward of charitable givings is maintained. Referenced is wide array of topics from overt/covert givings to seeking out those who do not ask.
After lengthy discussion on the method of handling the provisions given by the creator, a stern warning is given to those who practice poor financial habits initiated with usury. This beautiful juxtaposition illustrates the acceptable, as well as the unacceptable, methods of handling finances.
Poor financial habits, in these particular verses embellished with riba, can be discerned as a threat to the practice of giving, and practically a gateway to excessive spending. The end result is, as the verse of Surah Al Isra reminds us, ‘lest [avoid the risk] you should be sitting reproached [disappointed], empty-handed.’ The warning of this denial of the fundamental right of a portion of society was so stern that it could only have been revealed at the formation of the first Islamic society.
Similarly in Surah Al Nisa, verses 4:161-163, Allah (SWT) references the wrongdoing of the Jewish people, ‘And their taking of Riba though they were forbidden from taking it, and their devouring men's substance wrongfully...’
The very next line references those among them who were firm in knowledge,
‘But those firm in knowledge among them and the believers believe in what has been revealed to you, [O Muhammad], and what was revealed before you. And the establishers of prayer [especially] and the givers of zakah and the believers in Allah and the Last Day - those We will give a great reward.’
Hence the correlation between the fulfillment of the rights of others and substandard financial habits is a common theme in the Sunnah of the Prophet(S) and the Quran. Financial planners, contend that the availability of excessive financing, being either Islamically compliant or not, clearly puts the person at risk of being a spendthrift. Islamically the fear is further expounded; foregoing the rights of others.
Dave Ramsey, a celebrity Christian financial author - as well as others in the field, have also recognized this link. The culmination of Ramsey’s financial plan includes not only removing all forms of the borrowed funds but ultimately giving in the form of charity. Hence the fulfillment of the rights of others is recognized by the trained in the field. The hindrances of said fulfillment is also recognized; overbearing debt easily facilitated by the availability of funds.
The realization of overbearing debt is even more so dangerous in our day and age as
the availability of easily financed funds are now present in a wide array of products; department stores, furniture stores, cell phone carriers, pet stores, and even bicycle shops. This leveraging the long term for the immediate possession of goods is often facilitated via overzealous employees with reward incentives for opening such finance accounts!
The most famous psychology ever experiment conducted, by Walter Mischel, revolved around the quintessential dilemma of short term satisfaction vs long term gain.
In the experiment, children were asked to sit in front of a marshmallow. If there were able to resist the temptation of the marshmallow for a short period of time, they would be rewarded with a larger treat for their patience.
The children were followed up later in life, and the ones who were able to sacrifice the short term satisfaction were more successful due to their discipline; higher SAT scores, greater social and cognitive competence, greater educational attainment, and less drug use and criminal record.
Despite the fact that this experiment was conducted over 40 years ago, this Quranic dua encapsulated the very essence of short term satisfaction (dunya) whilst not sacrificing long term (akhira) gain.
"اللهم آتنا في الدنيا حسنة، وفي الآخرة حسنة، وقنا عذاب النار
O our Lord! give us in this world that which is good and in the Hereafter that which is good, and save us from the punishment of the Fire
The essence of Islamic teaching is not only recognizing, and avoiding, that which is an obvious prohibition of the religion, but also the implementation of diligence in avoiding that which leads to the prohibited matter. The following verse serves as a warning of such items that have been beautified and subsequently desired.
زُيِّنَ لِلنَّاسِ حُبُّ ٱلشَّهَوَٲتِ مِنَ ٱلنِّسَآءِ وَٱلۡبَنِينَ وَٱلۡقَنَـٰطِيرِ ٱلۡمُقَنطَرَةِ مِنَ ٱلذَّهَبِ وَٱلۡفِضَّةِ وَٱلۡخَيۡلِ ٱلۡمُسَوَّمَةِ وَٱلۡأَنۡعَـٰمِ وَٱلۡحَرۡثِۗ ذَٲلِكَ مَتَـٰعُ ٱلۡحَيَوٰةِ ٱلدُّنۡيَاۖ وَٱللَّهُ عِندَهُ ۥ حُسۡنُ ٱلۡمَـَٔاب
‘It has been made attractive for people to love the desired things; that is, women, children, hoarded heaps of gold and silver, branded horses, cattle and tillage. That is an enjoyment of the worldly life; but with Allah lies the beauty of the final resort.’ Surah Ali Imran (3:14)
In fact, such guidance was given to the first of mankind; Adam (AS), as told in surah Al Baqarah (2:35):
وَلَا تَقۡرَبَا هَـٰذِهِ ٱلشَّجَرَةَ
and do not go near the tree! From the infinite wisdom of our Creator, He knows that the best method for Adam (AS) was to simply distance himself from the tree.
Infact, the children most successful in the Marshmallow experiment, referenced above, did exactly that; they distanced themselves, physically and/or mentally, from the marshmallow. The children who did not fare so well would often be lost in the allurement and amaze of a the beautiful marshmallow; touching, smelling, tasting… ultimately eating! This observation has lead Mischel to conclude that the most practical way to restrain from overindulgence is simply to avoid the situation altogether, as similarly commanded of Adam(AS).
The path to overindulgence has evolved into, and revolves around, the allure of easily available financing. Conventional mortgages, being the largest financed product of Americans, are the proverbial marshmallow.
The statistics show that we, as an American society, not only have been offered said marshmallow, in the form of easily available money, but that we have binged on them.
What is more frightening, for the consumer, is that the answer of the financial sector to this convoluted problem is to increase lending! This subtly appears in the form of reducing the monthly obligation by lower rates, interest only products or lengthening the term of borrowed funds. Hence it is now common to see car loans up to 7 or even 10 years. Home loans have seen such things as interest only loans and even 40 year terms. Credit cards minimum payments have similarly decreased to amounts such as 1% principal + interest; translating to a payment (and balance) that will continue on practically for an indefinite time!
The approach of the Islamic Finance sector to this complex scenario of home finance revolves around the exclusion of interest from the transaction between the homeowner and the financing entity (the primary transaction).
The de facto result is, regardless of your view on their respective permissibility, a finance method focusing on the mechanism of the transaction, e.g., a contract based on leasing or partnership that a scholar, or group of, agree that removes riba from the primary transacting. The standard benchmarks [DTI, LTV, term, rate] observed with conventional loans are utilized with the Islamic alternatives. As a result, the ability to procure an Islamic loan product is practically identical with that of the conventional counterparts. The respective payment amounts and terms are also similar. Lending to the similarity of the many such Islamic products naturally resulted from the inclusion of the GSE’s into the process.
The mainstream shift recently [AMJA opinion regarding Islamic finance companies 10/14/2014] however has been to question the involvement of the GSE’s. The standard benchmarks, or said consequences of such, are not considered. The troubling questions must be asked; in lieu of the mechanism of the transaction [between the lender and lendee], are the standard benchmarks [set by Fannie and Freddie], which were instrumental at the arriving of given Islamic product, Islamic? What are the ramifications on a society that is allowed to allocate 45% of its pre tax income to paying debt for 30 years while putting as little as 3% down?
The adherence to these conventional benchmark values have been held strongly by the GSE’s, which ultimately trickle into Islamic products. Their view is quite clear; more money to lend, longer terms and ease of access.
The reality is that the mortgage sector’s purpose is to create loans. Revenues are directly correlated to the generation of loans. Accordingly there will always be a mortgage sector creating products that suits the largest amount of borrowers, from Islamic, sub-prime, reverse, etc. Fannie Mae alone, for example, earned more than 84 billions dollars in 2013. Simply put; more borrowers (regardless of criteria) equates to more revenues.
The question must be asked, when FHA says, ‘Another American dream comes true,’ one has to wonder, who is the beneficiary of the this dream, the homeowner or the bank?
Although interest does effectively serve as a gateway towards over embellishment and a spendthrift mentality, these detrimental practices can easily be implemented in a manner, label as halal, via ease of accessibility of borrowed funds.. Hence while riba aversion is focused on, the gateway to squandering of wealth and overburdening debts, which are inherently built in with conventional loans, albeit halal or haram, must be reproached.
An Islamic solution to this mortgage/overspending paradox could be attained. Part 3 will explore several alternatives as well as the respective barriers.
