RIBA' IN ISLAM

DEFINITION OF RIBA

It is instructive that the basic Qur'an definition of riba should come in the very first revelation on the subject:

'And that which you put out (i.e., invest) in riba seeking increase (i.e., profit) through the wealth of others (i.e., at the expense of the wealth of others), will not increase in the sight of Allah (thus Allah disapproves of it); whereas all that you give as charity, seeking Allah's Face (i.e., Allah's Pleasure), such will be blessed with multiple increase.' (Qur'an:- 30:39)

RIBA IN THE HOLY QUR'AN

First Revelation (Surah al-Rum, verse 39)
That which you give as riba to increase the peoples' wealth increases not with God; but that which you give in charity, seeking the goodwill of God, multiplies manifold. (30:39).

RIBA IN HADITH

From Jabir: The Prophet, may peace be on him, cursed the receiver and the payer of riba, the one who records it and the two witnesses to the transaction and said: "They are all alike [in guilt]." (Muslim, Kitab al-Musaqat, Bab la'ni akili al-riba wa mu'kilihi; also in Tirmidhi and Musnad Ahmad).

RIBA IN FIQH

The Four Schools
Abd al-Rahman al-Jaziri's al-Fiqh 'ala al-Madhahib al-Arba'ah, is a compendium on the juristic opinions of the four predominant schools of Muslim jurisprudence. It is held in high esteem and considered to be an authority on the subject. Given below are some relevant excerpts from this book on the subject of riba.

Definition and Classification

Riba is one of those unsound (fasid) transactions which have been severely prohibited (nahyan mughallazan). It literally means increase...

However, in fiqh terminology, riba means an increase in one of two homogeneous equivalents being exchanged without this increase being accompanied by a return. It is classified into two categories.

First, riba al-nasi'ah where the specified increase is in return for postponement of, or waiting for, the payment; for example, buying an irdab (a specific measure) of wheat in winter against an irdab and a half of wheat to be paid in summer. As the half irdab which has been added to the price was not accompanied by an equivalent value in the commodity soled and was merely in return for the waiting, it is called riba al-nasi'ah.

The second category is riba al-fadl, which means that the increase mentioned is irrespective of the postponement and is not offset by something in return. This happens when an irdab of wheat is exchanged hand to hand for an irdab and a kilah (another measure) of its own counterpart, the buyer and the seller both taking reciprocal possession; or when ten carats of gold produce are exchanged for twelve carats of similar gold produce.

Riba would thus be 'increase in capital at the expense of the wealth of others'. In other words if 'my' capital increases through riba, then 'my gain' would be 'your loss', - or 'the loss of others'. Such a transaction does not qualify as 'business'; rather it is the opposite of 'business'! Allah made 'business' permissible (halal), and riba prohibited (haram)! In riba the `loss' of one is the `gain' of the other. In business, on the other hand, Islam ordains an ideal of mutual satisfaction amongst all parties.

This definition of riba is further confirmed in the second revelation on the subject in which Allah condemns the Jews for their oppression, tyranny and evil or wicked conduct (zulm / zalim). Among their acts of oppression was their taking riba, 'although it had been prohibited for them', and, as a consequence of their taking riba, Allah went on to declare, they were:

' . . . consuming the wealth of mankind through means which were false and wrong (batil) . . .'
(Qur'an:- 4:161)

And so, what we now have is a definition of riba as follows: increase in capital, at the expense of the wealth of others, through means which are false and wrong.

In the third and fourth revelations of the Qur'an on the subject of riba, Allah, the Supreme, identifies one form of riba, i.e., lending on the condition that the capital sum lent be returned with a pre-determined additional amount (today called interest). (Qur'an:- 3:130, 2:279)

Riba is, therefore, an 'increase'. When used in the Qur'an it refers to unlawful increase derived through the interest on capital which has been loaned, or increase in which the wealth which belongs to others is wrongfully appropriated. Riba as interest on capital loaned was prevalent in Arabia in both personal and commercial loans.

The Qur'an directs particular attention to one form of riba mentioned above, that of borrowing and lending on 'interest', i.e., transactions in which the principal sum which is 'lent' increases through its repayment with a contractually pre-determined extra amount known today as 'interest', regardless of the amount of 'interest' involved.

This is clear from the very last revelation in the Qur'an (2:278-281) revealed to the Prophet which orders the believers to give up whatever remained of (their demand for) riba. It went on to explain that when a believer complied with this divine order he was then entitled to the return of only the principal sum lent (i.e., the principal sum without any interest whatsoever).

(Qur'an:- 2:278).

In fact the Qur'an rejects the view that such transactions as 'lending on interest' are business transactions. They are not! Allah has made business permissible (halal) and has made riba prohibited (haram). Riba is not business. All business takes place in the free and fair market, where there is risk, and where there can be profit or loss.

In riba the market is bypassed or circumvented and corrupted. The purpose for this is to eliminate risk and, as a consequence, eliminate all possibilities of loss! That is not fair! That market will no longer be a free and fair market. If A is insulated against loss while B is forced to assume the risk of loss it is clear that there will be a one-way long-term transfer of wealth from B to A. B will, in fact, be absorbing all losses, - his, as well as those of A. And that is precisely what is happening in today's world economy.

The competition in interest rates between banks and other lending institutions does not provide evidence of a free and fair market. Rather it is analogous to the competition in rates between hired killers.

Banks are constantly trying to relocate from those areas where poor people live, and banks don't like to lend to the poor. Such lending forces the banks to assume risks! And banks do not want to assume risks since they want to eliminate all possibilities of loss when they extend loans.