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Islam is a complete code of life offering its own economic, political and social ways to direct a Muslim’s conduct in all spheres of life. Ordinances are laid down in the acknowledged source of guidance, The Holy Quran. It is unanimously agreed by all Islamic School of Thoughts that the practice of riba “usury” is forbidden in Islam.

In fact, the word “riba” appears eight times in the Quran and it is dealt with in twelve verses. Originating from “raba”, riba means addition, increase or swell and it is synonymous to interest and usury. It is generally considered that the word “al-riba” mentioned in the Quran is some kind of in vogue commerce during the pre-Islamic periods, similar to our modern secular economic systems where interest plays a vital role.

However, Muslim Jurists have categorized riba in two types: riba al-nasi’ah and riba al-fadl.

Riba al-nasi’ah: it is to take interest on any money taken on loan. It is prohibited according to the Quran and Islamic Laws to take interest on a loan as a reward for waiting, as implied in the term nasi’ah, which means postpone or wait.

Riba al-fadl: it implies the taking of a superior thing of the same kind of goods and giving more of the same kind of goods of inferior quality; it is related that Abu Said al-Khurdi said: “the Prophet Muhammad (saw) has said that gold in return for gold, silver for silver, wheat for wheat, barley for barley, dates for dates and salt for salt, can be traded if and only if they are in the same quantity and that is should be hand to hand. If someone gives more or takes, then he is engaged in riba and accordingly has committed a sin.” Islam condemns all forms of unjust exchange in any business dealings.

Consequently, riba is any increase sought through illegal means, such as usury, bribery, profiteering and fraudulent trading. All unlawful grasping of wealth at other people’s expense is condemned. Economic selfishness and many kinds of sharp practices on an individual, national and international level come under this ban. The principle is that any profit which we should seek should be through our own exertions and at our own expense, not through exploiting other people or at their expense. Hence, Riba is the extreme opposite of charity, unselfishness, striving ourselves in the service of Allah and our fellow men.

“Those who devour usury will not stand except as stands one whom the evil one by his touch has driven to madness. That is because they say, “trade is like usury”, but Allah has permitted trade and has forbidden usury”(2:275)

“Allah will deprive usury of all blessing, and will give increase for deeds of charity, for He loveth not creatures ungrateful and wicked.”(2:276)

“Oh you who believe! Fear Allah and give up what remains of your demand for usury, if you are indeed believers.”(2: 278)

“If you do not, take notice of war from Allah and his Messenger but if you repent you shall have your capital sums. Deal not unjustly and you shall not be dealt with unjustly.” (2:279)

“That which ye lay out for increase through the property of (other) people, will have no increase with Allah: But that which ye lay out for charity, seeking the countenance of Allah (will increase): it is these who will get a recompense multiplied”. (30:39)

“That they took riba (usury), through they were forbidden and that they devoured men’s substance wrongfully – We have prepared for those among men who reject faith a grievous punishment.” (4:161)

“O ye who believe! Devour not usury doubled and multiplied; but fear Allah, that ye may (really) prosper.” (3:130)

The above mentioned verses of the Holy Quran give us a clear insight of the consequences of riba and an assertion of the complete prohibition of riba which was revealed in sequence.

The word Riba has given rise to a lot of controversy. In fact, in modern economic days, interest is the livelihood of the existing financial institutions and the modern banking system which is structured on the basis of interest is in conflict with the principles of Islam, prohibiting riba.The modern Islamic banks, through a method of participation, are in fact trying to correct this anomaly.

 Reference: The Holy Quran, translation by A. Yusuf Ali