What is Riba?

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What is Riba?

What is Riba?

Forms of Riba

Prohibition of Riba in the Quran

Prohibition of Riba in Hadith

Types of Riba

What is Riba?

  • Riba is an Arabic word which is derived from the verb Raba, which means ‘to increase’, ‘to grow’, and ‘to exceed’. It can be translated as usury or interest. It refers to any excess or premium charged on money lent. It is some kind of an increase in a loan, which might end up doubling or quadrupling the debt.
  • The meaning of Riba has been clarified in the following verses of the 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)

Forms of Riba

Some forms of riba include hoarding, selling of debts, dealing in share market derivatives, Speculative transactions, bribery, lending or borrowing on interest and other transactions where a fixed interest is received or paid.

Prohibition of riba in Quran

الَّذِينَ يَأْكُلُونَ الرِّبَا لاَ يَقُومُونَ إِلاَّ كَمَا يَقُومُ الَّذِي يَتَخَبَّطُهُ الشَّيْطَانُ مِنْ الْمَسِّ ذَلِكَ بِأَنَّهُمْ قَالُوا إِنَّمَا الْبَيْعُ مِثْلُ الرِّبَا وَأَحَلَّ اللَّهُ الْبَيْعَ وَحَرَّمَ الرِّبَا فَمَنْ جَاءَهُ مَوْعِظَةٌ مِنْ رَبِّهِفَانتَهَى فَلَهُ مَا سَلَفَ وَأَمْرُهُ إِلَى اللَّهِ وَمَنْ عَادَ فَأُوْلَئِكَ أَصْحَابُ النَّارِ هُمْ فِيهَا خَالِدُونَ

“Those who consume interest cannot stand [on the Day of Resurrection] except as one stand who is being beaten by Satan into insanity. That is because they say, “Trade is [just] like interest.” But Allah has permitted trade and has forbidden interest. So whoever has received an admonition from his Lord and desists may have what is past, and his affair rests with Allah. But whoever returns to [dealing in interest or usury] – those are the companions of the Fire; they will abide eternally therein.” (Quran 2: 275)

  • يَمْحَقُ اللَّهُ الرِّبَا وَيُرْبِي الصَّدَقَاتِ وَاللَّهُ لاَ يُحِبُّ كُلَّ كَفَّارٍ أَثِيمٍ

“Allah destroys interest and gives increase for charities. And Allah does not like every sinning disbeliever” (2:276)

  • يَا أَيُّهَا الَّذِينَ آمَنُوا اتَّقُوا اللَّهَ وَذَرُوا مَا بَقِيَ مِنْ الرِّبَا إِنْ كُنتُمْ مُؤْمِنِينَ

“O you who believe! Be careful of (your duty to) Allah and relinquish what remains (due) from usury, if you are believers. “(Quran 2: 278)

Prohibition of Riba in Hadith

  • “Abu Huraira reports that Allah’s Messenger (saw) said: Riba is of 70 different kinds, the least grave of it being equivalent to a man marrying (i.e sleeping) with his own mother.” (Ibn Majah, Baihaqi)
  • Abdullah ibn Hanzala reported that Allah’s Messenger of Allah said: A dirham of riba, which a man receives knowingly, is worse than committing Zina (adultery) 36 times. (Ahmad) 
  • Jabir reported that Allah’s Messenger (saw) cursed the accepter of interest and its payer, and one who records it, and the two witnesses, and he said: They are all equal (in guilt). (Muslim) 
  • Riba is haram in all of its aspects, as the Prophet (saw) said: “Allah has cursed the one who consumes riba, the one who gives it, the one who witnesses over it, and the one who writes down the transaction.” (Muslim),
  • “The selling of gold for gold is Riba except if the exchange is from hand to hand and equal in amount, and similarly, the selling of wheat for wheat is Riba unless it is from hand to hand and equal in amount, and the selling of barley for barley is Riba unless it is from hand to hand and equal in amount, and the selling of dates for dates is Riba, unless it is from hand to hand and equal in amount”-(Bukhari Volume 3, Book 34, Number 382).

Types of Riba

There are two types of Riba

  1. Riba An Nasiyah or Riba Al Jahiliya. It’s excess or an increase in the payment made by a borrower to the lender over and above the original loan. This amount charged due to delay in payment of the principal amount. This type of riba is called riba al-Quran as it is specifically prohibited in the Quran and it was commonly practised in Arab society at that time. Examples, Credit cards, Car or automotive loan, Personal loan,  Capital market bonds,etc.,
  2. Riba Al Fadl, Riba An Naqd or Riba Al Bai. It refers to excess compensation without any consideration resulting from a sale of goods. It happens in a sale or exchange transaction of a commodity. When two people exchange the same commodity but in unequal amounts, the extra would be considered as  This type of Riba is called Riba al-Hadith as it is not directly mentioned by the Quran but, the Prophet (saw) has termed it as riba in the following hadith: “Gold for gold, silver for silver, wheat for wheat, barley for barley, the date for date, salt for salt, must be equal on both sides and hand to hand, whoever pays more or demands more (on either side) indulges in Riba” [Sahih Muslim]. So, there are two main criteria to consider any transaction as Riba. These are:
  • The commodities must be exchanged on the spot and not delayed.
  • There should not be the difference in quality in exchange for similar commodities. Also, the commodities must be equal in quantity.

“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)

Here is a compilation of few more articles on Riba:

Quran on Riba

Prohibition of Riba in stages

10 reasons behind the prohibition of Riba

Dangers of Riba

5 ways to stay away from Riba

Prohibition of Usuary in major religions