Riba (interest, usury) is a mechanism and dangerous weapon that has the power to get hold of assets/properties of individuals, enterprises, and nations deceitfully. Nature is the Limit in Islam; anything not natural is prohibited, stopped, and declared illegal. This is unfair and against nature, so Allah banned Riba (interest, usury) very strictly to stop this criminal action. The most famous and unique principle of the Islamic financial system is the prohibition of riba. Allah says:
وَمَا آتَيْتُم مِّن رِّبًا لِّيَرْبُوَ فِي أَمْوَالِ النَّاسِ فَلَا يَرْبُو عِندَ اللَّهِ وَمَا آتَيْتُم مِّن زَكَاةٍ تُرِيدُونَ وَجْهَ اللَّهِ فَأُولَٰئِكَ هُمُ الْمُضْعِفُونَ
“And whatever you give for interest to increase within the wealth of people will not increase with Allah. But what you give in Zakath, desiring the countenance of Allah – those are the multipliers.” (Ar-Rome, 30-39)
Raba, meaning ‘to increase’, ‘to grow’, and ‘to exceed’. It includes interest that is paid by banks or on loans such as car loans, home loans or credit card debt. Riba is fundamentally prohibited both by the Quran and the Sunnah. On the concept of interest, there is no doubt or dispute among Muslims that it is absolutely prohibited. The word riba is most commonly understood as charging or promising a fixed rate of return. Allah says:
يٰۤـاَيُّهَا الَّذِيۡنَ اٰمَنُوۡا لَا تَاۡكُلُوا الرِّبٰٓوا اَضۡعَافًا مُّضٰعَفَةً وَاتَّقُوا اللّٰهَ لَعَلَّكُمۡ تُفۡلِحُوۡنَۚ
“Believers! Do not swallow interest, doubled and redoubled, and be mindful of Allah so that you may attain true success.” (Ali ‘Imran, 3:130)
Riba is of its very nature an invalid exchange because one party receives an increase without giving to the other party an equivalent return. This unearned increment is the root of injustice and exploitation because it enriches the class of money-lenders who accumulate wealth by impoverishing others.
Reasons for the prohibition of Riba constitutes war against Allah SWT and The Messenger:
- Riba causes trauma and depression due to mounting debts
- Riba contractis deemed to be unjust to the borrower
- Riba leads torich are rewarded for being wealthy
- Riba is a sure gain without any possibility of loss
- Riba is one of the major contributors to inflation
- Riba conflicts with the spirit of brotherhood
- Ribaconcentration of wealth in few hands
- Riba affects unity among the community
- Riba causes many economic evils
- Riba leads to corrupts society
- Riba refers to charged interest
- Riba creates a monopoly in society
- Riba destroys the spirit of sympathy
- Riba affects the feelings of brotherhood
- Riba implies the improper appropriation
- Riba destroys mutual help and cooperation
- Riba’s results in negative economic growth
- Riba demeans and diminishes human personality
- Riba also causes the establishment of monopolies
- Riba leads to hoarding of money, adversely effecting
There are many proofs showing that riba is haram and one of the most serious sins in Islam. For those with true faith in Allah and the Quran, this clear verse prohibiting riba is sufficient. Allah does not declare war on anyone except those who deal in riba. Allah says:
“O you who believe, fear Allah and give up what remains of your demand for riba if you are indeed believers. If you do it not, take notice of war from Allah and His Messenger.” (Quran 2:278-279)
The first and foremost reason riba is haram is that Allah declared it so. It is based on Allah’s infinite wisdom that He deems an action to be obligatory or prohibited, prescribing matters in man’s best interests, in this life, and in the Hereafter, as He is the All-Wise, All-Knowing. The scholars of Islam have suggested the following reasons as to why riba is haram.
Why riba is prohibited?
What is the rationale behind the prohibition of riba? Riba has both negative effects socially and negative effects economically. Many poor people end up refinancing these loans over and over in a never-ending cycle of debt and riba. Riba-based lenders only care that the loan is repaid and not where the money to repay comes from or the economic hardship endured by the borrower. Allah says:
يَا أَيُّهَا الَّذِينَ آمَنُوا اتَّقُوا اللَّهَ وَذَرُوا مَا بَقِيَ مِنَ الرِّبَا إِنْ كُنْتُمْ مُؤْمِنِينَ
“O, believers! Fear Allah, and give up outstanding interest if you are ˹true˺ believers.” (Surah 2. Al-Baqara, Ayah 278)
Riba-based finance tends to be directed towards borrowers who are likely to repay without any consideration towards whether the underlying activity is beneficial or productive.
Short-Sighted “Dumb Money”
Riba-based investments encourage directionless and short-sighted investments rather than channelling investments towards visionary and meaningful advancements.
The difference between Riba and Trade
The jurists hold that, unlike bay’ (trade), riba implies that money is loaned for self-generating or self-expanding value which is not a form of sale. For them, this growth increase of money is inequitable. In bay’, there is purchase and the sale which is a lawful economic activity, a productive movement.
Riba in Christianity and Judaism
The Old Testament of the Bible mentions three types of verses that deal with usury. One forbids usury in general, without reference to Jews or non-Jews.
“Do not ill-treat an alien or oppress him, for you were aliens in Egypt. Do not take advantage of a widow or an orphan… If you lend money to one of my people among you who is needy, do not be like a moneylender, charge him no interest.” (Exodus 22:21-25)
Another forbids Jews from taking usury from poor non-Jews living with them:
“If one of your countrymen becomes poor and is unable to support himself among you, do not take interest of any kind from him but fear your God that your countryman may continue to live among you. You must not lend him money at interest or sell him food at a profit.” (Leviticus, 25:35-37)
The New Testament of the Bible shows that Prophet Jesus (peace be upon him) not only prohibited interest, but asked his followers not to take back even the principal of the loan, and to lend not only to friends but even to enemies.
“Give to the one who asks you, and does not turn away from the one who wants to borrow from you.” (Matthew 5:42)
“And if you lend to those from whom you expect repayment, what credit is that to you? Even sinners lend to sinners, expecting to be repaid in full. But love your enemies, do good to them, and lend to them without expecting to get anything back. Then your reward will be great, and you will be children of the Highest because he is kind to the ungrateful and wicked.” (Luke 6:34-35)
In Islam, one is forgiven for performing a forbidden act in times of desperation. Therefore, if one is forced to use riba, otherwise risk extreme hardship or death, it becomes temporarily permissible, until that hardship is overcome.The most effective way to avoid riba and determine which transactions are permissible is by consulting Islamic scholars and utilizing their knowledge.
The prohibition of riba appears in the Holy Quran, Allah Almighty says:
- “…Allah has permitted trade and has forbidden riba.” (Quran 2:275)
- “… Allah knows all that you reveal and all that you conceal.” (Quran 5:99)
- “Establish salah (prayer) and pay zakah (charity) will have their reward with their Lord, and there is no fear for them, nor shall they grieve.” (Surah Al-Baqarah 277)
- “The only saying of the faithful believers when they are called to Allah (His Words- the Qur’an) and His Messenger, to judge between them, is that they say: “We hear and we obey.” And such are the successful (who will live forever in Paradise).” (Quran 24:51)
- “Those who consume riba cannot stand (on the Day of Resurrection) except as one stand who is being beaten by Satan into insanity. That is because they say, ‘Trade is (just) like riba.’ But Allah has permitted trade and has forbidden riba…” (Quran 2:275)
- “And if you do not, then be informed of a war [against you] from Allah and His Messenger. But if you repent, you may have your principal – [thus] you do no wrong, nor are you wronged.” (Surah Al-Baqarah 2:279)
- “O you who believe, fear Allah and give up what still remains of riba if you are believers.” (Surah Al-Baqarah 278)
Allah commands His believing servants to fear Him and warns them against what would bring them closer to His anger and drive them away from His pleasure. When a sentence contains “fear Allah,”it is a reminder for us to give the wrong that we are doing. Have a fear that Allahwill hold you accountable for this wrong action. Allah says:
رَبَّنَا تَقَبَّلْ مِنَّا ۖ إِنَّكَ أَنتَ السَّمِيعُ الْعَلِيم
“Our Lord, accept [this] from us. Indeed You are the All-Hearing, the All-Knowing.” (Al-Baqarah 2: 127)
Success in this Life & the Hereafter
When examining this issue of riba, we should remember that true success lies with the help of Allah alone. If we abide by that which is lawful and avoid that which is haram, our wealth will be blessed and beneficial in this world and the Hereafter. On the Day of Resurrection, people will rise from their graves quickly, except those who engaged in riba. They will stand up and then fall down like epileptics. Allah says:
وَأَخْذِهِمُ الرِّبَا وَقَدْ نُهُوا عَنْهُ وَأَكْلِهِمْ أَمْوَالَ النَّاسِ بِالْبَاطِلِ وَأَعْتَدْنَا لِلْكَافِرِينَ مِنْهُمْ عَذَابًا أَلِيمًا
“And (also) because of their taking usury, despite that they were forbidden to do it, and because of their usurping others’ wealth wrongfully (they were punished). And We have prepared a torturous torment for those of them who disbelieve.” (Surah An-Nisa 4:161)
None can doubt that riba is haram and a major sin, and no disobedience to Allah is worth the risk of His punishment. We must remember that the life of this world is short and fleeting and that the purpose of our existence is not to lust after beauty and wealth, but rather to worship Allah correctly and live by His rules. Thus, we learn that even co-operation in the deal in which interest is involved is an invitation to the Curse and Wrath of Allah.
Allah emphatically forbidden riba in all its forms and declared its practice equal to disbelief in Him. Prophet Muhammad, on him be peace, has also specified it and prohibited it in clear terms. There is consensus among Muslim scholars, moreover, on the illegality of dealing in riba.Is riba worse than Zina? ›
According to Sunan Ibn Majah, the Islamic prophet Muhammad declared the practice of riba worse than "a man committing zina (fornication) with his own mother". In that hadeeth, he said that there are 70 sins of riba.What is the main danger of riba? ›
The main reason riba is prohibited is the concept that it makes the rich richer and the poor poorer. There is an inequality in the dealings between the parties that is frowned upon in Islam. Interest is seen as perpetuating and often increasing the gap between rich and poor humans in society.Will Allah declare war? ›
"Whoever shows enmity to a Wali of Mine, then I declare war against him." The Wali of Allah is the pious God-fearing believer who follows Allah's legislation.How can we avoid Riba in Islam? ›
The first thing we can do is shun riba-based products and use halal alternatives instead. This instruction comes directly from the Quran, where believers are commanded to give up interest and repent. Therefore, review your financial arrangements to see if you are currently consuming or paying interest.How to deal with riba in Islam? ›
An acceptable way for Muslims to spend Riba is to donate it to charity. Rewards will not be received for doing so, but by donating Riba to a charitable cause, your wealth will be cleansed and you will have disposed of the haram Riba in a way that does not benefit yourself.What is the biggest sin in Islam? ›
Ithm is also associated with what is considered the worst sin of all, shirk. Shirk signifies associating partners with God. The Quran states that: He who associates with God has surely forged a great sin (ithm).What are 7 major sins in Islam? ›
He said, “Associating others with Allah (shirk); witchcraft; killing a soul whom Allah has forbidden us to kill, except in cases dictated by Islamic law; devouring orphans' wealth; consuming Riba; fleeing from the battlefield; and slandering chaste and innocent women.”Is Riba a minor sin? ›
Despite knowing that Riba is Haram and is considered one of the major sins of Islam, it is still treated as a lesser sin compared to murder and adultery.What are the evil effects of riba in Islam? ›
“Those who eat Riba will not stand (on the Day of Resurrection) except like the standing of a person beaten by Satan leading him to insanity". Al-Baqarah (2) 275. Hence, all Riba based transaction whether giving or receiving, dealing with Muslim or non-Muslim is unlawful in Islam.
Riba Al-Fadl, “the interest of excess,” the Prophet, on him be peace, specified as a haram, or forbidden, business transaction. Riba Al-Fadl is the unequal exchange of like commodities. One trades gold, silver, wheat, etc. for a greater amount of the same commodity from another.Why interest is forbidden in Islam? ›
To charge interest from someone who is forced to borrow to meet his essential consumption requirement is considered as an exploitative practice in Islam. Charging of interest on loans for productive purposes is also prohibited because it is not an equitable form of transaction.How does Islam justify war? ›
Islam allows war in self-defence (Qur'an 22:39), to defend Islam (rather than to spread it), to protect those who have been removed from their homes by force because they are Muslims (Qur'an 22:40), and to protect the innocent who are being oppressed (Qur'an 4:75).Who does Allah declare war on? ›
In the Qur'aan, Allaah does not declare war on anyone except the people who deal in ribaa.Do Muslims have to pray in war? ›
Muslim scholars have proclaimed ritual prayer, ṣalāt, as the main pillar of the Islamic faith. The Qur'ān enjoins the performance of prayers even during military operations (Q 4:102), albeit in a modified way.Is it Haram to get a bank loan in Islam? ›
“In the light of the holy Quran, it is haram (something that is illegal in the eyes of Islam) to take interest-based loan”, the “fatwa” issued by the seminary's “Darul Ifta” (department of fatwa) said. “Hence you should not take interest based loan for home,” the fatwa went on to say.Is it Haram to pay interest on a mortgage? ›
Whether you're the house buyer or a lending bank, earning or paying interest (otherwise known as riba) is considered haram (not allowed under Islamic law). The Islamic faith doesn't believe that banks should be able to profit on someone's need for a loan to help purchase assets.Is it Haram to pay interest? ›
Interest is considered haram in Islam, which means it is forbidden and should be avoided at all costs. Whilst it is relatively easy to avoid charging interest (simply by not asking for it), in the modern-day, it is increasingly more difficult for Muslims to abstain from making interest payments.What religion does not pay interest? ›
A Muslim is not allowed to benefit from lending money or receiving money from someone. This means that earning interest (riba) is not allowed – whether you are an individual or a bank. To comply with these rules, interest is not paid on Islamic savings or current accounts, or charged on Islamic mortgages.Is life insurance halal in Islam? ›
Life Insurance Is Permissible for Muslim-Americans
Islamic law specifically permits Takaful, where policyholders pool premiums together to support one another. This embodies the spirit of caring within Islam and is the only option for Muslims when available.
I believe that God can forgive all sins provided the sinner is truly contrite and has repented for his or her offenses. Here's my list of unforgivable sins: ÇMurder, torture and abuse of any human being, but particularly the murder, torture and abuse of children and animals.What are the three sins Allah will not forgive? ›
The previous verses mentioned the three worst major sins: shirk, murder, and zina. Allah removes all sins, major and minor, through repentance. In order to repent, you must first accept Islam.What is the 1 unforgivable sin in Islam? ›
of mušrik مشرك) are those who practice shirk, which literally means "association" and refers to accepting other gods and divinities alongside God (as God's "associates"). The Qur'an considers shirk as a sin that will not be forgiven if a person dies without repenting of it.Are tattoos a sin in Islam? ›
Muslims believe that tattooing is a sin, because it involves changing the natural creation of God, inflicting unnecessary pain in the process.Does Allah forgive all sins? ›
Despair not of the Mercy of Allah: for Allah forgives all sins: for He is Oft-Forgiving, Most Merciful. Again, God says to the believers in a Hadith Qudsi: "O son of Adam, so long as you call upon Me, and ask of Me, I shall forgive you for what you have done, and I shall not mind.What is the first sin in Islam? ›
The concept of Original Sin is not part of Islamic doctrine. Muslims believe humans are born without sin and with a desire to please God. We have free will, which causes us to go astray at times, but God is always willing to forgive.What is Zina according to Islam? ›
Zina is an Islamic legal term, meaning illicit sexual relations, that can be found in the Koran and the hadith (the collected words and acts of the Prophet Muhammad). Muslim empires like the Ottomans, the Mughals and the Safavids defined zina in different ways. But it usually refers to adultery and extramarital sex.Does the Quran say interest is haram? ›
Interest is considered haram in Islam, which means it is forbidden and should be avoided at all costs. Whilst it is relatively easy to avoid charging interest (simply by not asking for it), in the modern-day, it is increasingly more difficult for Muslims to abstain from making interest payments.What are the evil effects of Riba in Islam? ›
“Those who eat Riba will not stand (on the Day of Resurrection) except like the standing of a person beaten by Satan leading him to insanity". Al-Baqarah (2) 275. Hence, all Riba based transaction whether giving or receiving, dealing with Muslim or non-Muslim is unlawful in Islam.What kind of Riba is haram? ›
Riba Al-Fadl, “the interest of excess,” the Prophet, on him be peace, specified as a haram, or forbidden, business transaction. Riba Al-Fadl is the unequal exchange of like commodities. One trades gold, silver, wheat, etc. for a greater amount of the same commodity from another.
٢٧٥ Those who consume interest 1 cannot stand [on the Day of Resurrection] except as one stands who is being beaten by Satan into insanity. That is because they say, "Trade is [just] like interest." But Allāh has permitted trade and has forbidden interest.