Definition of Riba Classification of Riba Laws governing types of Riba Riba and present day arguments Nature of Money in Islam Difference between money and Commodity
Definition of Riba
Riba means any excess compensation over and above the principal which is without due consideration. Its a premium paid to the lender in return for his waiting as a condition for the loan. As per hadith Every loan that draws interest is riba The prohibition of interest is not limited to Islam but it is shared by Judaism and Christianity
Creates imbalance in the society, where money is earned on money without the risk of return.
Banks tend to cater loans only to the rich and entire capital is utilized for the benefit of the few. Community as a whole does not benefit.
Classification of Riba
Riba un Nasiyah or Riba al Jahilia refers to loan transactions Riba al Fadl or Riba al Bai refers to sale transactions
Classification of Riba
Classification of Riba
Classification of Riba
Includes all commodities having equal weight or volume and are being exchanges
Classification of Riba
Therefore, the law applies on everything edible or having natural ability of becoming a medium of exchange (currency)
Classification of Riba
Classification of Riba
Classification of Riba
First Law
Exchange of any of the six commodities with itself but differing in quality is allowed only under certain conditions
Conditions of Exchange
Any difference in value/quality should be ignored and commodities should be exchanged in equal amount Instead of direct exchange of commodities of the same kind, a person should sell his commodity against cash at the market value and buy the commodity against cash
Second Law
Exchange of a product with its raw material is allowed under certain conditions
Conditions of Exchange
If the characteristics of the commodity has been totally altered by the industry, then different amounts can be exchanged If little alteration has been done then the exchange should be either in equal weights or sold against cash
Third Law
Exchange of any of the six commodities with one another is allowed in unequal amounts but the payment should not be deferred.
Conditions of Exchange
General conditions of sale contract are filled
Third Law
Exchange of any of the six commodities with one another is allowed in unequal amounts but the payment should not be deferred.
Conditions of Exchange
General conditions of sale contract are filled
Riba as practiced during the days of the Prophet (SAW) was Usury Commercial Interest did not exist during the days of the Prophet (SAW)
Riba as practiced during the days of the Prophet (SAW) was Usury
Counter argument: Islam when prohibiting something does not only prohibit the prevalent form but all forms that might erupt in future. E.g Liquor, Pork, Corruption
Commercial Interest did not exist during the days of the Prophet (SAW)
Counter argument: The claim is incorrect as both forms existed in pre-islamic days.
In present day banking no one being exploited or faces injustice, it cannot be called Riba There is a Quranic verse O believers do not devour one anothers possessions wrongfully; rather than that let there be trading by mutual consent. Wrongful devouring only arise if the consent of one or more parties is not present but in commercial interest the mutual consent is present of both parties, so its not Riba.
In present day banking no one being exploited or faces injustice, it cannot be called Riba
Counterargument: Islam prohibits one party getting confirmed profit and other party getting unconfirmed profit from the same investment
There is a Quranic verse O believers do not devour one anothers possessions wrongfully; rather than that let there be trading by mutual consent. Wrongful devouring only arise if the consent of one or more parties is not present but in commercial interest the mutual consent is present of both parties, so its not Riba.
In commodities, the transaction of sale and purchase are affected on identifies commodity
Opinion on Money `
Post great Depression Economic Crisis Committee discussing the pitfalls stated:
In order to ensure money performs its true function of operating as a means of exchange and distribution, it is desirable that it should ceased to be traded as a commodity
Opinion on Money `
Opinion on Money `
Opinion on Money `