Riba (Usury)

ٱلَّذِينَ يَأۡكُلُونَ ٱلرِّبَوٰاْ لَا يَقُومُونَ إِلَّا كَمَا يَقُومُ ٱلَّذِي يَتَخَبَّطُهُ ٱلشَّيۡطَٰنُ مِنَ ٱلۡمَسِّۚ ذَٰلِكَ بِأَنَّهُمۡ قَالُوٓاْ إِنَّمَا ٱلۡبَيۡعُ مِثۡلُ ٱلرِّبَوٰاْۗ وَأَحَلَّ ٱللَّهُ ٱلۡبَيۡعَ وَحَرَّمَ ٱلرِّبَوٰاْۚ فَمَن جَآءَهُۥ مَوۡعِظَةٞ مِّن رَّبِّهِۦ فَٱنتَهَىٰ فَلَهُۥ مَا سَلَفَ وَأَمۡرُهُۥٓ إِلَى ٱللَّهِۖ وَمَنۡ عَادَ فَأُوْلَٰٓئِكَ أَصۡحَٰبُ ٱلنَّارِۖ هُمۡ فِيهَا خَٰلِدُونَ ٢٧٥

Those who eat Riba will not stand (on the Day of Resurrection) except like the standing of a person beaten by Shaitan leading him to insanity. That is because they say: ‘Trading is only like Riba’, whereas Allah has permitted trading and forbidden Riba. So, whosoever receives an admonition from His Lord and stops eating Riba shall not be punished for the past; his case is for Allah; but whoever returns (to Riba), such are the dwellers of the Fire – they will abide therein forever.

Surah 2 Al-Baqarah Verse 275

• Riba: Usury is of two major kinds:

• Riba An-Nasia’h i.e., interest on lent money
• Riba Al-Fadl i.e., taking a superior thing of the same kind of goods by giving more of the same kind of goods of inferior quality

• The term ‘Riba’ in Arabic means ‘to grow, to exceed, to increase’. Technically, it denotes the amount that a lender receives from a borrower at a fixed rate of interest.
• At the time of revelation of the Quran, several forms of interest transactions were in vogue and were designated as Riba by the Arabs:

• Vendor sold an article and fixed a time limit for the payment of the price, stipulating that if the buyer failed to pay within the stipulated time, he would extend the time limit but increase the price of the article.
• A man loaned a sum of money to another person and stipulated that the borrower should return a specified amount in excess of the amount loaned within a given time limit.
• The borrower and the vendor agreed that the former would repay the loan within a certain time limit at affixed rate of interest, and that if he failed to do so within the limit, the lender would extend the time limit, but at the same time would increase the rate of interest

It is to transactions such as these that the injunctions mentioned in the verse apply.

• The subject of Riba is a difficult subject for many scholars. Umar bin Al-Khattab said “I wished that the Messenger of Allah (pbuh) had made three matters clearer for us, so that we could refer to his decision: the grandfather (regarding inheriting from his grand children), the Kalalah (those who have neither descendents nor ascendants as heirs), and some types of Riba”. Umar was referring to the types of transactions where it is not clear whether they involve Riba or not. Umar also said “The Ayah about Riba was one of the last Ayah to be revealed and the Messenger of Allah (pbuh) died before he explained it to us. So leave that which makes you doubt for that which does not make you doubt”
• Narrated An-Numan bin Bashir that he heard the Prophet (pbuh) say: ‘Both lawful and unlawful things are evident, but in between them there are matters that are not clear. So whoever saves himself from these unclear matters, he saves his religion and his honour. And whosoever indulges in these unclear matters, he will have fallen into the prohibitions, just like a shepherd who grazes (his animals) near a private pasture, at any moment he is liable to enter it’
• The Shariah supports the rule that for any matter that is unlawful, then the means to it are also unlawful, in the same way that whenever an obligation will not be complete except with something then that something in itself is an obligation.
• Narrated Ali and Ibn Masud that the Prophet (pbuh) said: ‘May Allah curse whoever consumes Riba, whoever pays Riba, the two who are witnesses to it, and the scribe who records it’

يَمۡحَقُ ٱللَّهُ ٱلرِّبَوٰاْ وَيُرۡبِي ٱلصَّدَقَٰتِۗ وَٱللَّهُ لَا يُحِبُّ كُلَّ كَفَّارٍ أَثِيمٍ ٢٧٦

Allah will destroy Riba (usury) and will give increase for Sadaqat (deeds of charity, alms); And Allah likes not the disbelievers, sinners.

Surah 2 Al-Baqarah Verse 276

• The fact stated in this verse is a truism from a moral and spiritual as well as from an economic and social viewpoint. For, although wealth apparently multiplies through interest and shrinks as a result of charity, in actual fact the opposite is the case. By Allah’s decree, the law of nature is such that interest not only serves as a strain on moral and spiritual well-being, and social and economic growth, it also causes actual regression and decline. Charity, however, (including such acts as lending money to people with the stipulation that they should return it if they can. and at their convenience) leads to the growth and expansion of man’s moral and spiritual qualities and to the growth of human society and economy.
• Looked at from moral and spiritual standpoints, it is evident that interest is not only the outcome of selfishness, miserliness and callousness but also encourages their growth. Charity, on the other hand, is the outcome of generosity, compassion, large -heartedness and magnanimity, with the result that the more one practises charity the more these qualities develop. It is obvious that if there is a society whose individuals are selfish in their dealings with one another, in which none is prepared to assist the other without self-interest, in which every person considers the other's need an opportunity to capitalize and exploit, in which the interests of the rich are directly opposed to the interests of the common people, that society does not rest on stable foundations. In such a society, instead of love and compassion there is bound to grow mutual spite and bitterness, apathy, indifference and callousness. The elements which compose such a society are bound to remain inclined towards disintegration and chaos; acute internal conflict and strife are sure to occur. Contrast this with the society which is based on mutual sympathy and co-operation, whose individuals deal with one another magnanimously, in which, when a person is in need, people willingly come forward to accord generous help, in which the ‘haves’ assist the ‘have-nots’ with compassion and at least engage in just and equitable co-operation. In such a society mutual cordiality, goodwill and fellow-feeling are bound to flourish. The various components of such a society will be closely knit together and prove a source of mutual support. In such a society internal conflict and strife will make few inroads. Also, owing to mutual co-operation and goodwill the pace of development should be faster than in the other kind of society.
• From an economic viewpoint, from which interest- bearing loans are seen to be of two kinds. The first category, consists of loans incurred by people in genuine need, who are compelled to borrow for their personal consumption requirements. The second consists of the loans incurred by businessmen for investment in trade and industry or agriculture. The first category is generally acknowledged to lead to ruin. Nevertheless, there is not one country in the world where financiers and financial institutions are not sucking the blood of poor labourers, peasants and ordinary low-income people through interest on consumption loans. The burden of interest makes it extremely difficult, often impossible, for borrowers to pay off the original loan. They may even have to resort to fresh borrowing from elsewhere to pay if off. Because of the way interest works, the sum outstanding against them often remains even after they, have paid twice or three times its amount in interest. The bulk of the income of labourers is snatched away from them by lenders, leaving them without enough for the bare necessities of life for themselves and their families. This situation steadily erodes their interest in their jobs. For if someone else is to reap the benefit of a man's hard work, why should he work hard at all? Moreover, oppressed by the worries of debt, the health and strength of labourers is gradually destroyed by undernourishment and lack of medical treatment. In short, a minority of people continually fatten themselves by sucking the blood of millions of ordinary people, but the total production level of the people remains much lower than its optimum potential. Ultimately, of course, these exploiters are seldom spared the evil consequences of their actions. Their callous selfishness causes such widespread misery among the masses that anger and resentment against the rich smoulder in their hearts ready to erupt in times of revolutionary unrest. The exploiters then have to pay very dearly: their ill-earned riches are not only wrested from them; they are either killed mercilessly or subjected to ignominy and humiliation.

The second category of loans, those invested in productive enterprises, also cause harm because of the infliction of a predetermined rate of interest on such borrowings. The most significant are the following:

(1) Projects which do not promise a higher rate of profit than the current rate of interest fail to attract sufficient funds, no matter how useful and necessary they may, be from the viewpoint of larger national interests. Loanable funds flow towards those business enterprises which are likely to yield at least the same, if not a higher rate of profit on investments than the current rate of interest, even though they may be of very little or no benefit to the nation at large.

(2) There can be no guarantee that a business investment, whether it is in trade, industry or agriculture, will always yield a rate of profit which is higher than the rate of interest. Not only can there be no such assurance, there can never be an assurance about any business that it will always remain profitable. What really happens, therefore, is that the financier is assured interest at a predetermined rate whereas the business in which the loan is invested is exposed to risk and possible losses.

(3) Since the lender does not share the profit and loss of the business but lends out funds on the assurance of a fixed rate of interest, he is in no way concerned with the fortunes of the business itself. He is solely concerned, and in a totally selfish spirit, with his own pecuniary benefit. Hence, whenever the lender senses the faintest sign of depression, he begins to withdraw money from the market. The result is that sometimes imaginary fears and anxieties spark off an actual depression in the economy. And if the economy is depressed owing to other factors, the excessive selfishness of the financiers tends to escalate the situation into a full-scale economic crisis. These three evils of interest are obvious to every student of economics. Can anyone then deny the truth of the Natural law, enunciated by Allah that interest decreases the national economic wealth?

Let us now look at the economic effects of charity. Suppose the general attitude of the prosperous members of a society, is that within the limits of their means they spend generously on the fulfilment of their own requirements and on the requirements of their family, and then devote the surplus to helping the poor. After that they, either use their funds to provide interest-free loans to businessmen, invest them in business with the stipulation that they shall be co-sharers in both the profit and loss of the business, or deposit them with the government so that it may use them on projects of public welfare. A little reflection will make it obvious that trade, industry, and agriculture in such a society, will attain maximum prosperity; the standard of living of its people will continually rise and production in it will be much higher than in societies where economic activity is fettered by interest.

يَٰٓأَيُّهَا ٱلَّذِينَ ءَامَنُواْ ٱتَّقُواْ ٱللَّهَ وَذَرُواْ مَا بَقِيَ مِنَ ٱلرِّبَوٰٓاْ إِن كُنتُم مُّؤۡمِنِينَ ٢٧٨ فَإِن لَّمۡ تَفۡعَلُواْ فَأۡذَنُواْ بِحَرۡبٖ مِّنَ ٱللَّهِ وَرَسُولِهِۦۖ وَإِن تُبۡتُمۡ فَلَكُمۡ رُءُوسُ أَمۡوَٰلِكُمۡ لَا تَظۡلِمُونَ وَلَا تُظۡلَمُونَ ٢٧٩

O you who believe! Be afraid of Allah and give up what remains (due to you) from Riba (from now onwards) if you are believers. And if you do not do it, then take a 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).

Surah 2 Al-Baqarah Verse 278-279

• Although interest was considered objectionable earlier, it had not been legally prohibited. After the revelation of this verse interest-bearing transactions became a punishable offence within the realm of Islam

يَٰٓأَيُّهَا ٱلَّذِينَ ءَامَنُواْ لَا تَأۡكُلُواْ ٱلرِّبَوٰٓاْ أَضۡعَٰفٗا مُّضَٰعَفَةٗۖ وَٱتَّقُواْ ٱللَّهَ لَعَلَّكُمۡ تُفۡلِحُونَ ١٣٠ وَٱتَّقُواْ ٱلنَّارَ ٱلَّتِيٓ أُعِدَّتۡ لِلۡكَٰفِرِينَ ١٣١

O you who believe! Eat not riba doubled and multiplied, but Fear Allah that you may be successful. And fear the Fire, which is prepared for the disbelievers.

Surah 3 Al-Imran Verses 130-131

• The existence of interest in a society generates two kinds of moral disease. It breeds greed and avarice, meanness and selfishness among those who receive interest. At the same time, those who have to pay interest develop strong feelings of hatred, resentment, spite and jealousy. Allah threatens Riba eaters with Fire and warns them against it.

فَبِظُلۡمٖ مِّنَ ٱلَّذِينَ هَادُواْ حَرَّمۡنَا عَلَيۡهِمۡ طَيِّبَٰتٍ أُحِلَّتۡ لَهُمۡ وَبِصَدِّهِمۡ عَن سَبِيلِ ٱللَّهِ كَثِيرٗا ١٦٠ وَأَخۡذِهِمُ ٱلرِّبَوٰاْ وَقَدۡ نُهُواْ عَنۡهُ وَأَكۡلِهِمۡ أَمۡوَٰلَ ٱلنَّاسِ بِٱلۡبَٰطِلِۚ وَأَعۡتَدۡنَا لِلۡكَٰفِرِينَ مِنۡهُمۡ عَذَابًا أَلِيمٗا ١٦١

For the wrongdoing of the Jews, We made unlawful to them certain good foods which has been lawful to them, and for their hindering many from Allah’s Way; And their taking of Riba (usury) though they were forbidden from taking it and their devouring of mens’ substance wrongfully. And We have prepared for the disbelievers among them a painful torment.

Surah 4 An-Nisa Verses 160-161

• The Torah categorically lays down the injunction: “And if you lend money to any of my people with you who is poor, you shall not be to him as a creditor, and you shall not exact interest from him. If ever you take your neighbour's garment in pledge, you shall restore it to him before the sun goes down; for that is his only covering, it is his mantle for his body; in what else shall he sleep? And if he cries to me, I will hear, for I am compassionate” (Exodus 22: 25-7). This is one of several passages of the Torah which embody the prohibition of interest. The followers of the Torah, however, are most conspicuously engaged in transactions involving interest and have become notorious the world over for their meanness and hard-heartedness in monetary matters.

END OF CHAPTER