Understanding of the concept of riba by Muslim economists and its comparison with

understanding or riba by earlier jurists.

By
Afzal Roomy
Faizur Rehman
Ahmed Faraz
Tehsin
Ovais Ahmed
Introduction
Interest based system is the most prevalent financial system in the world. Interest or riba,
which creates hardships and inequalities, is prohibited in Islam, yet in almost every Muslim
country this is the dominant part of their financial structure. In recent decades there has been
a shift toward Islamic financial system not only in Islamic countries but also in the western
world. Islamic finance is free of Riba and offers many products such as Mudarabah, Ijara,
Musharakah etc. This article will put forward views on riba by modern jurist and also that of
early jurist. We have selected Abu Bakr al-Jassas as the early jurist whose book Ahkam al
Quran has been a guide for all who have followed him. For the modern Jurist we have chosen
Rashid Reda who was a student of Shaykh Muhammad Abduh and whose work is the basis
for most new modernistic scholars. We have also chosen Dr Khalid Zaheer as a modern day
economist and his views on riba. To understand the concept Islamic banking system and
especially insurance, concept of riba should be clear. To achieve this we will start by
providing a more general meaning of riba and then follow it up by the views of our jurist. In
the end we will conclude by summarising the similarities and differences between the two
jurists. This article is intended to provide a guide and it is upto the reader to make his or her
view on this subject of riba.
What is Riba

The modern secular economic system interest plays a vital role whole over the world. In fact,
except some Muslim countries especially some Western world people cannot think of any
economic system withoud interest. But from the religious point of view, all the major religions
(Islam, Christianity, Judaisam, Hindu) riba (Interest) is purely prohibited and from the theoritical
standpoint, interest has been a deductable subject among economic and political theorists. Abu
Saud who was the member of Islamic Foundation Leicester UK defines interest as " the excess of
money paid by the borrower to the lender over and above the principle for the use of the lender's
liquid money over a certain period of time" . Moreover different economists defines interest
byheir differnet views like J.M Keynes did not define interest but mentioned the rate of interest
as "The percentage of excess of a sum of units of money contracted for forward units of time
over the spot or cash price of the sum thus contracted for forward delivary".
Islam prohibited few earnings that includes Riba (Interest) , Gharar (Uncertainity) , Maisir
(Gambling), earnings from prostitution, pork, alcohol, drugs and other similar earnings. Out of all
these Riba is one of the legal role practising in all the countries. All the sources of Islamic law
strictly condemned riba. The Holy Quran and Hadith of Prophet (PBUH) says about riba in
various places and situations which quoted below:-

(Quranic verses and its translations)

 First, in Surah Ar-Rum, a Makkan Surah wherein the term riba finds mention in the
following words:

"And whatever riba you give so that it may increase in the wealth of the people, it does not
increase with Allah." (Ar-Rum 30:39)
 The second verse is of Surah Al-Nisaa where the term riba is used in the context of
sinful acts of the Jews in the following words:
"And because of their charging riba while they were prohibited from it." (An-Nisaa 4:161)
 In the third verse of Surah Al-i-'Imran the prohibition of riba is laid down in the
following words:

"O those who believe do not eat up riba doubled and redoubled." (Al-i-'Imran 3:130)
 The following set of verses is found in the Surah Al-Baqarah in the following words:

"Those who take interest will not stand but as stands whom the demon has driven crazy by
his touch. That is because they have said: 'Trading is but like riba'. And Allah has permitted
trading and prohibited riba. So, whoever receives an advice from his Lord and stops, he is
allowed what has passed, and his matter is up to Allah. And the ones who revert back, those
are the people of Fire. There they remain for ever.
Allah destroys riba and nourishes charities. And Allah does not like any sinful disbeliever.
Surely those who believe and do good deeds, establish Salah and pay Zakah, have their
reward with their Lord, and there is no fear for them, nor shall they grieve.
O those who believe, fear Allah and give up what still remains of the riba if you are
believers. But if you do not, then listen to the declaration of war from Allah and His
Messenger. And if you repent, yours is your principal. Neither you wrong, nor be wronged.
And if there be one in misery, then deferment till ease. And that you leave it as alms is far
better for you, if you really know. And be fearful of a day when you shall be returned to
Allah, then everybody shall be paid, in full, what he has earned. And they shall not be
wronged." (Al-Baqarah 2:275-281).

(Hadiths-sayings of Prophet):

From Usamah ibn Zayd: The Prophet, peace be on him, said: "There is no riba except in
nasi'ah (waiting)." (Bukhari, Kitab al-Buyu, Bab Bay al-dinari bi al-dinar nasa'an, Muslim
and Musnad Ahmad)

"There is no riba in hand-to-hand “spot transactions." (Muslim, Kitab al-Musaqat, Bab bay'i
al-ta'ami mithlan bi mithlin; also in Nasa'i). 

Sahih al – Bukhari, Volume 3, Book 34, Number 282:

Narrated 'Aisha:
The Prophet purchased food grains from a Jew on credit and mortgaged his iron armor to
him. (ishtara ta'aman min yahudi ila ajalin wa rahnahu dir'an min hadid; in al-Bukhari, Vol. 3,
309 the hadith is narrated with nasi’ah, instead of ajal)

Sahih al-Bukhari, Volume 3, Book 41,Nuber 579:

Narrated Jabir bin Abdullah:
I went to the Prophet while he was in the Mosque. (Mis'ar thinks that Jabir went in the
forenoon.) After the Prophet told me to pray two Rakat, he repaid me the debt he owed me
and gave me an extra amount. 
The Meaning of RIBA
After knowing the sevre verdict of Quran and Sunnah against riba, it is necessary to determine
the term "Riba" and what its really stands for. Riba is an Arabic word literally means increase,
addition or growth. However, it is not mean every increase or growth which has been prohibited
by Islam. In Shariah, riba technically refers to "premium" that must be paid by the borrower to
the lencer along with the principal amount as a condition for the loan or for an extension in its
maturity. In this sense, riba has the same meaning and import as interest. However, the term riba
in Shariah used in two senses. The first is Riba-Al-Fadl and the second is Riba-Al- Nasiah

Riba Al Nasiah
The term "nasiah" comes from the root "nas'a" which means to postpone, defer or wait and refers
to the time allowed to the borrower to repay the loan with "addition" or "premium". Hence Riba
Al Nasiah is equivalent to the interest charged on loans. In this sense, the term riba has been used
in the Quran verse 2:275 which states that " God has allowed trade and forbidden riba (Interest).
The prohibition of Riba Al Nasiah essentially implies that fixing the rate of return on loan in
advance and waiting for the positive incerement of the loan and the reward for the waiting is
prohibited in Shariah. It makes no difference either the rate of return or fixed or variable amount
of principal. The predetermined positiveness of rate of return should be the question that points.
But it is important to note that, according to the shariah, the waiting involved in the repayment of
loan does not by itself justify a positive reward.

 Narrated Usamah bin Zaid: The prophet PBUH said:” There is no riba except in nasiah”.

 Narrated Anas bin Malik: The prophet PBUH 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 a animal, he should not ride, unless two of them have been previously accustomed to
exchanging such favours mutually”

Ref:
Bukhari, “Kitab al Buyu”, also in Muslim and Musnad Ahmad;

Riba Al Fadl.
While Islam allowed interest on loans and allowed trade, it has not allowed everything in trade.
Because by the perspective of legel maxims of Islamic jurisprudence anything which serves the
means of unlawful is also unlawful. Since people may cheated and exploited in several different
ways .

 Narrated Umar: The Prophet said, ‘The selling of wheat for wheat is Riba except if it
is handed from hand to hand and equal in amount. Similarly the selling of barley for
barley is Riba except if it is from hand to hand and equal in amount, and dates for
dates is Riba except if it is from hand to hand and equal in amount.’ (Bukhari 1985, h.
2026)

 Narrated Ibn Shihab that Malik Ibn Aws said: ‘I was in need of change for one-
hundred Dinars. Talhah Ibn ‘Ubaydullah called me and we discussed the matter, and
he agreed to change (my Dinars). He took the gold pieces in his hands and fidgeted
with them, and then said: ‘Wait till my storekeeper comes from the forest.’ ‘Umar was
listening to that and said: ‘By Allah! You should not separate from Talhah till you get
the money from him, for Allah’s Apostle said: ‘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 dates for dates, is Riba unless it is from hand to hand and equal in
amount’. (ibid. h. 2029)

 Narrated Abu Hurayrah: The Prophet said: ‘If you give gold, then receive back the
same gold: the same weight and the same quality; and if you give silver then receive
back the same silver: the same weight and the same quality, because the one who
gives more or expects more, then that is exactly Riba’. (Muslim 1981, p. 211)

 Narrated by Talhah Ibn ‘Ubaydullah: ‘Umar Ibn Khattab said that the Prophet said: ‘If
you will sell gold for silver then there is a danger of interest in it. [Likewise, if you
will sell] wheat for wheat, barley for barley and dates for dates, the result would be no
different; except that the exchange be spot.’ (ibid., p. 208)
Rashid Rida
Rashid Rida was one of the modernist of the last century. He was the student of Shaykh
Abduh a very prominent Islamic scholar from Egypt. He was a learned scholar and later in
his life did change his opinion on riba. His view was that Riba was of two types one that
Quran talks about and the other that Sunnah discusses. His view was base on the fact that in
Quran there is concept of Riba which he called Riba al jahiliyah is prohibited and the one in
Sunnah should be avoided but can be permitted if required.(Nayzee, p31). Riba al jahiliyah
for him was the doubling and multiplying of the interest. He also called such riba as riba al
nisiah that with delay. On Riba Rashid Rida had a view that only compounded interest was
riba and simple interest was allowed. Rida also passed few Fatwas on riba and often quoted
Abduh as reference. Some argue that Rida’s views are more in line with that of Ibn Qayyim.
It is important to understand Rida’s views as most modern scholar agree to his views up to
some extent.

Dr Khalid Zaheer View on Riba

Dr Khalid Zaheer is an academic who did his PhD from university of Wales in Islamic
economics. His thesis title is “An Enquiry Into The Basic Concept of Banking As Perceived
By The Spirit of Islamic Economic Justice.”
Dr Zaheer is of view that the understanding of riba, has been unnecessarily made problematic
by the methodological framework devised by the jurists. He believes Quran is clear and
unambiguous and Hadith should be assessed in the light of Quran and Sunnah. On topic of
Riba it is his view that the reason for no clear definition of riba in Quran is the fact that
concept of riba was very clear to the Arabs of that time. In case of simple interest some
writers like Faizlur Rehman believe only compounded interest is not allowed and simple
interest is allowed. They base their argument on the following Quranic verse “O you who
believe, do not take riba charging [it] doubled and redoubled” (Qur’an, 3:1 30) that is this
refers to compound interest only. Dr Zaheer doesn’t agree with these scholars and give his
reasoning by quoting another verse from Quran that “Do not kill your children out of fear of
poverty’ (Qur’an, 17:3). He argues that based on above argument killing one child should be
permissible.
Dr Zaheer also gives his view on Riba Al fadl which he believes that the only riba mentioned
in Quran is the riba and Riba al fadl created unnecessary. His argument for this is the fact that
we have sidelined the Quran, elevation of Hadith to unchallengeable status and taqlid of
earlier scholars blindly.

Conclusion
Concept of Riba is not easy to explain because there are too many views on it what is allowed
and what isn’t. The purpose of this article is not giving a definite meaning of riba but just
provide views of some scholars. It is up to the reader to make his or her own judgment on the
topic. We have looked at three scholars of different era, each providing their view on riba.
There seem to be some agreement on the Riba that is in Quran but major difference appears
when it comes to Sunnah and Hadith. The reason for us not providing our opinion is because
we feel that we don’t have adequate knowledge to have a proper opinion on this subject.