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The Concept of Riba in Islam Documentation

Riba refers to interest charged on loans according to Islamic law. There are two main types of riba: interest charged on loans (riba al-nasiyah) and interest from unequal exchanges (riba al-fadl). The Prophet Muhammad categorized riba as a major sin and said that even one coin of interest knowingly received is worse than committing adultery thirty-six times. Riba is prohibited in Islam because it makes the rich richer while making the poor poorer and perpetuates inequality. While interest earnings cannot be donated to charity, repentance for riba is allowed and interest-based amounts must be returned.

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169 views2 pages

The Concept of Riba in Islam Documentation

Riba refers to interest charged on loans according to Islamic law. There are two main types of riba: interest charged on loans (riba al-nasiyah) and interest from unequal exchanges (riba al-fadl). The Prophet Muhammad categorized riba as a major sin and said that even one coin of interest knowingly received is worse than committing adultery thirty-six times. Riba is prohibited in Islam because it makes the rich richer while making the poor poorer and perpetuates inequality. While interest earnings cannot be donated to charity, repentance for riba is allowed and interest-based amounts must be returned.

Uploaded by

umar03029452584
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© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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The Concept Of Riba in Islam

 Definition:

Riba is an Arabic word that means “to increase" or “to exceed" and is commonly used in
reference to unequal exchanges or charges and fees for borrowing. Riba is a concept in
Islamic banking that refers to charged interest. It has also been referred to as usury, or the
charging of unreasonably high-interest rates. There is also another form of riba, according to
most Islamic jurists, which refers to the simultaneous exchange of goods of unequal
quantities or qualities.

 Types of Riba:
 Riba in a loan contract (Riba al-Nasiyah)
 Riba in a sale or exchange contract (Riba al-Fadl)

The Prophet Muhammad (PBUH) categorized riba its imposition, consumption, contractual
inscription, and validation as the fourth of the “seven deadly deeds” meaning the seven
major sins.

He said;

“A single coin of riba that a man receives knowingly


is worse than committing adultery thirty-six times”
 WHY IS RIBA/INTEREST PROHIBITED?

The main reason riba is prohibited is the concept that it makes the rich richer and the poor
poorer. There is an inequality in the dealings between the parties that is frowned upon in
Islam. Interest is seen as perpetuating and often increasing the gap between rich and poor
humans in society.

In Islam, riba money from interest can be donated to charity. The donor must make clear to
the charity that the donation money is interest money and not zakat or sadaqah. Riba money
can be spent by charitable organisations on buying essential supplies for the poor. The
donation money cannot be used to purchase Qurans or to build a mosque.
 Unfair Enrichment:

Riba is forbidden to prevent unfair enrichment, especially in transactions involving the


exchange of goods or loans.

 Consequences:

The Quran warns of severe consequences for those who engage in riba, both in this world
and in the Hereafter.

 Alternative Financial Practices:

Islamic finance promotes alternative methods such as profit-and-loss sharing, partnership-


based contracts, and interest-free lending to ensure ethical and equitable financial
transactions.

 Repentance:

The Quran allows for repentance, and individuals engaged in riba are encouraged to repent,
return any unlawfully gained amounts, and correct their financial practices.

 Social Welfare:

The prohibition of riba is tied to broader principles of social welfare, economic stability, and
the well-being of the community.

 Legal Consequences:

In Islamic legal systems, engaging in riba may have legal consequences, and Islamic
financial institutions operate in compliance with Sharia principles, avoiding interest-based
transactions.

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