By Abdullahi Jamaa
Consuming riba (interest) is one of the seven destructive sins that share almost or equal punishment with shirk (associating partners with Allah), magic, killing an innocent person, eating the property of an orphan, running away from the battlefield and accusing chaste women.
Those who deal in usury and illegally acquire people’s money, using various evil methods and wicked avenues are trading unlawfully as they await the torment of hell fire.
Some of the companions of the prophet (SAW) have cursed those who indulge in riba, including whoever pays it, its writers and its witnesses. It is such a grave sin that will undoubtedly land a person in the lowest suctions of hellfire.
Ibn Majah recorded that Abu Huraira (RA) said that the prophet (SAW) said, “Riba is seventy types, the least of which is equal to one having sexual intercourse with his mother.”
On the day resurrection, the person who engages in riba will wake up from his grave like a person afflicted by insanity or possessed by a demon. They will appear sickly with bodily seizures and dark faces.
That is why a person who consumes riba will resemble a majnoon (madman). Such a person cannot think rationally and will only work to spread mischief and injustices on earth.
“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” (Quran 2.275)
Their bodies will also face an endless round of torments and tortures in Hayatul-al-Barzakh (grave) as the Prophet (SAW) testified. And here on earth, Allah states that He destroys riba, either by depriving wealth from those who eat it, or by removing the blessings of their money.
The meaning of Riba
Riba is an Arabic word that means increase, addition or growth. Technically, it refers to the extra amount of money (valuables) that one earns from lending.
It is the difference that a borrower pays in excess and the lender earns in return. It is that interest that makes the difference between the initial principal amount and the repayment quantity.
Modern day riba involves the price of a rent paid on money in exchange of its use. In contemporary banking, the entry of exploitative interest has turned money into a commodity of trade.
With riba, money is no longer a medium of exchange. One can buy and sell money in any market, a practice that makes interest tantalizingly within the rich of most people.
Since money is now a commodity, banks sell money to individuals and business, enticing them with a longer repayment plan.
The selling and buying of money is now as competitive as bread and butter. The sweet-lacing of loans and bigoted descriptions of interests even amongst Islamic banks has put believers into a religious crossroad.
Imam Al-Ghazali said trading in money for earning some interest makes money an end object like a market commodity. “Engaging money in that way is an oppression”
Presently the widespread unabated practice of dealing in riba shrouded Muslim lives, overshadowed businesses, and engulfed souls. It partly defines the way of life as survival of most businesses and persons depend on it.
Engaging in usury has been presented as an acceptable profit-sharing investments in an economic environment where financial transactions are controlled by manipulative financial institutions.
The concentration of wealth in few hands, the increasing monopoly of key products and services, the rising number of super wealthy individuals informs an economic malpractice that emanates from exploitative credit facilities.
Riba now controls all kinds of markets becoming almost an inseparable part of economic activity. It has grown to be the mother and father of market cycles, fluctuations, dictating prices and creating artificial shortages of products and services.
In its modern forms, it shaped the backbone of economic frustrations that remains to be a true hurdle in the way of economic emancipation further widening the gap of the haves and have-nots.
The interest that is paid by banks, or charged on loans, or car loans, or mortgages, or credit card debts all fall under the devilish arm of riba.
In this age and era usury is transforming into an economic monster ravaging incomes, depleting profits while expanding monetary losses and risks.
The concept of interest originated from the people of Jahiliya, the pre-Islamic period when honesty and integrity remained an all-time low.
Riba subjugates the borrower, fleecing and undermining an individual’s economic freedom. It leads to fall of prime businesses that stood the test of time and tide.
When usury enters into businesses, within a short period it takes tall on profits. It creates economic havocs, deprives blessings and ultimately leading to collapse of investment.
Types of Riba
With competitive markets and ever-changing dynamics of capital economy, riba changes its ugly face so often. Islamic scholars have identified and categorised several types of Riba that involve buying and selling of goods and services.
In this chapter we will limit ourselves to two common types defined and discussed by Islamic jurists. Riba An-nasiya and Riba al-Fadl which are both haram as per the Holy Quran and the traditions and sayings of prophet Muhammad (SAW)
Riba an-nasiya is on credit transactions that happens when two items of the same kinds are exchanged but one or both parties delay delivery or payment.
It results from predetermined interest which a lender receives over and above the principal amount. It appears to be the most common form that is spread today in the world, where interest is charged on credits.
The interest here can be excess earned from lending money as opposed to excess earned through selling of goods and services. Selling for profit is permitted in Islam giving a religious green light of business activities.
Riba An-nasiya is a primary type of usury categorically mentioned in the Holy Quran. Its unlawfulness has been mentioned in the Quran on seven verses and more than forty hadiths signifying the danger of engaging in it.
Allah deems only two sins worthy of a war from Him: enmity with His friends and dealing in riba. Few Muslims doubt the enormity of dealing in riba, as clear as it is in Allah’s words.
“O you who have believed, fear Allah and give up what remains [due to you] of interest, if you should be believers. 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. (Quran 2:278-279)
The war that Allah will wage on individuals who transact on interests is undoubtedly a battle that will swallow them for good. No army or wealth can escape the power of Allah.
The other type which is Riba Al-fadl has been classified and rendered haram through the traditions and saying of our prophet (SAW). It is a kind of Riba that involves tangible homogenous commodities that are exchanged in terms of volume, weight and measure.
Any excess amount of commodities compensated to a lender makes this kind of exchange Islamically illegitimate.
Riba Al-fadl is a back door interest where a single measure of commodity exchanged in excess during repayment results in the engagement of usury.
The Prophet (SAW) said, “Gold is to be paid for by gold, silver by silver, wheat by wheat, barley by barley, dates by dates, salt by salt, like for like and equal for equal, payment being made hand to hand. If these classes differ, then sell as you wish if payment is made hand to hand [Sahih al-Muslim]
Contemporary forms of Riba
Usurious transactions that amount to brazen exploitation of people and businesses is indisputably illegal in Islam. Any form of excess earnings on credit facilities is categorised as part of new forms of riba.
The changing faces of usury and the issuance of new arrangements of ambiguous financial facilities with predetermined returns continue to put Muslim jurists and scholars into perpetual curiosity.
Lending is desirable and greatly rewarded by Allah, as the prophet regarded it as a charity since it involves helping somebody who is in dire need.
However scholars unanimously agree that if the lender stipulates any increase and takes it, this will be considered riba, it doesn’t matter whether the loan is for consumption or for development.
It is impermissible for a lender, a bank, a person or a company to take a stipulated increase regardless of the name given to it (profit, interest, gift)
Interest free loans known in the Islamic circles as the ‘goodly loan’ (Qard Hasan ) is allowed within the context of Islamic jurisprudence.
Yet the development of mortgage financing has taken deep roots all over the world. Most financial arrangements that involve properties such as homes are increasingly entangled in riba.
You will find a believer who is a good Muslim. He prays, he fasts, he pays zakat. He regularly performs voluntary acts of obedience. He’s a caring family man and a respected member of the community. By every outward measure, he appears to be leading the life of an exemplary Muslim.
But, somewhere along the line, he reconciled his views on interest-based finance, particularly in relation to conventional mortgages, with his religious beliefs.
Many Muslims are incorrectly convinced that Islam permits one to take a conventional mortgage to finance the purchase of a home. As a general Shariah principle in Islam, avoiding harm takes precedence over seeking benefit.
A conventional mortgage is a loan of money on which interest is charged. It constitutes a cash loan advanced by a bank or mortgage agency to finance the purchase of a property.
In mortgage, the homebuyer agrees to repay the principal in addition to making an interest payment, while non-payment of either entitles the bank to seize the title.
It means, some money today for more money tomorrow. The lender takes no equity position in the property. The lender provides only some cash today for more cash tomorrow. riba, no less, and this is forbidden.
One cannot seek pleasure in riba. Interest-based mortgage given out by conventional banks or even Islamic banks are completely prohibited in Islam.
Banking interest
The most common and critical issues facing the present-day Muslim Ummah is the issue of banking interest that is practiced widely in personal and businesses financing, affecting almost every individual directly or indirectly.
Deep into the current world of consumerism and worldly possessions, loans and credits are largely given on concessionary interest rates with longer payback periods.
Present financial facilities appear as innovations and practical solutions to help businesses and individual achieve some form of financial independence yet capitalist banking institutions exploit and amass wealth to the detriment of the overwhelming majority of poor populations.
Credit and loan facilities with interest rates have mushroomed over the last decades with general acceptance from Muslims and non-Muslims alike. This primitive practice in a civilised world affected general economic development.
In tandem with the provisions of the teachings of the Holy quran and with the guidance of traditions and sayings of prophet Muhammad (SAW) cotemporary Muslim scholars have thrown their weight behind the fundamental tenets of Islam in declaring impermissible any banking facility that imposes interest.
In interest-based loans that is haram in nature, the creditor receives fixed rate of return no matter how much profit or loss the venture makers. If the venture makes loss the creditor still receives a fixed rate of return as the debtor bears the risk of loss.
In prohibited loans, interest results from a kind of financial transaction where the debtor bears the majority of the loss and risks while the creditor enjoys most of the rewards.
Prohibition of RIBA is the most eminent feature of Islamic economics yet contemporary Islamic banks may entertain some form of modern interest in the issuance of ambiguous credit facilities.
All forms of economic exploitation certainly touches the issue of interest. Over the past few decades, Islamic finance has witnessed exponential growth that includes the entry of different of forms financial services.
In the world of consumerism where happiness is derived from increased consumption and material possession banks and individuals engage in trading activities that may contain elements of interest, uncertainty and gambling.
The use of Credit Cards in conventional banking and also within Islamic bank is one of the most widely accepted facilities that invites discussions on its legality within the context of sharia.
Islamic economists and scholars have studied the Islamic lawfulness of using Credit Cards in an era where issuing banks use it as a means to raise additional finance and diversify their sources of funds.
Credit cards have been used to securitize loans and debts where many issuing banks charge interest putting it into the list of prohibited interest-laced transactions.
It is expressly clear that Islamic sharia does not allow interest laden credit cards that only benefits the issuing financial institutions.
While credit cards promote consumerism and debt-compilation which is disliked in the religion of Islam, its mode of lending and borrowing strengthens the dirt and darkness that comes with Interest.
The counsel of Islamic Fiqh in the Academy of Organization of Islamic Conference debated on the issue of credit card in its twelve session in the year 2000. Through a resolution, they resolved that conventional cards are not permissible in Islam if it includes imposition of interest.
Usually, riba in credit card is charged in two situations i) either for delay in payment as a late payment fine, or ii) daily interest on balance amount of deferred payments.
Either way, the Riba (interest) paid over and above original amount is legally considered prohibited (haram).
Dangers of riba
The impact of riba on the lives of people and its oppressiveness cannot be denied. In the name of profit taking people have been pushed into corner to continuously earn money for “lenders” and pay them monthly interest.
Interest economy created a culture and environment that promotes certain behaviours that includes selfishness, stinginess, mercilessness and hardness of the heart.
Riba creates a society and culture that is completely in opposition to everything Islam teaches. It turns to be a tool of oppression that denies opportunities for economic growth and development. It is a back robbery that infringes the basic economic rights of vulnerable members of the society.
Islam prohibits eating people’s money unjustly and considers riba as one way of stealing people’s money. Allah (SW) states: “And do not consume one another’s wealth unjustly or send it [in bribery] to the rulers in order that [they might aid] you [to] consume a portion of the wealth of the people in sin, while you know [it is unlawful].”(Quran 2:188)
