The prohibited elements in Islam
. breweries.uncertainty/deception Haram Activities -casinos.interest/usury Gharar. and interest-based financial services. pornography.Prohibited Elements
to rise and to become lofty (al-irtifa and al-uluw) Technically it denotes. in a loan transaction. any increase or premium or advantage obtained by the lender as a condition of the loan.Riba in Islam
The Arabic word 'riba' means to increase (alziyada). to expand.
. to grow (al-numuw). to multiply.
i. In return. Interest on lent money or capital. 2.
. Riba Al-Fadl ± This is riba which occurs as a result of trade or sale transactions.g. the borrower must pay the additional or premium for the extension in duration. Riba An-Nasi¶ah ± This riba occurs when time is allowed for the borrower to repay the loan after its due date.Types of Riba
1. Taking a superior thing of the same kind of goods by giving more of the same kind of goods of inferior quality. dates of better quality for dates of inferior quality in greater amount.e. e..
Prohibition of riba in Al Quran
This shows interest deprives wealth of God¶s blessings. seeking the goodwill of God.
.(Surah An Nisa:161). We have prepared for those among them who reject faith. and their wrongful appropriation of other people¶s property. ³That which you give as interest to increase the people¶s wealth increases not with God. This verse indicates the seriousness a felony of taking interest in the eye of The Almighty. but that you give in charity. multiplies manifold ³. a grievous punishment ³.(Surah Ar Rum:39). ³And for their taking interest even though it was forbidden for them.
Fear the fire which has been prepared for those who reject faith. ³O believers. and obey God and the Prophet so that you may receive mercy´. and fear God so that you may prosper.(Surah Al-Imran:1302)
. take not doubled and redoubled interest.Prohibition of riba in Al Quran
Muslims to stay clear from interest for the sake of their own welfare.
Prohibition of riba in Al Quran
Surah Al-Baqarah (275-281) establishes a clear distinction between interest and trade ± "Those who benefit from interest shall be raised like those who have been driven to madness by the touch of the Devil. Hence those who have received the admonition from their Lord and desist. their case being entrusted to God.this is because they say: "Trade is like interest" while God has permitted trade and forbidden interest. . but those who revert shall be the inhabitants of the fire and abide therein for ever.. may have what has already passed.."(275)
´ The Prophet said: "There is no riba except in loaning. he who usurps an orphan¶s property without right and he who is undutiful to his parents." (Nasa¶ee)
.Prohibition of riba in Hadith
Abu Hurayrah (ra) narrated that the Prophet (saw) said: ³´God would not allow four persons to enter paradise or to taste its blessings: he who drinks wine. he who takes riba.
dates for dates and salt for salt ± like for like.
. provided that the exchange is hand to hand.Prohibition of riba in Hadith
³Gold for gold. barley for barley.´ It is reported from Usamah bin Zayd that the Messenger of God said: "There is no riba in what is hand to hand (on the spot)". then you may sell as you wish . equal for equal and hand to hand. if the commodities differ. wheat for wheat . silver for silver.
Riba as Unearned Income Islam only permits trade but forbids riba or usury. Interest is fixed.
. a person has work hard to earn the profits. In the case of interest. This interest or riba here is an unearned income. a person knows his or her return and can be sure of it. but profit fluctuates. In the case of profit. Profits are the result of initiative. enterprise and efficiency.The rationale of prohibition of riba
2.Riba as a Mechanism of Inequitable Redistribution of Wealth The observation that riba or usury acts as a mechanism by which 'the rich get richer and the poor get poorer' is common to several traditions. 3.Riba as Exploitation of the Needy The condemnation of riba or usury is in the form of charging for loans to the poor. Islam rejects financial interest on the basis that it contradicts the Principle of Distributive Equity
. A parallel modern argument relates to the devastating social impact of the so-called ³Third World debt crisis´.
recession and recovery. Ahmad (1958) claims ³the greatest problem in the capitalist economy is that of the crises and interest plays a peculiar part in bringing about the crises´.
4. i. the cycles of boom and bust.e.Riba as an Agent of Economic Instability An endemic factor in the instability of interestbased economies.
Riba as Discounting the Future The practice of discounting future values are using compound interest .
. the faster the resources are likely to be depleted. It is presumed rational for people to prefer having a specified amount of currency now than the same amount some time in the future.results in an appreciation in invested monetary capital. This simple and rarely questioned logic has several disastrous implications.the higher the discount rate. For instance.
5. Pearce and Turner (1990) note that discounting affects the rate at which we use up natural resources .
.The prohibition of riba is important : to ensure justice in Islamic economy to remove all forms of exploitation through unfair exchanges and to close all back doors to riba because in Islamic Shariah anything that serves as a means to the unlawful is also unlawful.Riba free economy
Islam wishes to establish justice between the financier and the entrepreneur.