Fundamentals of Shariah for Islamic Finance

REASONS BEHIND THE PROHIBITION OF RIBA

Tan Lyn Ing CIC160086

Zainab Fateema Binti Mustafa CIC170065
Nur Allieya Aini Binti Azahar CIC170045
Hasmiera Insyierah Mohd Rashid CIC170015
Koo De Young CIC170017
Muhammad Syahmi Bin Nordin CIC170032
What is Riba?
•In Arabic language, literally means an ‘excess’ or ‘addition’.

•Technically, it refers to the ‘premium’ that must be paid by the borrower to the
lender along with the principal amount as a condition for the loan.

•Riba are divided into two; Riba an-Nasiah and Riba al-Fadhl.
Quranic Verse
“Those who charge riba are in the same position as those controlled by the devil's
influence. This is because they claim that riba is the same as commerce.
However, God permits commerce, and prohibits riba. Thus, whoever heeds this
commandment from his Lord, and refrains from riba, he may keep his past
earnings, and his judgment rests with God. As for those who persist in riba, they
incur Hell, wherein they abide forever” (Quran; 2:275).•
Types Of Riba:
•Riba an-Nasiah
The term Nasiah means to postpone or wait and refers to the time that is allowed
for the borrower to repay the loan in return for the addition (riba’). More specifically
arise in loan contract.
•Riba al-Fadhl
The exchange of different quantities or qualities of the same commodity (ribawi
item). More specifically arise in exchange contract.
Riba al-Fadhl arises from the exchange between two items of the same type, but
in unequal amounts, whether in terms of quality or delivery time.
1. Riba‘ brings corruption in society

● Happens to people who has power and rights

● One could accumulate wealth by taking advantage of other people’s work

● Using money to make more money

2. Riba causes negative impact on the
economy

Recources
High credit-worthiness Average credit-worthiness
Bad project performance High productivity project

Rabumal-Capital provider

Mudarabah
Partnership
Mudarib-Management
3. Improper appropriation of other’s property
and their rights
● Do not eat another’s property unjustly

● Illegal way/activities

● Compunding interest by bank

4.Interest (riba) Demeans and Diminishes
Human Personality
● Born to be a good and kind person in this world

● Nature of social life that requires cooperation, care and help for the needy

● Exp: When your friend need help for their financial problem , do u still charge any
interest from him??

What if u charge the interest on him??

 5. INJUSTICE
● Riba is a contract based on interest which involves injustice
among the parties.

● If the entrepreneur earns a loss in the business, he/she would

receive no return for time and work from the business they have
started
- Lender : Could not obtain their payment back.
- Borrower : Incurred a loss and obligated to pay principal and
interest charges (debts piled up).

● Qur’an states clearly that individuals that have difficulty in paying

their debts should have their obligations made easier for them
instead of more difficult

● Qur’an, clearly states that taking an amount more than the

principal would be injustice. It also acknowledges the rights of the
lender and creditor towards the principal without any decrease as
it would too be unjustice
References