Riba: Definition,

Prohibition, Classification,
and Misconceptions
 Definition of Riba

 The Arabic word: riba, literally means growth, excess,
addition, expansion, surplus or increase

 According to Shariah terminology, implies any excess

compensation without due consideration (consideration
does not include time value of money)

 “O those who believe, fear ALLAH and give up what

still remains of the riba if you are believers. But if you
do not do so, then be warned of war from ALLAH and
His Messenger. If you repent even now, you have the
right of the return of your capital; neither will you do
wrong nor will you be wronged.” Al Baqarah 2:278-9
 PROHIBITION OF RIBA IN ISLAM


Stages of Revelation:

 First stage: al-Rum, 39

 Second stage: al-Nisa’, 161

 Third stage: al-i’Imran, 130

 Fourth stage: al-Baqarah, 275-281

 PROHIBITION OF RIBA IN ISLAM
Stages of Revelation

 First stage: al-Rum, 39


َ‫و َ ﺟ ۡ ﮧ‬ ٍ ‫ز َ ﮐٰﻮة‬ ِ ‫اَﻣ ۡﻮ َال‬
“And whatever riba you give so that it may increase in the wealth
of the people, it does not increase with ALLAH.”

 Second stage: al-Nisa’, 161

ِ‫ﻣ‬
“And because of their charging riba while they were prohibited
from it.”
 PROHIBITION OF RIBA IN ISLAM
Stages of Revelation (continued….)
 Third stage: al-i’Imran, 130

َ‫ن‬ ً ‫ﻌ َ ﻔَ ۃ‬ ‫ﮩَ ﻦ َ ا ٰ ا ﻻ َﳇ ُ ُﻮا اﻟﺮ ّ ِﺑٰۤﻮا‬
“O those who believe do not eat up riba doubled and redoubled.”

 Fourth stage: al-Baqarah, 275-281

َ ‫ﻊَ و‬ َ‫ﻮا ۘو َ ا‬ ِ‫ﳇ ُ ُﻮن ۡ َ اﻟﺮ ّ ِﺑٰﻮاﻻ َ ﻘﯾ َُﻮﻣ ُۡﻮ ۡن َ اِﻻ ﻘُﻮ ۡ ﺘ ﯾ ََﺨ َﺒﻄ ُ ﮧُﻦ ُ ﻣﻄ ِٰﻦ َ اﻟۡﻤ َﺲ ِّ ؕذ ٰ ﻢ ۡﻧﮩُ ﻗَﺎﻟُﻮ ۡۤ ا ا‬
ِ‫ﻮ اﻓَؕﻤ َﻦ ۡ ﻣء َە َٗﻮ ۡ ﻋ ِﻈ َ ۃﻣٌ ِّﻦ ۡ ﻓَﻣﺎﻧَۡﺎﺘَﮩٰﺳ َ ﻠَﻒ َ ؕ و َ اَﻣ ۡﺮ ُ ە ٗۤ ا‬
﴾۲۷۵﴿ َ ‫ُ ﮩَ ن‬ ٰ ۡ َ‫ِﮏ َﲱا‬ ٓ ٰ‫ﺌ وﻟ‬ َ‫و‬
“Those who take interest will not stand but as stands whom the demon has
driven crazy by his touch. That is because they have said: ‘Trading is but like
riba‘. And ALLAH has permitted trading and prohibited riba. So, whoever
receives an advice from his Lord and stops, he is allowed what has passed, and
his matter is up to ALLAH. And the ones who revert back, those are the people
of Fire. There they remain for ever.”
 PROHIBITION OF RIBA IN ISLAM
Stages of Revelation (continued….)

﴾۲۷۶﴿ ٍ ۡ ‫ﺛِﲓ‬
 ُِ ‫ﳛ‬ ؕ ِ‫ﺖ‬ ُ َ ‫ﻮا و‬ َ‫ﯾ‬
“ALLAH destroys riba and nourishes charities. And ALLAH
does not like any sinful disbeliever.”

ۡ ‫ﻮة َ ﻟَﮩُﻢ ۡ اَ ﻢ ۡ ﻋﺪ ِ َﻨۡ ر َ ﺑ ّ ِﮩِﻢ ۡو َ ۚ ﺧﻻ ََﻮ ۡف ٌ ﻢ ۡ ﮩِو َ ﻻ َ ُﻢ‬ ٰ ‫ﻮة َو َ ا‬ َ‫ﺖ ِ و َ ا‬

ٰ ‫اِ ﻦ َ ا ا ٰو َ ﲻ َ ِﻠُﻮا اﻟﺼ ّ ٰﻠِﺤ‬
﴾۲۷۷﴿ َ ‫ﳛﺰ َ ۡﻧ ُﻮ ۡن‬
“Surely those who believe and do good deeds, establish Salah
and pay Zakah, have their reward with their Lord, and there is
no fear for them, nor shall they grieve.”
 PROHIBITION OF RIBA IN ISLAM:
Stages of Revelation (continued….)

﴾۲۷۸﴿

ۡ ُ ۡ‫ا ﻣ َﺎ ﺑَﻘ ﻣِﯽ َِﻦ َ اﻟﺮ ّ ِﺑٰۤﻮا اِن ۡ ﮐُﱲﻨ‬ ٰ ‫ﮩَ ﻦ َ ا‬
O those who believe, fear ALLAH and give up what still remains of
the riba if you are believers.
﴾۲۷۹﴿ َ ‫س ۡ ُﻣ ۡﻮاََاﻟِﲂ ُ ۡ ۚﺗﻻ ََﻈ ۡ ﻠِﻤن َُﻮ ۡ و َ ﺗﻻ َُﻈ ۡ ﻠَﻤ ُﻮ ۡن‬
‫ء ُو‬ ِ‫ﻟِﮧٖ ۚو َ ا‬ ۡ ‫ا ﻓَذﺎَۡﻧ ُﻮ‬ ۡ ‫ﻓَﺎِن‬
But if you do not, then listen to the declaration of war from ALLAH
and His Messenger. And if you repent, yours is your principal.
Neither you wrong, nor be wronged.
﴾۲۸۰﴿ َ ‫ن ۡﱲ ُ ۡﮐُﻨۡ ﺗَﻌ ۡ ﻠَﻤ ُﻮ ۡن‬ ۡ ‫ُﴪ ۡ َﻓةَ ٍَﻈ ِ ﺮ َ ةٌﱃاِ ٰﴪ َ َ ة ٍ ؕو َ اَن‬
ۡ ‫و َ اﰷِنَ ۡ ن َ ذﻋ ُو‬
And if there be one in misery, then deferment till ease. And that you
leave it as alms is far better for you, if you really know.
﴾۲۸۱﴿ َ ‫ﻢ ۡ ﻻ َﻈ ۡﯾُﻠَﻤ ُﻮ ۡن‬ ۟‫٭‬ ِ‫ﮧِ ا‬ َ‫ا ﯾ‬
And be fearful of a day when you shall be returned to ALLAH, then
everybody shall be paid, in full, what he has earned. And they shall
not be wronged.”
 Implication of Quranic Ayahs
pertaining to Riba

 Riba is a type of increase in a loan: ۡ ُ ‫س ۡ ُﻣ ۡﻮاََاﻟِﲂ‬
‫و َ اِن ۡ ﻓَﻠَﲂ ُ ۡر ُء ُو‬
“you shall have your capital sums (ru`us alamwal)”

 Taking riba is zulm on the borrower: َ ‫ﺗﻻ ََﻈ ۡ ﻠِﻤ ُﻮ ۡن َ و َﻻﺗ َُﻈ ۡ ﻠَﻤ ُﻮ ۡن‬
“you do not deal unjustly and you are not dealt with unjustly”

 Depriving the lender of ra`s al-mal is zulm: َ ‫ﺗﻻ ََﻈ ۡ ﻠِﻤ ُﻮ ۡن َ و َﻻﺗ َُﻈ ۡ ﻠَﻤ ُﻮ ۡن‬
“you do not deal unjustly and you are not dealt with unjustly”

 Riba often involved doubling and redoubling of the debt: ً ‫اَﺿ ۡ ﻌ َﺎﻓًﺎ ﻌ َ ﻔَۃ‬
“O you who have believed! Devour not riba, doubled and redoubled.”
 Implication of Quranic Ayahs
pertaining to Riba (continued…)

 Charity is an alternative or an opposite to riba:
ِ‫ﺖ‬ ُ َ ‫ﻮا و‬ َ‫ﯾ‬
“God brings riba to destruction, but gives increase (yurbi) to sadaqah. God
loves not anyone ungrateful and wicked”

 Riba is not like sale:

‫ﻮا‬ َ‫ﻮا ۘو َ ا‬ ِ‫ﻢ ۡﻧﮩُ ﻗَﺎﻟُﻮ ۡۤ ا ا‬ ٰ‫ذ‬
“Those who eat riba do not stand except as stands one whom Shaytan has
thrown by the touch into confusion. That is because they say: "Sale is like
riba". God has permitted sale and forbidden riba”

 Riba leads to destruction and sadaqah to growth:

ِ ‫ﻮاﺮ ۡو َ ُﰉ ِ ﺖ‬ َ‫ﯾ‬
“God brings riba to destruction, but gives increase (yurbi) to sadaqah ”
 Implication of Quranic Ayahs
pertaining to Riba (continued…)

 Dealing in riba is gaining through the wealth of other
people:
“That which you give for riba so that it may increase through the property
of (other) people, will have no increase with God … . “

 Riba was prohibited earlier for the Jews:

‫ﻋَ ﻨۡ ُﮧ‬
“And their taking of riba, though they were forbidden from it ”

 Taking riba is a very serious sin:

‫ﻟِ ٖﮧ‬ ۡ ‫ا ﻓَذﺎَ ۡﻧ ُﻮ‬ ۡ ‫﴾ ﻓَﺎِن‬۲۷۸﴿ ۡ ُ ۡ‫ا ﻣ َﺎ ﺑَﻘ ﻣِﯽ َِﻦ َ اﻟﺮ ّ ِﺑٰۤﻮا اِن ۡ ﮐُﱲﻨ‬ ٰ ‫ﮩَ ﻦ َ ا‬
“O you who believe! Fear God, and give up what remains (due to you) from
riba, if you are believers. If you do not do it, then take a notice of war from
God and his Messenger”
 PROHIBITION OF RIBA IN ISLAM
Evidence from Hadith

َ ‫ آﻛِﻞ‬- َ ‫ﻠﱠﻰ ﷲ ﱠ ُ ﻋ َ ﻠَﯿْﮫِ و َ ﺳ َ ﻠﱠﻢ‬-َ ‫ﻌَﻦ» َ ر َ ﺳ ُﻮل ُ ﷲ ﱠ ِﺻ‬:َ‫ ﻗَﺎل َﻟ‬- ُ‫َﺿ ِ ﻲ َ ﷲ ﱠ ُ ﻋ َ ﻨْﮫ‬- ‫ﻋ َﻦ ْ ﺟ َ ﺎﺑِﺮ ٍر‬
. ٌ ‫ھُ)ﻢ ْ ﺳ َﻮ َاء ٌ ( ر«َو َاهُ ﻣ ُ ﺴ ْ ﻠِﻢ‬: َ ‫ و َ ﻗَﺎل‬،ِ‫اﻟﺮ ﱢ ﺑَﺎ و َ ﻣ ُﻮ َ ﻛِﻠَﮫُ و َ ﻛ َﺎﺗِﺒَﮫُ و َ ﺷ َﺎھِﺪ َ ﯾْﮫ‬

From Jabir : The Prophet ‫ ﺻﻠﯽ ﷲ ﻋﻠﯿہ وﺳﻠﻢ‬cursed the

receiver and the payer of interest, the one who records
it and the two witnesses to the transaction and said:
"They are all alike [in guilt]." (Muslim, Tirmidhi and
Musnad Ahmad)
 PROHIBITION OF RIBA IN ISLAM
Evidence from Hadith(continued…)

ِ ‫ ﺻ َ ﻠﱠﻰﷲ ﱠ ُ ﻋ َ ﻠَﯿْﮫ‬- ِ ‫ ﻗَﺎل َ ر َ ﺳ ُﻮل ُﷲ ﱠ‬: َ ‫ﯿﻞﻟِْﻤ َﻼ َ ﺋِﻜ َ ﺔِ ﻗَﺎل‬ ‫ﻋ َﻦ ْ ﻋ َ ﺒْﺪ ِﷲ ﱠ ِ ﺑْﻦ ِ ﺣ َ ﻨْﻈَﻠَﺔَﻏ َﺴ ِ ا‬
ُ‫ " د»ِر ْ ھَﻢ ُ ر ِﺑًﺎ ﯾَﺄْﻛ ُ ﻠُﮫُاﻟﺮ ﱠﺟ ُ ﻞ ُو َ ھُﻮ َ ﯾَﻌ ْ ﻠَﻢ ُ أَﺷ َ ﺪ ﱡﻣ ِﻦ ْ ﺳ ِ ﺘﱠو َﺔٍﺛَﻼ َ ﺛِﯿﻦ َ ز ِﻧْﯿَﺔً« "ر َ و َ اه‬: َ ‫و َ ﺳ َ ﻠﱠﻢ‬
. ‫أَﺣ ْ ﻤ َ ﺪ ُو َاﻟﺪ ﱠار َ ﻗُﻄْﻨِﻲ ﱡ‬
ُ‫ " ﻣ»َﻦ ْ ﻧَﺒَﺖ َﻟَﺤ ْ ﻤ ُ ﮫ‬: َ ‫اﻹ ْ ِ ﯾﻤ َﺎن ِ ﻋ َﻦ ِ اﺑْﻦ ِ ﻋ َ ﺒﱠﺎسٍو َ ز َاد َ و َ ﻗَﺎل‬ ِ‫و َ ر َو َ ىاﻟْﺒَﯿْﮭَﻘِﻲ ﱡ ﻓِﻲ ﺷ ُ ﻌَﺐ‬
“ «ِ‫ﻣ ِﻦ َاﻟﺴ ﱡﺤ ْ ﺖِ ﻓَﺎﻟﻨﱠﺎر ُ أَو ْ ﻟَﻰ ﺑِﮫ‬

From 'AbdALLAH ibn Hanzalah : The Prophet ‫ﺻﻠﯽ ﷲ ﻋﻠﯿہ وﺳﻠﻢ‬, said:
"A dirham of riba which a man receives knowingly is worse than
committing adultery thirtysix times" (Mishkat al-Masabih, Kitab
al-Buyu', Bab alriba, on the authority of Ahmad and Daraqutni)

Bayhaqi has also reported the above hadith in Shu'ab al-iman with
the addition that "Hell befits him whose flesh has been nourished
by the unlawful."
 CLASSIFICATION OF RIBA


 Riba-un-Nasiyah or Riba-al-Jahiliya or Riba al-Quran
‘Riba An Nasiyah’ is defined as excess, which results from
predetermined interest (sood) which a lender receives over and above
the principle (Ras ul Maal)’

 Riba-al-Fadl or Riba-al-Bai or Riba al-Hadith

‘Riba-al-Fadl is an excess which is taken in exchange of specific
homogenous commodities and encountered in their hand-to-hand
purchase & sale’
CLASSIFICATION OF RIBA (continued…)

Riba-un-Nasiyah or Riba-al-Jahiliya or Riba al-Quran
“O those who believe, fear ALLAH and give up what still remains of the
riba if you are believers. But if you do not do so, then be warned of war
from ALLAH and His Messenger. If you repent even now, you have the
right of the return of your capital; neither will you do wrong nor will you
be wronged.” Al Baqarah 2:278-9

 real and primary form of riba

 premium paid to the lender in return for ones waiting
 giving or taking of every excess amount in exchange of a loan
at an agreed rate irrespective of whether it is low or high
 CLASSIFICATION OF RIBA (continued…)

 Riba-al-Fadl or Riba-al-Bai or Riba al-Hadith


ُ ‫ " ا»ﻫ َﺐ‬: - ِ ‫َ ر َﺳ ُﻮل ُ ا‬: َ‫ﻗﻗَﺎ َلﺎل‬- - ْ ‫ﻋ َﻦ‬
ِ
. ٌ ِ ‫ ُ ﻣ ُﺴ ْ ﲅ‬."‫و َاﻟ ْﻤ ُﻌ ْﻄ ِﻲ ﻓ ِﻪ ِ ﺳ َ ﻮ َارءٌ«َو َ اﻩ‬
The Prophet ‫ ﺻﻠﯽ ﷲ ﻋﻠﯿہ وﺳﻠﻢ‬said, "Sell gold in exchange of
equivalent gold, sell silver in exchange of equivalent silver, sell
wheat in exchange of equivalent wheat, sell barley in exchange of
equivalent barley, sell date in exchange of equivalent date, sell salt
in exchange of equivalent salt, but if a person transacts in excess, it
will be riba. However, sell gold for silver anyway you please on
the condition it is hand-to- hand and sell barley for date anyway
you please on the condition it is hand-to-hand.”
 Six commodities in fiqh terminology are called “Amwal-e-
Ribawiya”
 Medium of
Loan Exchange
Factor

Riba

Quantity
Factor Amwal-e-
Ribawiah
 Classification of Amwal-e-Ribawiya


 Imam Abu Hanifa includes all commodities having characteristics of weight
or volume and are being exchanged

 Imam Shafi includes all commodities that are edible or can be used as a
medium of exchange(currency)

 Imam Maalik includes all commodities that are edible and can be preserved

 Imam Ahmad Bin Hanbal includes:

 first citation conforms to the opinion of Imam Abu Hanifa
 second citation conforms to the opinion of Imam Shafi
 third citation includes three characteristics at the same time i.e. edible,
weight and volume
 Abu Hanifa Imam Shafi Imam Maalik

Medium of
Gold Weight Preserved
Exchange

Medium of
Silver Weight Preserved
Exchange

Dates Volume Edible Edible

Wheat Volume Edible Edible

Salt Volume Edible Edible

Barley Volume Edible Edible

 Money and its
Food
Equivalents

1EQ:Equal Quantity
Barley Salt Wheat Dates Silver Gold
PD: Prompt Delivery

√ √ √ √ PD EQ1, PD1 Gold

Money and
its
√ √ √ √ EQ, PD PD Silver Equivalents

PD PD PD EQ, PD √ √ Dates

PD PD EQ, PD PD √ √ Wheat
Food
PD EQ, PD PD PD √ √ Salt

EQ, PD PD PD PD √ √ Barley
Nature of Money in Conventional Economy


 One of the presumptions of the theory of interest is that money is
treated as a commodity

 Merchant can sell a commodity for a price higher than its cost,
likewise, one can also sell money for a higher price than its face value
(buy-sell situation)

 One can lease his property and charge a rent against it, likewise, one
can also lend money and claim interest thereupon (rent situation)

Islamic rejects this assumption and treats money as a medium of exchange

 Difference between Money and Goods/Services
Money Goods/Services
Money is treated as a commodity in an Goods/services as truly qualify to be
economy categorized as commodities

Money has no intrinsic utility cannot be Goods/Services has intrinsic utility can
utilized in direct fulfillment of human be utilized directly without exchanging
needs and can only be used for acquiring it for some other thing
some goods & services

Money has no quality except as a A commodity can be of different

measure of value and medium of qualities
exchange- all same denomination money
equals 100% to each other

Money cannot be pin-pointed in a Commodity sold or purchased are

transaction of exchange identified to a particular unit

Time value is the basis for charging Profit on trade of goods or charging on
interest on capital providing service is the basis for
earning profit.
 Scope of Prohibition of Riba:
Personal & Commercial Loan

Riba encompasses both types of loan:

 Sarfi Sood (Usury): interest paid on loan taken for personal

need and expenses

 Tijarti Sood(Commercial interest): interest paid on loan

taken for productive and profitable purpose

Prohibition of riba in Islam encompasses

both these types