Have you ever wondered about the term “Riba in Islam and what it means? If your answer is yes, this is the right place to be! Whether you want to know more about it or are curious about why Riba in Islam is such a big deal, we’ve got you covered!
Riba is more than a financial term that sets rules for transactions and exchanges in Islam. Riba in Islam is a major sin. It has many consequences for both individuals and society. It also has severe punishment in the hereafter. Today, we will find out all about it by exploring the following:
- What is Riba in Islam?
- What is consuming Riba in Islam?
- What are examples of Riba?
- Is Riba in Islam a major sin?
- What is the punishment for Riba in Islam?
Let’s start!
What’s Riba in Islam?
Riba (Pronounced “ree-ba’) comes from the verb رَبا “Rabaa,” meaning increase, excess, or growth. It is usually translated in English into interest or usury. Riba in Islam, refers to charging excessive or unfair interest on loans. Furthermore, it can refer to any form of unequal exchange in trade. Riba dates back to Greek and Roman times. It was also common among people in the times of Jahiliyyah. However, it is haram (forbidden) in Islam.
So, are there different types of usury in Islam? Let’s find out!
What are the types of Riba in Islam?
The Quran didn’t specify any particular type of riba. But, Muslim scholars explained two types of Riba in Islam. They did this based on general texts of the Quran and some Ahadith (sayings) of the Prophet Muhammad ﷺ. The two types of Riba in Islam are Riba An-Nasiyah and Riba Al-Fadl. Let’s find out the difference between them.
- Riba In Islam: Riba An Nasiyah (Riba in a loan contract)
This is also called “Riba Al Jahiliya,” or “riba of delay.”. Some scholars refer to it as “riba al-Quran”. Why? because the Quran specifically prohibits this form of riba. Riba An-Nasiyah is when there is an increase in the original amount of money borrowed or taken as a loan. Whether it is from someone or a ban. Think of it like this: you borrow money and have to pay back more than you borrowed. That extra bit you pay is riba.
Moreover, It doesn’t matter if the amount is fixed or changed. It also doesn’t matter if it is before the contract (pre-determined) or after it or even if the borrower didn’t pay in time! All this is Riba and it is strictly prohibited.
- Riba In Islam: Riba Al Fadl (Riba in a sale or exchange contract)
This type is known as Riba Al Bai. It means adding an extra amount when exchanging one item for another of the same type in a trade or barter. This type of Riba in Islam is more common with tangible goods and commodities. A good example is when an individual trades 1 kilogram of high-quality tomato for 2 kilograms of lower-quality tomato. Here, the excess 1 kilogram of tomato is considered Riba al-Fadl. To avoid this type of Riba there are 2 rules:
- The exchange of goods should be done hand in hand, which means at the same time on the spot!
- The items should be of the same quality and quantity (volume or weight)
Another way to avoid this type of Riba is to sell your own goods in exchange for money at market value. Then buy someone else’s good with this money at the market value. This type of usury in Islam is also called Riba al-Hadith. Because it was not mentioned directly in The Quran but rather in the following hadith.
“Sell gold in exchange of equivalent gold, sell silver in exchange of equivalent silver, sell dates in exchange of equivalent dates, sell wheat in exchange of equivalent wheat, sell salt in exchange of equivalent salt, sell barley in exchange of equivalent barley, but if a person transacts in excess, it will be Riba. However, sell gold for silver anyway, you please on the condition, it is hand-to-hand and sell barley for date anyway, you please on the condition, it is hand-to-hand.” Sahih Bukhari
Now that we know the different forms of Riba in Islam, let’s dig deeper!
What is consuming Riba in Islam?
In Surah Al-Baqara verse 275, Allah mentions “Those who consume interest.”
ٱلَّذِينَ يَأْكُلُونَ ٱلرِّبَوا۟
The word yakuluna [يَأْكُلُونَ] translated as consuming. Consuming Riba in Islam means being involved in any transaction that includes Riba. It means benefiting from the extra charges or the unfair gain whether you’re giving or receiving it. In Islam, both giving and receiving riba are forbidden. The Prophet PBUH said:
“may cursed the receiver and the payer of interest, the one who records it and the two witnesses to the transaction and said: “They are all alike [in guilt].” [Muslim]
So even the ones who aid in or witness Riba are guilty! Looking at this hadith and reflecting on our day-to-day lives, we may find many examples of riba that we may not be aware of. Keep reading to learn more.
What are Examples of Riba?
Riba can be in many forms, it can also be part of everyday finance. Here are a few common examples:
- Interest on Loans: Charging or paying interest on personal or commercial loans.
- Bank Savings Accounts: Earning interest from savings accounts, individual savings accounts (ISAs), and other savings investments or fixed deposits.
- Credit Card Interest: Paying interest on outstanding credit card balances and those charges that pile up if you don’t pay in full! (Debit cards are fine)
- Mortgage Interest: Paying interest on home loans.
- Engaging in businesses that rely on interest
- Investment Products: investing in financial products that promise guaranteed returns based on interest.
Now that we have seen some examples, we know that Riba in Islam is prohibited. the next question is Is it a major sin or just frowned upon? Let’s find out!
Is Riba a Major Sin?
The simple and most straightforward answer to this is yes! Riba in Islam is a major sin!
In fact, it is one of the seven major sins that the prophet mentioned in the following Hadith
Shun the seven deadly [deeds]. ‘It was said [by a companion listening to him]: O Messenger of Allah! What are they?’ “He said: association of partners with Allah; the practice of sorcery; the killing of any person—which Allah has forbidden—except by a divinely established right; the consumption of interest; the consumption of an orphan’s wealth; fleeing on the day of advance into battle; and the defaming of virtuous, innocent, believing women.” (Bukhari)
These sins destroy a person’s wealth and well-being in this world and the hereafter. Both The Quran and Hadith (sayings of Prophet Muhammad) strongly condemn Riba. The word riba is mentioned many times in the Quran and Hadith, with clear instructions to avoid it. Let’s take a look
Riba in the Quran
The word riba is mentioned 8 times in 12 verses in the Quran. They all give clear wording on avoiding Riba
يَـٰٓأَيُّهَا ٱلَّذِينَ ءَامَنُوا۟ ٱتَّقُوا۟ ٱللَّهَ وَذَرُوا۟ مَا بَقِىَ مِنَ ٱلرِّبَوٰٓا۟ إِن كُنتُم مُّؤْمِنِينَ
O you who believe, fear Allah and give up what remains of your demand for riba, if you are indeed believers. (Surah AlBaqara Verse 278)
﴿ يَا أَيُّهَا الَّذِينَ آمَنُوا لَا تَأْكُلُوا الرِّبَا أَضْعَافًا مُّضَاعَفَةً ۖ وَاتَّقُوا اللَّهَ لَعَلَّكُمْ تُفْلِحُونَ﴾
“O you who have believed, do not consume usury, doubled and multiplied, but fear Allah that you may be successful”. (Surah Aal-e-Imran, Verse-130)
﴿ وَمَا آتَيْتُم مِّن رِّبًا لِّيَرْبُوَ فِي أَمْوَالِ النَّاسِ فَلَا يَرْبُو عِندَ اللَّهِ ۖ وَمَا آتَيْتُم مِّن زَكَاةٍ تُرِيدُونَ وَجْهَ اللَّهِ فَأُولَٰئِكَ هُمُ الْمُضْعِفُونَ﴾
Yet beware, for whatever you give others in usury — to gain increase from the wealth of people — shall never increase with Allah! But blessed is whatever you give of the Zakat-Charity — desiring only the Face of God. For it is such as these who shall have a much-multiplied reward. (Surat Al-Rum, 30:39)
Furthermore, Allah SWT prohibited Riba before Islam. He punished people for not obeying his commands on this
﴿ وَأَخْذِهِمُ الرِّبَا وَقَدْ نُهُوا عَنْهُ وَأَكْلِهِمْ أَمْوَالَ النَّاسِ بِالْبَاطِلِ ۚ وَأَعْتَدْنَا لِلْكَافِرِينَ مِنْهُمْ عَذَابًا أَلِيمًا﴾
Because of the wrongdoing perpetrated by those of Jewry, We have made forbidden to them wholesome foods previously made lawful to them, and also for their taking of interest, though they were forbidden to do it.” (Surat Al-Nisa’, 4:161)
- Riba in Hadith
Prophet Muhammad also emphasized the severity of riba!
may cursed the receiver and the payer of interest, the one who records it, and the two witnesses to the transaction and said: “They are all alike [in guilt].” [Muslim]
Narrated by `Aun bin Abu Juhaifa:
My father bought a slave who practiced the profession of cupping. (My father broke the slave’s instruments of cupping.). I asked my father why he had done so. He replied, “The Prophet (ﷺ) forbade the acceptance of the price of a dog or blood, and also forbade the profession of tattooing, getting tattooed and receiving or giving Riba, (usury), and cursed the picture-makers. : Sahih al-Bukhari 2086
But why is Riba a major sin?
Allah SWT wouldn’t forbid something unless it’s really bad for us. and in the case of usury in Islam, it’s not only bad for us as individuals but also bad for the economy and society.
Let’s reflect on each of them.
Riba in Islam: Individual losses.
As we mentioned before, Riba in Islam is one of the seven major sins. It destroys the person’s wealth and well-being in this world and the hereafter. Imagine being always in debt! It causes so much stress and can lead to depression and even suicide! (1) Furthermore, not only does it take the Barakah out of your life, but will also put you as a sinner on the Day of judgment.
يَمْحَقُ اللَّهُ الرِّبَا وَيُرْبِي الصَّدَقَاتِ وَاللَّهُ لا يُحِبُّ كُلَّ كَفَّارٍ أَثِيمٍ (276)
Allah has made interest fruitless and charity fruitful. And Allah does not like any ungrateful evildoer. (Surah AlBaqara Verse 276)
As mentioned in the Qur’an, Allah does not declare war on anyone except those who consume riba. Who would want to go to war against Allah almighty?
“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. but if you repent, you shall have your capital sums. Deal not unjustly (by asking more than your capital sums), and you shall not be dealt with unjustly (by receiving less than your capital sums).” Qur’an 2:278-279
يَـٰٓأَيُّهَا ٱلَّذِينَ ءَامَنُوا۟ ٱتَّقُوا۟ ٱللَّهَ وَذَرُوا۟ مَا بَقِىَ مِنَ ٱلرِّبَوٰٓا۟ إِن كُنتُم مُّؤْمِنِينَ فَإِن لَّمْ تَفْعَلُوا فَأْذَنُوا بِحَرْبٍ مِّنَ اللَّهِ وَرَسُولِهِ ۖ وَإِن تُبْتُمْ فَلَكُمْ رُءُوسُ أَمْوَالِكُمْ لَا تَظْلِمُونَ وَلَا تُظْلَمُونَ﴾ [ البقرة: 279]
Riba In Islam: It goes against our Islamic values.
Riba in Islam, is an exploitative practice that takes advantage of those in need. The lender increases in wealth without offering anything of value, while the poor just drown in endless debts. It makes the rich richer and the poor poorer! This widens the gap between the members of society.
Our Islamic values encourage sympathy, help, and cooperation among Muslims. When involved in Riba, these values are compromised. Riba makes us greedy, selfish, and uncaring about our brothers in need. Furthermore, Riba leads to inequality and injustice. Therefore, it is simply against the core Islamic values of fairness and compassion. However, that’s not the only thing, Riba harms the economy!
Riba In Islam: Economic Implications
Riba destabilizes the economy to some extent. It hinders the circulation of money. Moreover, any increase or decrease in an interest rate affects the economy.
The bottom line is that Riba in Islam has many consequences. It goes against our Islamic values of compassion and cooperation. Also, it affects the economy negatively. For us individuals, Riba is disobeying Allah’s orders. Thus facing grave consequences as sinners on the Day of judgment. Let’s delve into the punishment of Riba in Islam.
What is the Punishment of Usury in Islam?
Allah SWT doesn’t specify an earthly punishment for consuming Riba in Islam. However, we must know that any wealth gained from riba is not pure! And as we mentioned earlier, it can make us miserable as we are disobeying Allah’s orders. What’s more, Allah (SWT) made it very clear in the Quran that those who engage in Riba will have dire consequences in the afterlife. They will stand on the Day of Judgment like someone driven to madness by Satan.
﴿ الَّذِينَ يَأْكُلُونَ الرِّبَا لَا يَقُومُونَ إِلَّا كَمَا يَقُومُ الَّذِي يَتَخَبَّطُهُ الشَّيْطَانُ مِنَ الْمَسِّ ۚ ذَٰلِكَ بِأَنَّهُمْ قَالُوا إِنَّمَا الْبَيْعُ مِثْلُ الرِّبَا ۗ وَأَحَلَّ اللَّهُ الْبَيْعَ وَحَرَّمَ الرِّبَا ۚ فَمَن جَاءَهُ مَوْعِظَةٌ مِّن رَّبِّهِ فَانتَهَىٰ فَلَهُ مَا سَلَفَ وَأَمْرُهُ إِلَى اللَّهِ ۖ وَمَنْ عَادَ فَأُولَٰئِكَ أَصْحَابُ النَّارِ ۖ هُمْ فِيهَا خَالِدُونَ﴾
“Those who consume interest 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 Allah has permitted trade and has forbidden interest. So whoever has received an admonition from his Lord and desists may have what is past, and his affair rests with Allah. But whoever returns to [dealing in interest or usury]—those are the companions of the Fire; they will abide eternally therein.”
Surah Al-Baqarah, Verse-257!
The prophet SWT also mentioned the consequences of consuming interest.
We arrived at a stream whose water was red like blood. A man was swimming in it. On the bank of the stream was another. He had collected many stones. Whenever the swimmer approached him, he struck him with a stone that smashed his face. The swimmer would again swim until he approached the bank, and the other would strike him with a stone that smashed his face. The Prophet, on him be peace, asked [the Arch-Angel] Gabriel about the two of them. Gabriel said: ‘The man swimming and being stoned earned his money [in life] from interest.’” (Bukhari)
Now we know that Riba in Islam is haram and a major sin. We must consider all we do! whether it is our credit card or car loan. It’s very important for anyone who consumed Riba to repent (make Tawbah) and ask for forgiveness.
What if you already had some interest in your bank account? You cannot return those. Also, you cannot consume it. The best thing to do is to spend them on charitable causes. This could mean giving it to the poor and helping debtors. However, do not expect a reward for this, as it is not zakat or sadaqah.
Let’s Wrap It Up!
Riba in Islam is a major sin. No disobedience to Allah is worth the risk of such grave punishment. And just because Riba is common doesn’t mean it is okay to do it. It’s not just about making extra, unjust money! it’s about exploiting and taking advantage of those in need! That’s why we, as Muslims need to understand it and its implications on our society and ourselves. By avoiding Riba, Muslims can engage in fair trade, ethical investments, and compassionate lending. Thus, adhere to our deen (religion) and Islamic values. We hope you now understand about Riba in Islam To read more, head to our blog here!
