History and meaning of Riba:

The word riba was used by the Arabs prior to Islam to refer to an
"increase". In classical Islamic jurisprudence the definition of riba was
"surplus value without counterpart."
Usury and Riba:
Riba is a concept in Islamic banking that refers to charged interest. It has
also been referred to as usury, or the charging of unreasonably high-
interest rates.

Prohibitation of Riba In Quran and Hadis:

Riba was not prohibited abruptly, rather its prohibition was established
in a gradual manner. Four verses that were revealed in order to prohibit
riba gradually are stated in the following lines as per the sequence of
their revelation.
Riba In Quran:

1. First Revelation (Surah al-Rum, verse 39)

"Whatever Riba (increased amount) you give, so that it may

increase in the wealth of the people, it does not increase with
Allah; and whatever zakah you give, seeking Allah's pleasure with
it, (it is multiplied by Allah, and) it is such people who multiply
(their wealth in real terms)." (30: 39)

Riba In Hadis:

Narrated by Jabir ”: The Prophet 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]."
RIBA AND ITS TYPES
Definition of Riba (Interest) The word "Riba" means excess, increase or
addition. According to Shariah terminology, it implies any excess
compensation without due consideration (consideration does not include
time value of money).

This definition of Riba is derived from the Quran and is unanimously

accepted by all Islamic scholars.

Classification of Riba
There are two types of Riba, identified to date by the scholars namely
'Riba An Nasiyah' and 'Riba Al Fadl'

Riba An Nasiyah
'Riba An Nasiyah' is defined as excess, which results from
predetermined interest (sood) which a lender receives over and above
the principal (Ras ul Maal) in any loan transaction. This is the real and
primary form of Riba. Since the verses of the Holy Quran has directly
rendered this type of Riba as haram, it is also called ‘‘Riba Al Quran.’’
Similarly, since only this type was considered as Riba in the dark ages,
so it has earned the name of “Riba Al Jahiliyyah” as well.

Riba Al Fadl

The second classification of Riba is Riba Al Fadl.Since the prohibition

of this Riba has been established on the basis of Sunnah, it is also called
“Riba Al Hadees.”
Riba Al Fadl actually means that excess which is taken in exchange of
specific homogenous commodities and encountered in their hand-to-
hand purchase & sale.

Rationale for the prohibitation of Riba:

Riba is prohibited under Shari'ah law for a couple of reasons. It is meant
to ensure equity in exchange. It is meant to ensure that people can
protect their wealth by making unjust and unequal exchanges illegal.
Islam aims to promote charity and helping others through kindness.