RIBA, USURY, INTEREST

In recent past a controversy has arisen that Riba is

prohibited in Islam but the interest paid by banks on
deposits and received on advances does not tantamount to
Riba, hence, should be considered permissible.

To analyze and deal with the controversy, historical

background and true meanings of the terms are presented
below.
 Historical Background of Riba
1. In pre Islamic days Riba was prohibited in all ancient
philosophies and religions.

2. The concept of money lending at interest was started

when the society switched over from barter system to
monetary system.
 Historical Background of Riba
3. Aristotle, a Greek philosopher rejected the concept of
money lending at interest on the basis of the logic that
a piece of money can not be get another piece and
stressed that the sole natural object of the creation of
money is to facilitate the exchange i.e. money is a
medium of exchange and store of value. He declared
money is sterile and compared it with a barren hen
which lays no eggs.

4. Plato too condemned interest.

 Historical Background of Riba
5. In 340 BC Lex Genucia prohibited interest in the
republic of Rome.

6. In Biblical times all payments for the use of money

were forbidden. When the Roman Empire was
Christianized in the 4th century, the Church forbade
clergy from money lending at interest.

7. The teachings of Jesus on the subject are very clear,

“Love your enemies and do good, lend, expect nothing
in return.”
 Historical Background of Riba

8. The charging of interest has also been prohibited in

Judaism. It says, “If you lend money to any of my
people who is poor you shall be to him as a creditor
and you shall not extract interest to him.
 Historical Background of Riba
9. It is interesting to note that in AD 605; just before the
dawn of Islam, on a tempestuous day, a spark of fire
caught the curtains of Ka’ba (House of God in Makkah)
resulting in serious damages to the building. For the
repair and reconstruction of the building, contributions
were asked from the general public living in the
locality. It was, however, solemnly announced that for
the Holy building, only pure, clean and honestly earned
money should be donated; prostitutes and usurious
people were specifically debarred from contributing
anything. It is, therefore, obvious that even among the
pagans of Arabia, in the dark days of civilization, usury
and interest was considered to be the money earned
by unethical means.
 Historical Background of Riba

10. The end of thirteenth century saw the decline of the

influence of Orthodox Church and the rise of secular
powers. As a consequence, the charging of interest
which was forbidden by the Church gradually started
being tolerated. In the Mercantile Era (1500-1700)
money began to be used on a large scale for
commercial transactions and assumed the role of a
factor of production like land and interest on capital
was equated to the payments for renting of money,
similar to the rent of land.
 Historical Background of Riba

11. In 1740, the city of Verona, issued a bond at 4%

interest, which led to a lot of controversies. The
Benedict XIV wrote to the Bishop of Italy, firmly
emphasizing that it was a sin to take profit beyond the
principal amount given as loan. He specifically
condemned various pleas such as profit on loan was
moderate or that the loan was given to a rich person or
that it was to be used for production purposes. (Gul,
1992)
 Historical Background of Riba

12. In this connection, it is significant to note that after the

establishment of political supremacy of Islam over a
greater part of the world, the prohibition of usury or
interest which was also considered as undesirable
among non-Muslims was enforced more strictly. The
prohibition of Riba, usury or interest, by Islam is,
therefore, nothing new. Islam allows profits through
trade but prohibits interest because of the negative
effects of the fixed interest-bearing loans.
 Meaning of Riba, Usury, Interest

1. Riba is an Arabic word which means ‘increase’,

‘addition’, ‘expansion’ or growth’ and refers to the
additional amount which a lender recovers from the
borrower according to a fixed rate over and above the
principal amount.

According to Qur’anic illustrations, the literal meaning

of Riba is “increase”. In Shariah, it means “an addition,
however slight, over and above the principal”. Riba is,
therefore, the premium that is recovered by the lender
from the borrower along with the principal amount as a
part of lending arrangements, or for an extension in the
maturity period of loan.
 Meaning of Riba, Usury, Interest

2. In the New encyclopedia Britannica, usury is explained

as compensation for the use of money regardless of
the amount, according to earlier English law.
 Meaning of Riba, Usury, Interest
3. Encyclopedia Americana – International Edition (1970)
says:

“Interest is a charge for the use of money …… Interest

has not always been considered a legitimate or even
moral payment. Until the end of middle ages, any
charge for a loan was generally considered to be
Usury. The teachings of Christians, Judaic and Islamic
religion, all condemned in varying degrees, money
lending at interest.

In more recent times, however, usury has come to be

regarded as only the charging of illegal rates of interest
…….. “.
 Prohibition of Riba
Prohibition of Riba: In the Holy Quran

The following are the relative verses from the Holy Qur’an on the
subject. It is to be noted that the Holy Qur’an has used the Arabic
Word Riba in the verses, which has been retained in the English
translation.

1. Sura Rome, Para 21, Verse 39.

“That which ye give in Riba in order that it may increase on (other)
people’s property hath no increase with Allah; hut that which ye give
in charity, seeking Allah’s countenance, bath increase manifold.”
(30:39)

2. Sura Nisa, Para 6, Verse 161

“That they took Riba, though they were forbidden; and that they
devoured men’s substance wrongfully. We have prepared for those
among them who reject faith, a grievous punishment.” (4:161)
 Prohibition of Riba
3. Sura Al Imran, Para 4, Verses 130 to 132
“0 ye who believe! devour not Riba, doubled and multiplied;
but fear Allah; that ye may (really) prosper”. “Fear the fire,
which is prepared for those who reject faith.” “And obey
Allah and the Messenger; that ye may obtain mercy.”(3:130-

4. Sura Baqara, Para 3, Verses 275 to 281

“Those who devour Riba will not stand except as stands one
whom the evil one by his touch hath driven to madness.
That is because they say: ‘Trade is like Riba’. But Allah hath
permitted trade and forbidden Riba. Those who after
receiving direction from their Lord, desist, shall be pardoned
for the past; their case is for Allah (to judge). But those who
repeat (the offence) are companions of the fire; they will
abide therein (forever).” (2:275)
 Prohibition of Riba

5. “Allah will deprive Riba of all blessings, but will give increase
for deeds of charity; for He loveth not creatures ungrateful and
wicked.” (2:276)

6. “Those who believe, and do deeds of righteousness and

establish regular prayers and regular charity, will have their
reward with their Lord: on them shall be no fear, nor shall they
grieve.” (2:277)

7. “0 ye who believe! Fear Allah and give up what remains of your

demand for Riba, if ye are indeed believers.” (2:278)

8. “If you do it not, lake notice of war from Allah and His
Messenger. But if ye turn back, ye shall have your capital sums.
Deal not unjustly, and ye shall not be dealt with unjustly.”
(2:279)
 Prohibition of Riba

9. “If the debtor is in a difficulty, grant him time till it is easy for
him to repay. But if ye remit it by way of charity, that is best
for you, if ye only knew.” (2:280)

10. “And fear the Day when ye shall be brought back to Allah.
Then shall every soul be paid what it earned, and none shall
be dealt with unjustly.” (2:281)
 Prohibition of Riba: in Ahadith
There are numerous Ahadith (sayings, deeds or approvals of the
Holy Prophet of Islam, peace be upon him) on the subject of
Riba. The Ahadith containing the directives of the Holy Prophet,
peace be upon him, have been narrated by authorities including
Imam Malik, Bukhari, Abu Daud, Tirmizi, Nasa’i, Musnad
Ahmed, Ibn Majah, Ahmed bin Hanbal, Dar Qutni, Kitab Al
Buyua etc. in their collections of Ahadith. Some of the Ahadith
on the subject are:

1) From Jabir: The Prophet, peace be upon him, cursed the

receiver and the payer of Riba, the one who records it and the
two witnesses to the transaction and said: “They are all alike [in
guilt]”. (Tirmizi)

2) From Abu Hurayrth: The Prophet. Peace be upon him, said: “On
the night of Ascension I came upon people whose stomachs
were like houses with snakes visible from the outside. I asked
Gabriel who they were. He replied that they were people who
had received Riba.” (Musnad Ahmed)
 Prohibition of Riba: in Ahadith

3) From Abu Hurayrah: The Prophet, peace be upon him, said:

“There will certainly come a time for mankind when everyone will
take Riba and if he does not do so, its dust will reach him.” (Abu
Daud)

4) From Abu Hurayrah: The Prophet, peace be upon him, said:

“Allah would be justified in not allowing four persons to enter
paradise or to taste its blessings: he who drinks habitually, he
who takes Riba, he who usurps an orphan’s property without
right, and he who is undutiful to his parents.” (Kitab al Buyua)

5) From Ibn Masud: The Prophet, peace be upon him, said: “Even
when Riba is much, it is bound to end up into paltriness.”
(Musnad Ahmed)
 Prohibition of Riba: in Ahadith

6) From Anas Ibn Malik: The Prophet, peace be upon him, 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
an animal, he should not ride, unless the two of them have been
previously accustomed to exchanging such favours mutually.”
(Kitab al Buyua)

7) In his last sermon during the pilgrimage, the Holy Prophet,

peace be upon him, in the presence of about one hundred
thousand reverend companions declared:

“Every form of Riba is cancelled.” (Musnad Ahmed)

It is, therefore, clear, that interest, Riba and usury, in all forms
and intent are strictly prohibited, as per teachings given herein
above.
Prohibition of Riba in Fiqh

All the schools of thought of Muslims jurisprudence hold the

unanimous view that Riba, usury and interest are strictly
prohibited in Islam.