Riba (Usury) in Islam

Definition:
The word used for 'interest' in the Quran is Ar-Riba , an Arabic word
which means 'excess.' In Sharee`ah (Islamic Law), it is the measure of
excess in one thing when two things are exchanged in some bargain; or
in the case ofa loan, an increased amount of the loan at the time of
its payment.
In Islam, dealing with Riba is one of the major sins, which entail
severe punishment by Allaah Almighty. Allaah, the Exalted, Says(what
means): " Those who consume interest cannot stand [on the Day of
Resurrection] except as one stands who is being beaten by Satan into
insanity. That is because they say,'Trade is [just] like interest.'
But Allaah 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 Allaah. But whoever returns [to
dealing in interest or usury] - those are the companions of the Fire;
they will abide therein. Allaah destroysinterest and gives increase
for charities. And Allaah does not likeevery sinning disbeliever.
Indeed, those who believe and do righteous deeds and establish prayer
and give Zakaah will have their reward with their Lord, and there will
be no fear concerning them, nor will they grieve. O you who have
believed, fear Allaah and give up what remains [due toyou] of
interest, if you should be believers. And if you do not, then be
informed of a war [against you] from Allaah and His Messenger. But if
you repent, you may have your principal - [thus] you do no wrong, nor
are you wronged.'' [Quran 2:275-279]
Abdullah Ibn Mas`ood reported: 'The Messenger of Allaah cursed the one
who accepts usury and the one who pays it.' [Muslim] The Hadeeth
(narration) of At-Tirmithi adds: 'And the one who records it, and the
two persons who stand witness to it.'
Both the parties, the one who charges interest and the one whopays it,
are equally guilty in the matter of usury. This Hadeeth highlights the
intensity of unlawfulness of the usury, or, what has come to be called
nowadays interest which can be judged from the fact that not only the
person who charges it and the one who pays it are cursed, but even
those who writethe documents and bear witness to the transaction are
condemned although the latter two have no active part in the deal.
They have been condemned for their mere co-operation in thematter of
interest. Thus, we learnthat even co-operation in the deal in which
interest is involved is an invitation to the Curse and Wrath of
Allaah.
The reason for such severity in the matter of interest is that Islam
wants to create a society that is founded on fraternity, sympathy,
selflessness and sacrifice. If someone is in need of money, the rich
should fulfill his needs for the sake of Allaah's Pleasure or give him
a loan without interest. As against the Islamic system, this system of
interest is based on selfishness, exploitation and suppression.
In the interest-ridden societies, the affluent ones are not inclined
to co-operate with the needy for the sake of Allaah. All they are
concerned with is their own interest. Their lust and greed are not
reduced in the slightest measure even after draining the last drop of
the blood of the poor. This is the reason why Islam has forbidden
interest of every kind and regarded it unlawful, no matter whether the
loan is for the personal need or commercial requirements.
Some people say that there did not exist any practice of commercial
loan in Arabia at thattime (the advent of Islam) and people used to
borrow money fortheir personal needs only. On the basis of this plea,
they say that the interest, which has been forbidden by Islam relates
to the latter form. For this reason, they hold that interest charged
on a loan taken for industry and commerce is lawful. They contend that
since the borrowersin industrial and commercial sectors make huge
profits from such loans, how does it become unlawful if they pay the
lender a small fixed annual amount? In their opinion, it is a right of
the lender that should be paid to himon his wealth.
But such arguments are totally wrong for two major reasons:
First, the assumption that there was no practice of commercial loans
in Arabia is baseless. Commercial loans were certainly in vogue in
Arab society and there is no point in debating this fact.
Second, nobody can say with certainty that the amount invested by a
person in business will definitely yield a profit because we see every
day that sometimes huge investments made in business and industry
result in colossal loss, but the lending agency does not bother about
it at all and it recovers from the borrower every penny of his loan
and interest.
If it is supposed that there is no loss, even then the interest on a
loan substantially contributes to the increase in prices of goods.
Whatever interest an industrialistpays on a loan is added to the cost
of his goods, which ultimately increases their price and, in turn,
adversely affects the purchasing capacity of the customers - the
masses. This is the reason why Islam has closed this largest source of
exploitation, suppression and tyranny by declaring every kind
ofinterest unlawful.
The usury is of two kinds:
First, Riba Al-Fadhl : To take more in exchange of one commodity inthe
event of barter of two similarcommodities.
Second, Riba An-Nasee'ah : To take a larger return of one thing while
two identical things are bartered. But in this case the larger return
is affected after a fixed period of time.
In Islamic jurisprudence, assets are of two types. One type is of
commodities and the other is of the mode of price for
exchangingcommodities called Thaman (price). Then, every type has a
class of varieties. For example, food grains are a type of assets and
rice, wheat, etc., are its varieties. Similarly, silver, gold, etc.,
are varieties of the second type of assets. Coins, currency notes,
company shares, etc., can also be considered varieties of this type in
contemporary life.
These two types of assets have four varieties:
1. Commodities which are sold byweight.
2. Commodities which are sold bymeasure.
3. Commodities which can be stored.
4. Commodities which are used as Thaman in sale and purchase.
In all such matters the position of interest-bearing and interest-free
things would be as under:
1. When commodities to be exchanged are of the same `type' and
`variety,' any increase or decrease in them will be unlawful, as will
be their sale on credit; for example, exchange of wheat with wheat and
rice with rice. It is essential that these things are equal in measure
and/or weight, and are in one's actual possession.
2. If two things to be exchanged are of the same `type' but of a
different `variety,' any increase ordecrease in them is permissible.
Their sale on credit is, however, unlawful. For instance, the exchange
of one kilogram of silver with two grams of gold, or the barter of one
kilo of barley with half a kilo of wheat, or the exchange of one Dinar
with four Riyals. If such a bargain is on a cash basis it will be
fair, but any credit in this case is not correct.
3. When the two things to be exchanged are not of the same `type' and
are also different in `variety,' then any increase or decrease in them
is permissible and their sale on credit is also allowed. For example,
exchange of one kilogram of wheat with a gram of gold, bargain of one
kilogram of dates with ten Tola (about 116 grams) of silver. Any
increase or decrease in them is permissible, as is their sale on
credit .
To conclude, we, Muslims, ought to struggle to understand the truth in
the Quran and the Sunnah (Prophet's narrations), particularly as it
pertains to the prohibition of the usury, and to be faithful to it
regardless of the price we may have to pay, in order to gain Allaah's
Pleasure and avoid His unbearable