ISLAMIC CONCEPT OF RIBA
MARIA ABBASI (038)
MARIUM JAFRI (310)
KASHAF UL MALAIKA (326)
ZOHAIB AHMED (316)
SAAD AMIN (157)
HIRA KHURSHEED (255)
SUMBITTED TO: DR. AMBER GHANI
INTRODUCTON
The Federal Shariah Court of Pakistan in a recent case, Mahmood ur Rahman Faisal of Law held
that riba is unlawful and thus, made an order that all banks in Pakistan adopt Islamic principles in
eliminating all elements of riba from its operation. The Federal Shariah Court also resolves that:
(a) Any excess of profit on a loan for a deferred payment when the borrower is unable to repay
it after the fixed period and similarly any excess or profit on a loan at the time of contract,
both are riba forbidden in Shari’ah.
(b) The alternate banks should be established according to the injunctions of Islam to provide
economic facilities.
(c) The Academy resolved to request all the Islamic countries to establish banks based on
Shari'ah principles to fulfil all the requirements of a Muslim accord his beliefs so that he may
not face any repugnancy.
From the above decision, evidently the main element to be eliminated in the present banking
system in order to make it conform to the prescription of the Shari'ah is riba. Hence, it is
indispensable that the nature and rules pertaining to riba be clearly defined. This chapter discusses
the nature of riba, its prohibition in the Quran and Sunnah, and the juristic opinions and differences
around the prohibition of riba.
(Al Baqarah: part of ayah 275., n.d.)
(FSC, 1992, p.89, n.d.)
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THE MEANING OF RIBA
Literally, the word riba means excess, increase, augmentation, expansion, or growth. The word
means increased and mean the addition to a thing. An elevated place or hill is called because of
its 'superiority' (or increase) in height in comparison with the adjacent places.4 The Quran also
uses the riba in this sense, for example in Surah al Haj part of ayah 5 which reads:
“And (further), you see the earth barren and lifeless, but when We pour down rain on it, it is
stirred (to life), it swells, and it puts forth every kind of beautiful growth (in pairs).”
Muslim writers give various definitions to the term riba. Basically, it is used to denote a specific
kind of excess.
This excess originates either in the thing itself, or an increase in an exchange or sale of money as
the sale of one dirham for two dirhams, or of commodities as in cases of barter of a measure for
more of the same merchandise.
Ibn Hajar al Asqalani held that the essence of riba is excess whether it is in the commodity itself
or in money. Abu Bakr Ibn al ‘Arabi held that every excess in return of which no reward is paid
is riba.
Abu al A’la al Mawdudi 8 defined riba as “a predetermined excess or surplus over and above the
loan received by the creditor conditionally in relation to a specified period”. This definition
entails that riba contains the following three elements:
(a) excess or surplus over and above the loan capital.
(b) determination of this surplus in relation to time.
(c) stipulation of this surplus in the loan agreement
Ataul Haque defined riba as
"An increase or excess which, in an exchange or sale of a commodity, accrues to the owner
(lender) without giving in return any equivalent counter or recompense to the other party.
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From the above definitions, we can conclude that there are actually two distinguishable types of
excess, i.e., the excess accruing from a loan transaction in e to time: and the excess accruing in a
sale or barter transaction. These two types of excess are termed by the jurists as riba al nasiah
and riba al fadl respectively.
THE DIFFERENCE BETWEEN RIBA AND TRADE
Riba is different from trade, though, the difference may be very fine. Fine as it may, one is to be
distinguished from the other since the Quran itself declared such distinction, attributing one with
prosperity and blessings, and the other with wrath and war.
Abu al A'la al Mawdudi12 gave four fundamental differences between trade and riba, i.e.
(a) In trade the purchaser and vendor exchange on the basis of equality, for the purchaser derive
profit from that which he has purchased from the vendor, while the latter gets profit in
consideration of the labor and time which he spends in procuring that commodity for the
purchaser. In interest-transactions there is no division of profits between the two parties on
the basis of equality. The creditor gets for himself a definite amount of money for his loan,
but all the debtor gets is certainly the time to use the money, whilst time does not necessarily
procure him profit.
(b) In trade, however great a profit the vendor might demand from the purchaser, he does so
only once. In interest dealings, the creditor does not cease to demand his interest (as long
as the principal is not returned).
(c) In trade, the moment a commodity is exchanged for its price, the transaction comes to an
end. The purchaser does not give anything after that transaction to the vendor. In hire
transactions, whether of house, land, or other material, the original remains intact and is
returned to the owner afterwards. It is only for the usufruct of it (use and fruit) that the hirer
has to pay rent to the owner. In the case of interest, the debtor actually spends the amount
borrowed from the creditor and has to return the same amount with an addition by way of
interest.
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(d) In trade, professions and crafts, a person derives benefit after undergoing labor, hardship,
or by his skill or art. In interest transactions, he only lends out his surplus amount and
becomes, without any personal labor or hardship, a prominent partner in the earnings of his
debtor.
It should be clear from the above discussion that riba is different from bay’. The Quran in
unambiguous terms puts bay’ against the concept of riba, allowing the former while prohibiting
the latter.
(Ataul Haque; quoted by Shahrukh Rafi Khan, “Profit and Loss Sharing”, Oxford University
Press,, n.d.)
Explanation About the Riba Prohibited in the Quran
The riba which is prohibited by the Quran is called Riba al Duyun, or Riba al Jahili, or Riba al
Nasiah. Some of the followers of the Prophet consider it as the only type of riba which is prohibited
in Islam. They depend on the saying related to fun Abbas after Usamah ibn Zaid which reads to
the effect:
“There is no riba except riba al Nasiah”
This argument has also been said by Zaid bin Arqam, at Bara' bin Azib, and Ibn at Zubair, among
the companions of the Prophet.
Ibn Qayyim al Jawziyyah, calls this type of riba as al Riba al Jaliyy (obvious riba), distinguishing
it from another type which he calls al Riba al Khafiy (concealed riba). He says that riba al nasiah
was practiced by the pagan Arabs who used to defer the due date in exchange for an increment
added to the principal. The longer the period of the loan, the more one received in return, until the
principal is doubled or multiplied.
In this connection, Abu Zahrah says that these tests indicate the following:
(a) Linguistically, the word al Riba has been used by the Arabs to denote the increment in the
loan in exchange for time. This kind of riba has been prohibited by the Quran. The Prophet
described this type of riba as al riba al Jahili. Jurists as well as non-jurists are not in a
position to suggest that the linguistic meaning of. the word is obscure, or the real meaning
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cannot be defined because the meaning has been determined by the language, and the
Quranic text in ayah 2:279 specifies it by "but if you turn back, you shall have your capital
sums".
(b) There is a consensus among scholars that that the accrued amount which is added to the
capital in exchange for time is a! riba which falls under the text of the Quran. Thus, anyone
who rejects it undoubtedly rejects a basic religious fact which necessarily became known
to him.
RIBA IN THE SUNNAH
There are many narrations regarding the prohibition of riba in the Sunnah. It suffices to mention a
few of these narrations in this paper. Among these narrations are the prohibition of riba in general,
and the prohibition of specific types of riba that are riba al nasiah and riba al fadl.
Prohibition of Riba in General
From Jabir: The Prophet, may peace be on him, cursed the receiver and the payer of interest, the
one who records it and the two witnesses to the transaction and said:
“They are all alike (in guilt)”.
Prohibition of Riba al Nasiah
• "From Usamah bin Zaid: The Prophet s.a.w. said: "There is no riba except in nasiah
(waiting)"
• "From Anas bin Malik: The Prophet s.a.w. said: "When one of you grants a loan and the
borrower offers him a dish, he should not accept it; and if the borrower offers a ride on an
animal, he should not ride, unless the two of them have been previously accustomed to
exchanging such favors mutually"
• "From Anas bin Malik: The Prophet s.a.w. said: "If a man extends a loan to someone, he
should not accept a gift"
(Ibn Qayyim al Jawziyyah, “I’lam al Muwaqqi’in ‘an Rabb al ‘ Alamin”, 1, n.d.)
ISLAMIC CONCEPT OF RIBA PAGE 5
Prohibition of Riba al Fadl
• "From Abu Said al Khudri: The Prophet s. a. w. said: "Gold for gold, silver for silver,
wheat for wheat, barley for barley, dates for dates, and salt for salt, like for like, and
hand-to-hand. Whoever pays more or takes more has indulged in riba. The taker and the
giver are alike (in guilt).
• "From Abu Said at Khudri. The Prophet s.a.w. said: for gold except when it is like for
like, and do not increase one over the other; do not sell silver for silver except when it is
like for like, and do not increase one over the other, and do not sell what is away (from
among these for what is ready”
• "From Ubadah bin al Sami: The Prophet s.a.w. said: "Gold for gold, silver for silver,
wheat for wheat, barley for barley, dates for dates, and salt for salt -like for like, equal
for equal, and hand-to hand," if the commodities differ, then you may sell as you wish,
provided that the exchange is hand-to-hand".
Explanation about the Riba Prohibited in the
Sunnah
The riba which is prohibited in the Sunnah, especially in the category of riba al fadl, is subject
to some controversies.
M. Abu Zahrah 37 commented that riba al fadl which is also known as riba al buyu’ (riba
which is not based on loans, but on contracts) is a debatable type of riba. This may be caused
by the fact that such riba was not known to the Arabs before the advent of Islam. He quoted
Abu Bakr al Razi saying in his book Ahkam al Quran that
" Arabs did not know that trading gold for gold and silver for silver nasa'ah (deferred) is riba,
whereas it is riba according to Islamic Law.”
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In fact, riba al buyu' was not clearly defined even in the understanding of the companions. For
example, Abdullah bin Mas'ud was reported to have sold 8ome discarded items of Bayt al Mal
until he. was told that such action was prohibited by the Prophet. After knowing exactly what
the Prophet had said, he addressed the treasurers,
"O treasurers! What I have sold you was unlawful, since selling silver is lawful only if it is
weight for same weight. "
In addition, Ibn Abbas was reported to have given fatwa or legal opinion that there is no riba
except riba al nasi’ah, that is riba al jahli. Ibn Abbas was followed by other companions such
as Usamah bin Zaid, Zaid bin Arqam, Abdullah bin al Zubair and Sa'id bin Zubair. They based
their legal opinion on the previously mentioned hadith on the authority of Usamah bin Zaid
which reads to the effect:
" There is no riba except in al nasi'ah".
On the other hand, the ahadith regarding the six commodities which are subjected to riba al
fadl were traced to a large number of companions such as the four guided caliphs, Ubadah
bin al Samit, Abu Said al Khudri, Abu Hurairah and many other companions, among whom
were seven of the most trusted companions of the Prophet. The narration, which is regarded
as the most authoritative, is the one narrated by at Bukhari and Muslim on the authority of
Ubadah bin al Samit, because of its completeness.
Muslim jurists deduce from these ahadith the following rules which govern riba al fadl:
(a) In trading commodities of the same group and kind, such as gold for gold or dates for
dates; two conditions must be fulfilled, i.e.:
• both commodities must be exactly equivalent.
• there must be prompt delivery.
(b) In trading commodities of the same group but of different kinds, such as gold for silver,
or wheat for barley; there is only one condition, i.e., the promptness in delivery; equality
is not a condition.
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(c) In trading commodities of different groups and kinds, such as gold for wheat, or silver
for barley; no condition is imposed and free trading can exist, whether there is equality,
inequality, promptness, or delay.
(Narrated by Bukhari and Muslim., n.d.)
From the above narrations, we can conclude that riba al fadl was not exactly known to some
of the companions, and often misunderstood by them. Because of that, this type of riba is
subjected to many interpretations by later jurists, and such different interpretations will be
dealt with in the following discussion.
The Wisdom behind the Prohibition of Riba
The Muslim jurists also discussed the wisdom behind the prohibition of riba. Generally, it
can be summarized as the elimination of injustice and the call for cooperation. The Muslim
jurists also discussed the wisdom behind the prohibition of riba in the spirit of brotherhood.
Regarding riba al fadl specifically, the wisdom is the call for the other hand, the consideration
the transition of societies from the primitive barter system to a monetary system. This is
because money, as a perfect measure of value and medium of exchange, maintains the
accomplishment of exchanges on a fair basis where fraud is reduced. This may be evidenced
by a hadith which reads to the effect:
"From Abu Said: Bilal brought to the Prophet s.a.w. some 'barni' (good quality) dates
whereupon the Prophet asked him where these were from. Bilal replied, I had some inferior
dates which I exchanged for these – two sa’s for a sa’.” The Prophet said, "Oh no, this is
exactly riba. Do not do so, but when you wish to buy, sell the inferior dates against something
(cash) and then buy the better dates with the price you receive.”
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CONCLUSION
From the foregoing discussion, it is clear that al riba is prohibited in Islamic Law. This is
evidenced by the clear texts of the Quran, Sunnah, and juristic opinions.
It is also clear that the prohibited riba includes the interest imposed on bank loans and given
on deposits by the banks as had been declared in the Pakistani case referred to in the
introduction of this chapter, whereby, the learned judge concluded his discussion on the
prohibition of riba by saying:
"In view of the above discussion, we are of the firm view that the interest charged on loans
and given on deposits by the banks falls within the definition of Riba and that it makes no
difference whether the loan is taken for consumption purpose or for productive purpose, i.e.,
for trade, commerce and industry. "
Thus, in determining whether the Islamic bank conforms to the precepts of Islamic Law, the
most important element to be eliminated is the element of riba. With the elimination of riba,
all forms of exploitation will be eliminated.
(Abu Zahrah, "Buhuth fi al Riba", p.p. 61-62; quoted by Abd. at Mun'im Mahmud al Qusi,
op. cit., n.d.)
(Mahmood ur Rahman Faisal v Secv. Miny. of Law, op. cit. at p. 90, n.d.)
(Reference for the theories is made to Abd. Al Mun’im Mahmud al Qusi, op. cit. p.p. 171-
190, n.d.)
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