MONDAY, JUNE 17, 2024
Mediha Shah
In today’s society, the burden of financial obligations often extends far beyond mere numbers on a balance sheet. It reaches into the deepest corners of individuals’ lives, shaping their sense of security, self-worth, and even their will to live. As debt accumulates and loans loom like ominous clouds, some find themselves grappling with overwhelming despair. Tragically, for too many, this despair becomes insurmountable, leading to the unthinkable choice of ending their own lives.
This grim reality underscores the profound intersection between financial hardship and mental health, highlighting the critical need for a more compassionate and holistic approach to addressing the root causes of debt-driven distress. As we navigate the intricate web of financial hardship, it is increasingly evident that behind each statistic lies a human story, a narrative of struggle and silent suffering.
Statistics paint a stark picture of the magnitude of the crisis. Unemployment and indebtedness have driven a significant number of suicides, with over 25,000 suicides attributed to these factors in 2018, 2019, and 2020, according to Minister of State for Home Affairs, Nityanand Rai.
Furthermore, a survey by Punjab Agricultural University found that a staggering 88% of farmer suicides in Punjab between 2000 and 2018 were linked to heavy debt burdens. The dire situation is also evident in data from the National Crime Records Bureau (NCRB), where over 2,474 out of 3,000 farmers who took their own lives in 2015 cited loans from banks or microfinance institutions as a contributing factor.
As per the NCRB, 64.3% suicide victims were reported to have an annual income of less than Rs one lakh. A total of 1,70,924 suicides were reported in India in 2022, an increase of 4.2 per cent compared to 2021, according to the NCRB report released on December 4, 2023. Daily wage earners accounted for the highest number of victims.
Amid these daunting challenges, there are stories of hope and transformation. In these challenging times, noble souls are stepping forward to help those in need by providing interest-free loans. Various Islamic interest-free microfinance organizations are playing a transformative role in the lives of individuals, contributing significantly to economic empowerment and nation-building. These organizations extend interest-free loans to support personal needs, healthcare, education, and businesses, offering a lifeline to those trapped in the cycle of interest-based debt.
Interest-free Islamic banking, also known as Islamic finance or Sharia-compliant banking, is a financial system that operates in accordance with Islamic principles and prohibits the payment or receipt of interest (riba). Islamic banking is based on the principles of Islamic law (Sharia), which includes guidelines derived from the Quran (the holy book of Islam) and the Hadith (the sayings and actions of the Prophet Muhammad, peace be upon him).
Islamic banking offers a financial system that is compliant with Islamic law and is intended to provide financial services to people who wish to avoid interest-based transactions. It has gained popularity in many countries, where it caters customers seeking ethical and alternative financial service.
Islamic banks, including institutions like Al Rayan Bank, Qatar Islamic Bank, and Bank Islam Malaysia, operate on principles rooted in Islamic finance, fundamentally prohibiting the charging or paying of interest (riba). Instead, they embrace profit-and-loss sharing (PLS), where both the bank and the customer share in the profits and losses generated from financial transactions. These banks engage in various Islamic contracts such as Mudarabah, Musharakah, Murabaha, Ijarah and Istisna’a, adhering to ethical and moral considerations.
In Mudarabah, one party provides the capital while the other party provides the expertise and labour. Profits are shared based on a pre-agreed ratio, but losses are borne solely by the capital provider. Musharakah involves a joint partnership where both parties contribute capital and expertise. Profits and losses are shared based on the ratio of their contributions.
Murabaha is a cost-plus financing contract where the bank purchases an asset and sells it to the customer at a marked-up price, allowing the customer to make deferred payments. Ijarah is a leasing contract where the bank purchases an asset and leases it to the customer for an agreed period, with rent payments replacing interest. Istisna’a is a contract used for manufacturing goods, where one party orders the manufacture of a specific item from another party, with payment typically made in instalments as the work progresses.
Asset-backed financing is a common practice in Islamic banking, providing security for both parties, while waivers of profit demonstrate flexibility and compassion during times of financial hardship. Islamic banking emphasizes fairness, transparency, and ethical conduct, offering an alternative to conventional banking based on interest.
In the tapestry of human resilience, the narrative of Nissar Ahmad from the village of Kuttippuram stands as vivid testimony to the transformative power of interest-free financing. Nissar, a skilled artisan hailing from a rural village, found himself at a crossroads when financial setbacks threatened to derail his dreams. Despite his artistic talents, securing traditional loans proved futile due to his limited resources and lack of collateral. However, Nissar’s fortunes took a decisive turn when he crossed paths with Sanghamam, an organisation offering interest-free loans to individuals in need, located in India. With their support, Nissar Ahmad embarked on a journey of entrepreneurship, leveraging his creativity to establish a small business selling handmade crafts. As his venture flourished, Nissar not only attained financial stability but also discovered a newfound sense of purpose in empowering others within his community to pursue their own aspirations.
Nissar’s serves as beacons of inspiration, illuminating the transformative potential of interest-free financing in unlocking doors to prosperity and fostering resilience in the face of adversity.
The stories of tragedy and exploitation underscore the urgent need for change in India’s financial system, while the stories of hope and transformation demonstrate that there are viable alternatives available. By embracing interest-free microfinance and ethical principles, India can pave the way for economic justice and a brighter future for all its citizens.
