In Islamic jurisprudence, riba refers to any unjust gain or advantage obtained through the exchange of commodities, particularly in financial transactions. It is commonly understood as “interest” in modern finance. The prohibition of riba is explicitly mentioned in the Quran and is considered one of the major sins in Islam. The fundamental ruling regarding riba is that it is strictly forbidden (haram) in Islam.
The Quranic prohibition of riba is mentioned in several verses, including:
- Surah Al-Baqarah (2:275-279) – These verses emphasize the prohibition of riba and warn of severe consequences for those who persist in dealing with it.
- Surah Al-Imran (3:130) – This verse highlights the importance of avoiding riba and advises believers to fear Allah and give up what remains of it if they are truly believers.
The prohibition of riba is also reinforced by the teachings and actions of the Prophet Muhammad (peace be upon him). He explicitly forbade all forms of riba transactions and warned against its severe consequences.
Islamic scholars unanimously agree on the prohibition of riba due to its harmful effects on society and individuals. The primary reasons for its prohibition include:
- Exploitation: Riba allows one party to exploit the financial needs of another by charging excessive interest rates, leading to unfair and unequal transactions.
- Social Injustice: Riba exacerbates socio-economic disparities by favoring the wealthy over the poor and perpetuating cycles of poverty.
- Violation of Justice: Riba contradicts the principles of fairness and justice in Islamic law, which emphasize equitable and mutually beneficial exchanges.
- Destruction of Wealth: Riba leads to the concentration of wealth in the hands of a few, hindering economic development and prosperity for society as a whole.
In Islamic finance, alternative mechanisms such as profit-sharing, leasing, and equity-based financing are promoted as Sharia-compliant alternatives to riba-based transactions. Islamic financial institutions adhere to these principles to ensure that their operations are in accordance with Islamic law.
Overall, the prohibition of riba in Islam underscores the importance of ethical conduct, fairness, and justice in all financial dealings. Muslims are encouraged to seek halal (permissible) sources of income and to avoid engaging in transactions involving riba, as it is considered detrimental to both individual spiritual well-being and the welfare of society as a whole.
