Introduction
In Islam, financial transactions are governed by divine principles that promote justice, fairness, and social welfare. One of the most critical prohibitions in Islamic finance is Riba (interest or usury), which includes earning yield from loans or debt-based investments. This article explores why Islam forbids Riba, its dangers, and the ethical alternatives available to Muslims.
What is Riba (interest)?
Riba refers to any fixed, predetermined increase in a loan or debt transaction, where the lender profits without sharing risk. It includes:
- Riba al-Nasi’ah: Interest charged on loans (e.g., bank interest).
- Riba al-Fadl: Excess in exchange of the same commodities (e.g., selling gold for gold with extra).
Islam strictly prohibits both forms, as they lead to exploitation and economic imbalance.
Why is Riba Forbidden in Islam?
1. Divine Prohibition in the Quran
Allah has clearly condemned Riba in multiple verses:
- "Those who consume interest cannot stand [on the Day of Resurrection] except as one stands who is being beaten by Satan into insanity." (Quran 2:275)
- "Allah has permitted trade and forbidden interest." (Quran 2:275)
- "O believers! Fear Allah, and give up what remains [due to you] of interest, if you are true believers." (Quran 2:278)
These verses emphasize that Riba is not just discouraged but completely unlawful (Haram).
2. Exploitation and Unjust Enrichment
- Riba allows lenders to profit without effort or risk, while borrowers suffer if they fail to repay.
- Islam promotes risk-sharing models (like Musharakah and Mudarabah) where profits and losses are shared fairly.
3. Social and Economic Harm
- Riba widens the gap between rich and poor, as wealth flows to those who already have money.
- It encourages debt slavery, where people fall into endless cycles of repayment.
- Islam encourages interest-free loans (Qard Hasan) and charity to help those in need.
4. Severe Warning from the Prophet (PBUH)
The Prophet Muhammad (peace be upon him) said:
- "A dirham of Riba knowingly consumed by a man is worse than committing adultery 36 times." (Ahmad, graded Hasan)
- "The curse of Allah is on the one who takes Riba, the one who gives it, the one who writes it down, and the one who witnesses it." (Muslim 2995)
These Hadiths show the gravity of dealing with Riba in any form.
Islamic Alternatives to Riba-Based Yield
Islam encourages ethical, asset-backed, and risk-sharing financial models, such as:
1. Profit-Sharing (Mudarabah & Musharakah)
- Mudarabah: One party provides capital, the other provides labor; profits are shared based on agreement.
- Musharakah: Joint venture where all partners invest and share profits/losses proportionally.
2. Islamic Bonds (Sukuk)
- Sukuk represent ownership in an asset, not debt, ensuring compliance with Shariah.
3. Ethical Islamic Banking
- Banks operate on profit-sharing, leasing (Ijarah), or trade-based financing instead of interest.
4. Charity-Based Loans (Qard Hasan)
- A loan given without any extra charge, purely to help others, rewarded by Allah.
Conclusion
Islam prohibits Riba (interest/yield) because it fosters injustice, greed, and economic instability. Instead, Islamic finance promotes fair trade, shared risk, and social welfare. By avoiding Riba and adopting Shariah-compliant alternatives, Muslims can ensure their wealth is halal, ethical, and blessed by Allah.
"Allah destroys interest and gives increase for charities." (Quran 2:276)
Note:I hope binance lets users create islamic accounts