Islamic concept of financial interest
In Islam, there are several questions that arise whether Interest is prohibited or not. Some people argue that Riba has been prohibited in Islam and that interest and riba are not equivalent. Without a doubt Riba has been prohibited by both Quran and Hadeeth and it has been mentioned several times in different revelations, of which the first was in Makkah (30:39) and the other three times it was in Madinah (4:161, 3:130-2, 2:275-81). It was mentioned in utter words for those people who took riba and stated them to be at war with God and Prophet (SAS). It also gave a clear distinction between trade and riba.
The Prophet (PBUH) banned and prohibited riba and condemned not only those who take it, but also those who give it or record the transaction and those who act as a witness to it. Riba has been censured since the time of Prophet Muhammad (PBUH) and some people still fail to understand the true meaning of it. In easy words Riba means addition, increment or expansion. The Prophet (PBUH) even associated the people who take riba as being guilty of incest with one’s own mother or committing adultery thirty six times. Although profit also leads to increase in the principle amount so does riba, but profit is not prohibited. There are two different types of Riba:
- Riba al Nasiah
- Riba al Fadl.
Rabi al Nasiah refers to the extra time that is allowed to the borrower to return the principal amount or the loan with the addition or premium amount. Rabi al Fadl on the other hand refers to anything that is received extra from the two parties in the trade transaction. This was intended to ensure justice and to remove any unfair exchanges and to close all doors to Riba. One way to deal with Rabi al Fadl through barter transactions is to deal with cash rather than exchanging the products since it can be very difficult to measure the exact counter values of such transactions. The Prophet (PBUH) encouraged barter dealing in cash commodity and hence buy the proceedings with that cash.
The reason why Quran has used such harsh decree against Riba or Interest is because Islam wishes to establish a system that is just and where all forms of misuse and exploitation are eliminated. Seeing the above narrations, it would be a shame for anyone who could justify interest in Islam. Unfortunately, these days there are many transactions in our daily lives involve interest and it has become increasingly difficult for the Muslims to abstain from Riba.
