Islam

The Prohibition of Riba in Islam: Principles and Implications

Islam forbids Riba (Usury) because it promotes unfairness and exploitation, and Islamic rules aim to ensure fairness and protect people from unjust financial practices.

What is Riba in Islam?

Riba (Arabic: الربا), which originates from the Arabic word meaning “to increase” or “to exceed,” is commonly associated with excessive charges for borrowing money. In Islamic law, riba is more than just an excessive charge. It represents unjust, exploitative gains made in trade or business, often through the practice of charging interest on loans, which is strictly prohibited. The Qur’an references and condemns riba in multiple verses.

The Usurious definition

A person or entity is described as ‘Usurious’ if they engage in the practice of charging excessively high or unfair interest rates on loans. This behavior is typically considered exploitative and unethical. In many religious and legal systems, such as Islamic law, usurious practices are strictly forbidden.

About Riba in Quran

The Quran condemns interest as unjust and exploitative. It guides people to renounce interest and donate the accrued amount to charity.

اَلَّذِیْنَ یَاْكُلُوْنَ الرِّبٰوا لَا یَقُوْمُوْنَ اِلَّا كَمَا یَقُوْمُ الَّذِیْ یَتَخَبَّطُهُ الشَّیْطٰنُ مِنَ الْمَسِّؕ-ذٰلِكَ بِاَنَّهُمْ قَالُوْۤا اِنَّمَا الْبَیْعُ مِثْلُ الرِّبٰواۘ-وَ اَحَلَّ اللّٰهُ الْبَیْعَ وَ حَرَّمَ الرِّبٰواؕ-فَمَنْ جَآءَهٗ مَوْعِظَةٌ مِّنْ رَّبِّهٖ فَانْتَهٰى فَلَهٗ مَا سَلَفَؕ-وَ اَمْرُهٗۤ اِلَى اللّٰهِؕ-وَ مَنْ عَادَ فَاُولٰٓىٕكَ اَصْحٰبُ النَّارِۚ-هُمْ فِیْهَا خٰلِدُوْنَ(275)

“Those who consume usury will not stand on the Day of Resurrection except as one stands who has been driven to madness by the touch of Satan. That is because they say, ‘Trade is just like usury,’ but Allah has permitted trade and forbidden usury. So, whoever, after receiving admonition from his Lord, desists, shall keep his past gains, and his affair rests with Allah. But those who return to it—they are the inhabitants of the Fire; they will abide therein forever.” (Surah Al Baqarah: 275)

وَ اِنْ كَانَ ذُوْ عُسْرَةٍ فَنَظِرَةٌ اِلٰى مَیْسَرَةٍؕ-وَ اَنْ تَصَدَّقُوْا خَیْرٌ لَّكُمْ اِنْ كُنْتُمْ تَعْلَمُوْنَ(280)

“And if the debtor is in hardship, then grant him a delay until a time of ease. But if you give it as charity, that is better for you if you only knew.”

یٰۤاَیُّهَا الَّذِیْنَ اٰمَنُوْا لَا تَاْكُلُوا الرِّبٰۤوا اَضْعَافًا مُّضٰعَفَةً۪- وَ اتَّقُوا اللّٰهَ لَعَلَّكُمْ تُفْلِحُوْنَ(130)

“O you who believe! Do not consume usury, doubled and multiplied, but fear Allah so that you may be successful.” (Surah Al Imran: 130)

وَّ اَخْذِهِمُ الرِّبٰوا وَ قَدْ نُهُوْا عَنْهُ وَ اَكْلِهِمْ اَمْوَالَ النَّاسِ بِالْبَاطِلِؕ-وَ اَعْتَدْنَا لِلْكٰفِرِیْنَ مِنْهُمْ عَذَابًا اَلِیْمًا(161)

“And [this is] because they take usury while they have been forbidden from it, and they consume the wealth of others unjustly. And We have prepared for the disbelievers among them a painful punishment.” (Surah An Nisa: 161)

وَ مَاۤ اٰتَیْتُمْ مِّنْ رِّبًا لِّیَرْبُوَاۡ فِیْۤ اَمْوَالِ النَّاسِ فَلَا یَرْبُوْا عِنْدَ اللّٰهِۚ-وَ مَاۤ اٰتَیْتُمْ مِّنْ زَكٰوةٍ تُرِیْدُوْنَ وَجْهَ اللّٰهِ فَاُولٰٓىٕكَ هُمُ الْمُضْعِفُوْنَ(39)

“And whatever you give for increase through the wealth of people will not increase with Allah. But what you give in zakat, seeking the pleasure of Allah, those are the ones who will have their rewards multiplied.” (Surah Ar Rum: 39)

About Riba in Hadiths

According to many hadith about interest the Prophet (PBUH) condemns interest as a grave sin.

According to Hazrat Jabir, the Prophet (PBUH) cursed both the receiver and payer of interest. As well as the one who records it and the two witnesses to the transaction, stating: “They are all equal (in guilt).”

The Prophet (PBUH) said in his Farewell Pilgrimage: “All riba from the time of Jahiliyyah is abolished. The first riba I am annulling is the one owed to ‘Abbas ibn ‘Abd al-Muttalib, my uncle; it is being completely canceled.”

In another hadith the Prophet (PBUH) said, “One dirham of riba that a person knowingly receives is worse than committing adultery thirty-six times.”

Hazrat Abu Hurayrah reported that the Prophet (PBUH) said, “On the night of the Ascension, I saw people with stomachs like houses, with snakes visible from the outside. I asked Gabriel who they were, and he answered that they were people who had received interest.”

Hazrat Abu Hurayrah reported that the Prophet (PBUH) said, “Riba has seventy different levels, with the least severe being akin to a man committing adultery with his own mother.” (Ibn Majah)

The Prophet (PBUH) said, “A time will surely come when everyone will engage in riba. And if someone does not partake in it, its dust will still affect him.”

Hazrat Abu Hurayrah reported that the Prophet (PBUH) said, “God would have just cause to deny entry to Paradise or its blessings to four types of people: the habitual drunkard, the one who takes riba, the one who wrongfully seizes an orphan’s property, and the one who is undutiful to his parents.” (Mustadrak al-Hakim, Kitab al-Buyu’)

Why Riba is Haram?

Islam considers riba (usury) haram for several reasons:

Promotion of Inequality: Riba exacerbates economic inequality by disproportionately benefiting those who are already wealthy. It increases the financial gap between the rich and the poor. High interest payments burden those who are in need.

Exploitative Nature: Riba involves charging excessive interest on loans, which can lead to unfair enrichment and exploitation of borrowers. This is an unjust because it does not align with the principles of fairness and mutual benefit.

Economic Harm: Riba can lead to financial instability and harm the overall economic well-being of individuals and communities. It places a heavy burden on those who are already struggling financially.

Moral and Ethical Concerns: Islam emphasizes ethical behavior and social justice. Riba contradicts these values by promoting a system where wealth accumulates at the expense of others’ hardship.

The Qur’an condemns the practice of riba. It advises those who engage in it to give up the interest and donate it to charitable causes. This guidance reflects the intention to prevent exploitation and promote fairness in financial dealings.

Types of Riba (Usury)

Muslim scholars identify two forms of riba:

Riba al-Nasi’ah (Riba of Delay):

This type involves charging interest on loans when people defer repayment.The borrower pays back more than the borrowed amount, with the additional amount being the interest.

Riba al-Fadl (Riba of Excess):

This type occurs in transactions involving the exchange of similar goods or commodities of the same type but with unequal quantities. Islam prohibits it because it leads to unfair gain.

Differences Between Trade and Riba in Islamic Law

Islam encompasses all aspects of life, including spiritual, cultural, social, and economic dimensions. Its economic principles, governed by Shari’ah, regulate financial activities to ensure they align with Islamic law. Among the various prohibitions in Islamic commercial law, riba (usury) is a major concern. While trade is allowed, riba is strictly forbidden.

Traditionally, trade is defined as the exchange of goods or services for other goods, services, or money. In Islam, this concept is similar. A sale (ba’y) involves the exchange of one item for another.

Allah has allowed the exchange of goods and services (ba’y) to support individuals in earning a livelihood. And to address the interdependence of human needs. Merchants participate in trade transactions to generate profit.