Dangers of Riba

The Dangers of Riba

Dangers of Riba

The word “Riba” means excess, increase or addition. According to shariah, it is any excess compensation without due consideration. Riba or usuary is harmful and exploitative in nature. It is due to the following reasons:

1. Riba leads to Exploitation rather than Partnership

Riba contradicts the spirit of brotherhood and results in hard-heartedness. It is much better to enter into a contract of profit & loss sharing and the sharing of risks of a business or investment rather than establishing lender and borrower relationship where the lender gains an opportunity to grip the borrower in the trap of Riba. An example of this is:

In case of default by mortgage-holders on their home loan, banks frequently take back their home and put them out on the street though they have already paid the full price of the house.

It is unethical at all to gain the advantage of poor and needy people in their hard times by charging interest double and multiplied over and above the principal amount. As we know that it becomes difficult for the borrower to even pay interest amount regularly. When we read the Noble Quran, Allah orders us to create ease for others, not a difficulty.

“….and for their charging riba (usury or interest) while they were forbidden from it, and for their devouring of the properties of the people by false means. We have prepared, for the disbelievers among them, a painful punishment.”(Quran 4:161)

Again, Allah says, “O you, who believe, do not devour each other’s property by false means, unless it is trade conducted with your mutual consent. Do not kill one another. Indeed, Allah has been Very-Merciful to you.” (4:29)

1. Riba leads to Exploitation rather than Partnership

2. Riba hinders in promotion of business, commerce and other economic activities.

In Riba based economy. Those who have money to be lent are not excited to work hard for earning a livelihood as they are already receiving interest money over their wealth. But, this money and his energy can be better utilized in business and economic activities like trade, industry and commerce. It is prerequisite for a sound economy. The danger of Riba is that it creates a huge gap between those who have and those who have not. There is also misallocation of Capital. This is appropriate for a sound economy that lenders and investors must focus on underlying businesses success which could generate profits and thus creates economic value.

2. Riba hinders in promotion of business, commerce and other economic activities.


3. Riba is one of the major contributors to inflation.

Riba leads to inflation. Inflation means a rise in prices of goods and services. Inflation is a devaluation of paper money which is caused by banks issuing loans and hence flooding the market with more money. More money in the market creates more demand which is higher than the supply of goods and services. It results in a hike in prices which is inflation. It is said that an Islamic economy is seen not so vulnerable to price fluctuations in comparison with the conventional economy. The reason is that the due prohibition of interest, lending as a mode of finance no longer remains popular. In Islamic banking system where the transactions are based on profit and loss sharing, the way of money creation keeps the supply of money tied to the supply of goods and services.


4. Increasing foreign debt on nations and thus destroying economies.

There is huge interest due on countries which are to be paid to the world bank. There is a continuous reduction of Gold reserves of countries. Countries debt increasing with the passage of time. The large and small nations have mounting foreign debts. Former President Obasanjo commented on the debt Nigeria faces:

“All that we had borrowed up to 1985 or 1986 was around $5 billion and we have paid about $16 billion yet we are still being told that we owe about $28 billion. That $28 billion came about because of the injustice in the foreign creditors’ (lenders) interest rates. If you ask me what is the worst thing in the world, I will say it is compound interest.” – Jubilee 2000 news update, August 2000

President Obasanjo, commented on the debt Nigeria

Moreover, according to World Bank International Debt Statistics, published on October 2, 2019, Debt Stocks of Developing Countries Rose to $7.8 Trillion in 2018.

5. Social effects

In Riba based system, the rich will exploit the poor. It leads to cutting ties and creating bad feeling between those who have and those who have not. Conflicts arise and social order is threatened.  Riba also discourages people from doing well to one another. It creates socioeconomic classes where the lender is more likely to be wealthy and the borrower poor. The charging of interest is among those wrong behaviours that result in the corruption of society.

“Calamities have appeared on land and sea because of what the hands of the people have earned, so that He (Allah) makes them taste some of what they did, in order that they may return (to the right way).” (Quran: 30: 41)

Social effects of Interest

So, to come out of this destructive danger it becomes important to abandon Riba system and adopt Zakah System. As stated in the glorious Quran.

Whatever Ribā (increased amount) you give, so that it may increase in the wealth of the people, it does not increase with Allah; and whatever Zakāh you give, seeking Allah’s pleasure with it, (it is multiplied by Allah, and) it is such people who multiply (their wealth in real terms.) (Quran: 30: 37-39)


Riba is the destroyer of the economy. It is not only prohibited in Islam but in almost all major religion. It is mentioned in the Old Testament

“If one of your countrymen becomes poor and is unable to support himself among you, do not take interest of any kind from him but fear your God that your countryman may continue to live among you. You must not lend him money at interest or sell him food at a profit” (Leviticus, 25:35-37)

It is mentioned in the New Testament,

 “Do not charge your brother interest, whether on money or food or anything else that may earn interest.” (Deuteronomy 23:19)

The word “Riba” is used in the Holy Quran 8 times. In 30:39, 4:161, 3:130,  2:276, 2:278 and 3 times in 2:275.

In The Prophet (saw) declared war on usury and those who deal in it; he pointed out its dangers to society, saying,

“When usury and fornication appear in a community, the people of that community render themselves deserving of the punishment of Allah.”

(Reported by Al-Hakim; Abu Y’ala has reported something similar on good authority)

So, one must try best to stay away from Riba as much as possible(Learn how to stay away from Riba). In today’s world majority is involved in riba based transaction, but it does not make it halal. One must keep in mind that the life of this world is not eternal, what is eternal is hereafter.

“And whosoever fears Allah and keeps his duty to Him, He will make a way for him to get out (from every difficulty), and will provide him sustenance from where he never even imagined. And whosoever puts his trust in Allah, Allah is sufficient for him.”(Qur’an 65:2)