(30:39) fileincrease on the principal payable by the loanee” (Ahkamul Quran p. 465, 469) Imam Fakhruddin Al-Raazi : "As for the riba An-Nasiah, it was a transaction well-known and

4 STAGES

First Stage

(30:39)

Compare riba with zakat & charity

Praising zakat & charity, not riba

Second Stage

(4:160-161)

Attaching the practice of riba with the Jews

Consider the practice as an inequity (zulm)

Third Stage

(3:130)

Prohibiting the practice of charging double and multiple riba

Fourth Stage

(2:275-281)

Conclusively prohibiting all forms of riba

Any excess over the capital is disallowed

Historical Context of Verses in the

Holy Quran

• The First verse is a part of Surah Ar-Rum revealed inMakkah

"And whatever riba you give so that it may increase in the wealth of the people, it does not increase with Allah.”

•The second verse is of Surah Al-Nisaa. Here theterm riba is used in the context of sinful acts of theJews

“And because of their charging riba while they were prohibited from it."

Historical Context of Verses in

the Holy Quran

Historical Context of Verses in the

Holy Quran

• Third verse of Surah Al-i-'Imran :

“O those who believe do not eat up riba doubled and redoubled”

• The fourth set of verses is from Surah Al-Baqarah

"O those who believe, fear Allah and give up what still remains of the ribaif you are believers. But if you do not, then listen to the declaration ofwar from Allah and His Messenger. And if you repent, yours is yourprincipal. Neither you wrong, nor be wronged."

Historical Context of Verses in the Holy Quran

Riba in Hadith

. From Jabir: The Prophet, may peace be upon him,cursed the receiver and the payer of interest, the onewho records the transaction and the two witnesses tothe transaction and said: "They are all alike [in guilt]”(Muslim, Kitab al-Musaqat, Bab la‘ana akil al-riba wamu’kilahu; also in Tirmidhi and Musnad Ahmad).

Riba in Hadith

From Abu Hurayrah: The Prophet, peace be upon him, said: "Riba has seventy segments, the least serious being equivalent to a man committing adultery with his own mother” (Ibn e Majah).

Definition of Riba

• Not defined in the Holy Qur'an

• Prohibition of Riba is similar to the prohibition of pork, liquor,

gambling, adultery etc., for which no specific definition was

given.

• Arabs and all the previous societies had no confusion about its

exact sense.

Definition of Riba

Definition of Riba from Hadith:

It is reported from Hazrat Ali (RA) that the Holy Prophet صلى هللا

عليه وسلم has said,

“Every loan that derives a benefit (to the creditor) is Riba”

Definition of Riba

Definition of Riba according to interpreters of Quran:

• Imam Abubakr Al-Jassas:

– "And the riba which was known to and practiced by the Arabs was that they

used to advance loan in the form of Dirham (silver coin) or Dinar (gold coin)

for a certain term with an agreed increase on the amount of the principal

advanced.“

– On the basis of this practice, the same author has defined the term in the

following words:

“The Riba of Jahiliyya is a loan giving for stipulated period with a stipulated

increase on the principal payable by the loanee” (Ahkamul Quran p. 465, 469)

Imam Fakhruddin Al-Raazi :

"As for the riba An-Nasiah, it was a transaction well-known and

recognized in the days of Jahiliyya i.e., they used to give

money with a condition that they will charge a particular

amount monthly and the principal will remain due as it is. Then

on the maturity date they demanded the debtor to pay the

principal. If he could not pay, they would increase the term and

the payable amount. So it was the riba practiced by the people

of Jahiliyya.“(Al Tafsir Al Kabir p. 91)

Classification of Riba

Riba is mainly of two types:

1. Riba Al Quran ( Loan Riba)

2. Riba Al Hadith (Trade Riba) it is also called Riba al

Fazal.

Definition 1

Loan transaction:

A predetermined excess or surplus over and above theloan received by the creditor conditionally in relationto a specified period

Definition 2

Trade transaction:Unlawful gain derived from the quantitative inequality

of the counter-values in any transaction purporting toeffect the exchange of 2 or more species which belongto the same genus(category) and are governed by thesame efficient cause(illah)

(RIBAL QURAAN)

RIBAL QARZ RIBAL JAHILLIYA

Any predetermined benefit for theowner of debt stated in thecontract, which the debtor need tofulfil

E.g.: interest stated in loancontract

The surplus or excess paymentabove the original debt as apenalty to the debtor due tohis inability toservice the loanrepayment within thestipulated timeE.g: .: interest in credit cardtransactions due to the delayin the repayment

– Any additional quantity or inequality in the exchange of goods from the similar type of the ribawi items

– (Quantity Factor)

– Any delay in the exchange of the ribawi items from the same type and category

– (Time Factor)

(Ribal hadis)

Riba al-Fadl

Riba-Nasiya

Riba Al fadl• The Holy Prophet, Sall-Allahu alayhi wa sallam, prohibited

some other transactions, which were not known previously

as Riba.

• The Holy Prophet, Sall-Allahu alayhi wa sallam, issued the

following injunction:

Riba Al fadl• Under riba al-fadl, the Holy Prophet, Sall-Allahu alayhi wa

sallam, has identified six commodities, i.e.:

– Gold,

– Silver,

– Dates

– Salt,

– Wheat, and

– Barley

• It was not clearly mentioned in the hadith whether this rule

is limited to these six commodities or it is applicable to

some other commodities.

Riba Al fadl• Measureable

– In terms of weight

– In terms of Volumes.

Riba Al fadl

JURIST MEASUREABLE/WEIGHTABLE

MEDIUM OF EXCHANGE

FOOD ITEM ABLE TO STORE

Imam Abu Hanifa & Imam Ahmad

X

Imam al-Shafii X X

Imam Malik X X

• This causes difference of opinion among Muslim Jurists.

• Following table illustrates the difference of opinion among

the Muslim jurists:

General definition of Riba

• A surplus of any type without due counter value or rightful consideration (Iwadh) in a commutative transaction in which one asset/good/value is exchanged for another.

Arguments in favor of Riba (common myths) & their rebuttal...1

It is argued that

– Prohibition of riba should be restricted to limited transactions

specifically mentioned in the Hadith.

– Its prohibition cannot be extended to modern banking system.

– The modern banking system was not imaginable at the time

of revelation of verses.


Consumption and production loans

• Holy Quran has prohibited to claim any increase over andabove the principal in the case of consumption loans only.

• These consumption loans were taken by the poor andneedy to fulfill their day to day needs such as food andclothing.

• It is injustice to claim an additional amount on the principalfrom a poor person.

• The Holy Quran has taken this practice as severe offenceagainst humanity.



• Productive and commercial loans were not in the vogue in the days of Holy Prophet صلى هللا عليه وسلم

• Nor the basic philosophy for the prohibition of Riba could be applied to these types.

• Therefore productive and commercial loans do not fall under the ambit of Riba prohibited in the verses of Quran.



The above argument is not valid basically due to three reasons:

1. Validity of a transaction is not based on the financial status of the party. (ie Sale ijarah gambling)

2. The Nature of Qur’anic Prohibitions.

3. Banking and productive loans in the age of antiquity.(surah e quraish and ghazwa e badar)


• Ibn Jarir al-Tabari says:

"The tribe of Banu Amr used to charge interest from thetribe of Banu al-Mughirah and Banu al-Mughirah used topay them interest.“

• These tribes used to work as a joint stock company tofinance their trade-caravans.

• Loans taken by these tribes were not for the purpose ofconsumption only; rather these were commercial loans.


Does Riba only refers to excessive rates of interest ?

• It is argued that prohibition of Riba is applicable to onlythose interest transactions where the rate of interest isexcessive or exorbitant.

• The verse of Surah Al-e-Imran is sought to Support thisargument.

• Since the Banking interest is normally not so high it is notcovered by this prohibition.



This argument is not valid due to the following reasons:

• It is a well established fact that different verses of the HolyQuran on a single subject must be studied in juxtapositionwith each other.

• No verse can contradict another verse on the same subject.

• The verse 278 of Surah Al Baqarah clearly states that give up“whatever remains of Riba”



This argument is not valid due to the following reasons:

• The verse (Al Baqarah 2:41) States “ Do not sell myverses for a little price.”

• Similarly the verse (Al Noor 24:33) states “And do notforce your slave girls to prostitution if they want toremain chaste”.

• Interpretation of the Holy Quran should be based on theexplanation given by or inferred from the Ahadith.

• Under the capitalist system, loans are purely commercial transactions

meant to yield a fixed income to the lenders

• Islam does not recognize loans as income – generating transactions

they are meant only for those lenders who do not intend to earn a

worldly return through them

• They, instead lend their money either on humanitarian grounds to

achieve a reward in the here after, or merely to save their money

through a safer hand.

Arguments in Favor of Riba & Their Rebuttal

The reality of Qurz in Islam;

Is lending a commercial transaction or a charitable one?

However, if his intention is to share the profits of

the borrower, he shall have to share his loss also

he will have to undertake a joint venture with the

opposite party whereby both of them will have a

joint stake in the business and will share its out

come on fair basis

Arguments in Favor of Riba & Their Rebuttal

Overall effects of Interest:

Interest-based loans have a persistent

tendency in favor of the rich and against

the interests of the common people. It

carries adverse effects on production

and all location of resources as well as

on distribution of wealth.

Documents

(30:39) fileincrease on the principal payable by the loanee” (Ahkamul Quran p. 465, 469) Imam Fakhruddin Al-Raazi : "As for the riba An-Nasiah, it was a transaction well-known and