💰 Understanding RIBA: The Prohibition of Usurious Interest in Islam

Definition

Riba (ربا) is an Arabic term that signifies usurious or exploitative interest, which is strictly prohibited in Islamic financial systems. The term extends to include practices where a fixed or guaranteed interest gains unearned profit and imposes undue financial burdens on the borrower.

Etymology

The term “Riba” is derived from the Arabic root “ر ب و” (r-b-w or r-b-a), which means to increase, grow, or multiply.

Background and Historical Facts

1. Quranic Prohibition:

   • The prohibition of Riba is explicitly mentioned in several Quranic verses, including Surah Al-Baqarah (2:275-279) which states, “Allah has permitted trade and has forbidden interest…”
   • Verses: Quran 2:275-279, 3:130, 4:161, 30:39

2. Hadith:

   • The sayings of Prophet Muhammad (PBUH) also condemn Riba, categorizing it as one of the major sins that severely threaten social equity and justice.

3. Islamic Jurisprudence:

   • The consensus among Islamic scholars (Ijma) reflects a uniform prohibition against Riba across various schools of thought including Hanafi, Maliki, Shafi’i, and Hanbali.
   • Terms: - Riba al-Nasi’ah: Riba on loans - Riba al-Fadl: Riba on trade transactions

Cultural Differences and Similarities

• Middle East: Gulf countries adhere strictly to the prohibition, implementing sharia-compliant financial systems.
• South Asia: Moderate, controlled interest is tolerated to avoid economic disbalance.
• Western Context: Muslim minorities create or use sharia-compliant financial institutions, making distinctions between permissible financial growth and Riba.

Synonyms

• Usury
• Exploitative Interest
• Compound Interest

Antonyms

• Halal Profit
• Ethical Financing
• Zero-Interest

Related Terms

• Murabaha: A form of credit sale where the seller discloses the cost and profit margin to the buyer.
• Mudarabah: A profit-sharing contract where one party provides the capital while the other offers expertise and management.
• Ijara: A leasing agreement where the owner allows another party to use an asset for a predetermined return.

Exciting Facts

• In Modern Finance: Islamic banking, adhering strictly to the prohibition of Riba, has grown rapidly, leading the global financial industry towards ethical practices.
• Renowned Models: Banks like the Islamic Development Bank and institutions like Al-Rajhi Bank have integrated Riba-free models successfully.

Quotations from Notable Writers

• Yusuf Ali (Translator of Quran): “Riba is any anticipation of a fixed return for a loan, in complete contrast with the uncertainty of profit or loss connected with an equitable financial project.”

Suggested Literature and Further Studies

• Books:
  • “Islamic Banking and Finance: An Integrative Approach” by Yusuf Al-Mansur
  • “The Prohibition of Riba in Islam: An Economic Perspective” by Muhammad Al-Farooq
• Journals:
  • “Arab Law Quarterly”
  • “International Journal of Islamic and Middle Eastern Finance and Management”
• Online Resources:
  • Islamic Development Bank’s online library
  • Harvard Islamic Finance Information Program

Additional Translations

• Arabic: ربا (Riba)
• Persian: ربا (Riba)
• Urdu: حرام سود (Haram Soor)
• Indonesian: bunga riba
• Turkish: faiz

Farewell Thought

Embark on a journey to not only understand but also appreciate the intricate balance within Islamic finance which blends ethical principles with economic growth. May our endeavors foster a world grounded in justice and compassion, in alignment with the timeless wisdom of Islamic teachings.

Yusuf Al-Mansur October 10, 2023