Critique of Banking and Insurance: The Riba Machine and Legal Deception of Capitalism
Dear readers, if you walk through any city center in the world today, the tallest and most luxurious buildings are usually owned by two institutions: Banks and Insurance Companies.
Have you ever wondered where they get so much money to build skyscrapers, pay their executives billions of rupiah, and advertise everywhere? After all, Banks do not produce any goods, and Insurance only sells “promissory paper.”
The answer is painful: That magnificence is built on the blood and sweat of ordinary people through mechanisms of Riba (Interest) and Maysir (Gambling/Speculation) legitimized by the Capitalist state.
Through the lens of Nizhamul Iqtishadi fil Islam, let us dissect these two “satanic pillars” of the modern economy, and how the Caliphate will tear them down to replace them with a system full of mercy.
1. Introduction: Two Satanic Pillars in the Modern Economy
Under the Capitalist system, money is considered a commodity (trade good). Money can “beget” money without any real work. This is the root of the problem.
- Banks are tasked with lending money (with interest/riba) to society.
- Insurance is tasked with collecting people’s money by frightening them about the future (illness, accidents, death).
Both operate on the principle of consuming others’ wealth unlawfully, something fiercely fought against in Islam.
Allah ﷻ says:
يَا أَيُّهَا الَّذِينَ آمَنُوا لَا تَأْكُلُوا أَمْوَالَكُمْ بَيْنَكُمْ بِالْبَاطِلِ
“O you who have believed, do not consume one another’s wealth unjustly…” (QS. An-Nisa’ [4]: 29)
2. The Reality of Conventional Banking: Blood-Sucking Leeches
What is Conventional Banking? Simply put, a bank is an intermediary institution. It borrows money from depositors (by giving small interest, e.g., 3%), then lends that money to entrepreneurs or the public (by charging high interest, e.g., 10%). That 7% difference is the bank’s profit (Spread).
This practice is pure Riba Nasi’ah, namely an additional amount stipulated on the principal of a debt due to the delay in payment time.
Allah ﷻ curses all parties involved in this riba ecosystem. The Messenger of Allah ﷺ said:
لَعَنَ رَسُولُ اللَّهِ صَلَّى اللَّهُ عَلَيْهِ وَسَلَّمَ آكِلَ الرِّبَا وَمُؤْكِلَهُ وَكَاتِبَهُ وَشَاهِدَيْهِ وَقَالَ هُمْ سَوَاءٌ
“The Messenger of Allah cursed the consumer of riba (usurer/bank), the one who pays it (borrowing depositor), the one who records it (secretary/notary), and its two witnesses. He said: ‘They are all the same (in sin).’” (HR. Muslim no. 1598)
3. The Magic of Banks: Creating Money Out of Nothing (Fractional Reserve)
The injustice of banks is not merely collecting interest. The greatest crime of modern banking is its ability to create money out of nothing (Money Creation) through the Fractional Reserve Banking system.
How does this magic work? If you deposit Rp 100 Million in a bank, the bank does not store that money in its vault. Central Bank rules (e.g., Reserve Requirement of 10%) allow the bank to hold only Rp 10 Million, then lend the remaining Rp 90 Million to someone else. That other person spends their money, it enters another bank. The second bank holds 10%, lends the rest again. And so on!
From the original Rp 100 Million, the banking system can “conjure” it into phantom money worth Rp 1 Billion in the market! This is the main cause of Inflation that makes staple food prices keep rising and the value of money in your wallet keeps shrinking. Banks secretly rob the value of your wealth.
4. The Sin of Riba: Heavier Than Adultery
In Islam, the sin of riba is not a minor sin. It is a sin that invites total destruction from the heavens.
The Messenger of Allah ﷺ described the horror of the sin of riba with his saying:
الرِّبَا ثَلَاثَةٌ وَسَبْعُونَ بَابًا، أَيْسَرُهَا مِثْلُ أَنْ يَنْكِحَ الرَّجُلُ أُمَّهُ
“Riba has seventy-three doors. The lightest of them is like a man committing adultery with his own mother.” (HR. Ibn Majah no. 2274, authenticated by Al-Hakim)
If committing adultery with one’s own mother is already an outrage beyond human reason, then consuming bank interest (even just 1%) is a far more repulsive sin in the sight of Allah ﷻ!
5. The Reality of Insurance: Betting on Suffering (Maysir & Gharar)
If banks are leeches, then Conventional Insurance (Life, Health, Vehicle Insurance) is a Gambling House.
What is the insurance contract? You pay a premium of Rp 500 thousand per month. If you have an accident, insurance pays your medical bills of Rp 50 Million. If you stay healthy for 10 years, your money is lost to the company.
In the view of Islamic fiqh, this contract is void by law because it contains:
- Gharar (Uncertainty): You do not know when you will have an accident, and the company does not know how much they will have to pay. A sales contract must have clear goods and prices.
- Maysir (Gambling): You are betting (gambling) with the company. If you get severely ill quickly, you “win” (big profit). If you stay healthy, you “lose” (money is lost).
The Messenger of Allah ﷺ strictly forbade contracts containing elements of speculation/uncertainty:
نَهَى رَسُولُ اللَّهِ صَلَّى اللَّهُ عَلَيْهِ وَسَلَّمَ عَنْ بَيْعِ الْحَصَاةِ وَعَنْ بَيْعِ الْغَرَرِ
“The Messenger of Allah forbade sale by pebble-throwing (lottery) and sale involving gharar (uncertainty/deception).” (HR. Muslim no. 1513)
6. Life Insurance: Preempting Allah’s Decree
Life Insurance is even worse. It sets a “price” for human life, something that is absolutely in the hands of Allah ﷻ. Insurance companies claim to be able to guarantee financial security if someone dies, whereas the One who guarantees sustenance for heirs is only Allah ﷻ.
Additionally, insurance collects trillions of rupiah in premiums from the public, and then what is done with that money? It is reinvested back into Riba Banks or the Stock Market (Capital Market)! So, insurance is a major supporter of the global riba system.
7. Visual Analogy: Giant Leech and Gambling House
To make understanding easier, let us analogize:
1. Bank (Giant Leech) Imagine a farmer who needs seeds. He borrows 1 sack of seeds from a loan shark, with the condition he must return 2 sacks at harvest. If the harvest fails due to pests, the loan shark does not care; he will seize the farmer’s land. The farmer works hard, the loan shark lounges around growing richer.
2. Insurance (Gambling House) Imagine you are walking along the edge of a cliff. Someone offers you: “Pay me Rp 100 thousand now. If you fall into the cliff and break a bone, I’ll pay your hospital bills. But if you make it safely to the end of the path, that Rp 100 thousand is mine.” This is not mutual help, this is pure gambling betting on fate!
8. Islam’s Solution for Loans: Qardh Hasan
If conventional banks are closed, how can people borrow money for urgent needs (medical treatment, paying children’s school fees)?
Islam provides the mechanism of Qardh Hasan (Good Loan without interest). In the Caliphate:
- The Baitul Mal (State Treasury) provides a special fund to lend money to citizens without a single penny of interest. Borrow 10 Million, return 10 Million.
- Community Culture: Muslims are educated to lend money to each other seeking reward, not financial profit. Giving an interest-free loan carries half the reward of giving charity.
If capital is needed for business (not consumption), the solution is not debt, but rather Syirkah (Profit-Sharing Cooperation). If there is profit, it is shared; if there is loss, it is borne together. Very fair!
9. Islam’s Solution for Risk: The Caliphate’s Social Security
If insurance is closed, who covers hospital costs if we have an accident?
Here lies the greatness of Dhaman Ijtima’i (State Social Security). In the Caliphate, healthcare is a Public Basic Need that the State Must Provide 100% Free.
- You do not need to pay monthly premiums like BPJS.
- You do not need to gamble with insurance companies.
- As soon as you are ill or have an accident, you are taken directly to the State Hospital, treated with VIP facilities, and leave without paying a single penny. The cost is taken from the Public Ownership Fund (Natural Resources) in the Baitul Mal.
What if our house catches fire? The state (Baitul Mal) must provide for citizens struck by disaster (Category of Ibn Sabil or sudden Fakir Miskin) from the Zakat Fund or State Ownership Fund.
Table 1: Capitalist Insurance vs. Caliphate Guarantee
| Aspect | Insurance (Capitalism) | Dhaman Ijtima’i (Caliphate) |
|---|---|---|
| Service Nature | Profit-seeking business (Commercial) | Raa’in (State) service obligation |
| People’s Cost | Paying regular premiums (Extortion) | 100% Free without contributions |
| Legal Status | Haram (Gharar, Maysir, Riba) | Obligatory (Caliph’s responsibility) |
| If Not Ill | Premium money is lost, seized by the company | The people are not disadvantaged at all |
10. Conclusion: Tearing Down the Temples of Riba
Conventional banks and Insurance are “temples of worship” in the religion of Capitalism. They suck the wealth of the ummah, concentrate it among a handful of conglomerates, and spread misery through inflation and debt.
When the Caliphate stands, the first step in the economic field is to close all conventional banks, stock markets, and insurance companies.
- Money will be returned to its function as a medium of exchange (Dinar and Dirham), not as a commodity to be traded.
- Capital needs will be resolved through Syirkah.
- Emergency needs will be resolved through Qardh Hasan and Baitul Mal Social Security.
This is an economy that is clean, humane, and invites blessings from the heavens and the earth.
Prayer for Protection from Riba
“O Allah, purify our wealth from the dust of riba. Destroy the economic system that oppresses Your servants. And hasten the establishment of the Caliphate institution that will apply Your sharia, so that we may taste the sweetness of lawful and blessed sustenance. Aameen.”
Continue Your Journey:
- Critique of Capital Markets and Non-Real Economy: The Casino in a Suit
- Social Security in Islam: Welfare Without Taxes and Premiums
- Baitul Mal: The Anti-Riba Financial Heart of the Caliphate State
- Syirkah: Halal and Blessed Business Cooperation
- Dinar and Dirham: Islam’s Anti-Inflation Monetary Fortress