Islamiyat Project

INTEREST :
Interest, in the context of finance and economics, is a complex topic in Islam. The
Arabic term for interest is "riba," which is prohibited in Islamic law (Shariah). Islamic scholars
and jurists have interpreted riba to mean excessive or exploitative interest, which is considered
unjust and harmful to society. Riba is a concept in Islamic banking that refers to charged
interest. It has also been referred to as usury, or the charging of unreasonably high-
interest rates. There is also another form of riba, according to most Islamic jurists,
which refers to the simultaneous exchange of goods of unequal quantities or qualities.
Here, however, we will be referring to the practice of charged interest.Allah says in
Quran:
"And whatever you give for Riba in order that it may increase in people’s wealth, it will not
increase in the sight of Allah; and whatever you give for Zakat, seeking Allah’s pleasure, it is
they who are the multipliers (to get manifold reward)." Al-Quran 30:39.
And in the other place in Quran,Allah says:

"The standing of those who eat Riba is like standing of the one who is confounded by Devil’s
stroke – that’s because they say trade is just like Riba, whereas Allah has permitted trade and
forbidden Riba. Hence those who have received the admonition from their Lord and desist,
may keep their previous gains, their case being entrusted to Allah; but those who revert shall
be the inhabitants of the fire and abide therein forever." Al-Quran 2:275
Some types of interest according to Islam are written below:

1. Riba al-Nasi'ah (Excessive Interest).
2. Riba al-Hadith (Verbal Interest).
3. Riba al-Sarf (Interest on Currency Exchange).
4. Riba al-Jahiliyah (Usury).
Riba al-Nasi'ah (Excessive Interest):

Riba al-Nasi'ah (Excessive Interest) is a type of
interest that is prohibited in Islam. It refers to the excess amount paid by a borrower to a lender
over and above the principal amount borrowed, as a condition of the loan. This type of interest
is considered exploitative and unjust, as it leads to debt slavery and financial burden on the
borrower.For example,
Let’s say you borrow $100 from a friend to buy a new phone, and you agree to pay back $120
after a year.
In this example:
The principal amount borrowed is $100. The excess amount paid (interest) is $20 ($120 - $100)
This $20 is considered Riba al-Nasi'ah, as it is an excess amount paid over and above the
principal amount borrowed. This type of interest is prohibited in Islam.
In Islamic finance, the lender would only receive the principal amount of $100, without any
additional interest or excess. This ensures that the lender does not benefit at the expense of
the borrower, and that the borrower is not burdened with excessive debt.
REFERENCE LINK:
https://www.islamicfiqh.net/en/articles/two-riba-al-nasiah-ie-increase-for-a-delay-115
Riba al-Hadith (Verbal Interest):

Riba al-Hadith (Verbal Interest) is a type of interest
refers to the practice of charging interest on a loan or debt without a written contract or
agreement. This type of interest is considered verbal or implicit, as it is not explicitly stated in a
written contract, but is rather implied or understood through verbal agreements or customs.
Riba al-Sarf (Interest on Currency Exchange):

Riba al-Sarf (Interest on Currency
Exchange) is a type of interest that is prohibited in Islam. It refers to the excess amount paid or
received when exchanging currencies, where the exchange rate is not based on the actual value
of the currencies, but rather on a predetermined rate that favors one party over the other.In
other words, Riba al-Sarf occurs when a person exchanges one currency for another, and the
exchange rate is not 1:1, but rather includes an additional amount that is considered interest.
For example,
Suppose you want to exchange $100 USD for Euros. The actual exchange rate is 1 USD
= 0.88 Euros. However, the exchange broker offers you an exchange rate of 1 USD = 0.85 Euros,
and also charges you an additional 2% "fee" on the transaction. In this example, the excess
amount paid (0.03 Euros per USD) and the additional 2% "fee" are considered Riba al-Sarf
(Interest on Currency Exchange), as they represent an excess amount paid over and above the
actual value of the currencies.
REFERENCE LINK:
https://islamicsystem.blogspot.com/2012/09/riba-and-currency-exchange-sarf.html
Riba al-Jahiliyah (Usury):
Riba al-Jahiliyah (Usury) is a type of interest that was prevalent in
the pre-Islamic era, particularly in Arabia. It refers to the practice of lending money at
exorbitant interest rates, often without any consideration for the borrower's ability to repay.
This type of interest was considered exploitative and oppressive, as it led to debt slavery and
financial burden on the borrower.In the pre-Islamic era, lenders would charge extremely high
interest rates, often exceeding 100% per annum, and would demand collateral or guarantees
from the borrower. If the borrower failed to repay the loan, the lender would seize the
collateral and sell it to recover the debt, often leaving the borrower in a state of financial ruin.
For example,
Let's say Abdullah needs to borrow $1,000 to pay for his daughter's wedding. A lender,
Khalid, agrees to lend him the money, but charges an interest rate of 50% per annum,
compounded annually. This means Abdullah will owe Khalid:
$1,000 (principal) + $500 (interest) = $1,500 after one year
If Abdullah is unable to repay the loan, Khalid demands collateral, such as Abdullah's house or
business, to recover the debt.
In this example, Khalid is practicing Riba al-Jahiliyah (Usury) by:
Charging an exorbitant interest rate (50% per annum).Demanding collateral or
guarantees.Exploiting Abdullah's financial desperation
This type of lending is prohibited in Islam, as it leads to debt slavery, financial burden, and
exploitation.
REFERENCE LINK:
https://islamweb.net/en/article/157155/riba-usury-in-islam

Islamiyat Project

Uploaded by

Copyright:

Available Formats

Islamiyat Project

Uploaded by

Document Information

Original Description:

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Islamiyat Project

Uploaded by

Copyright:

Available Formats

INTEREST :

And in the other place in Quran,Allah says:

Some types of interest according to Islam are written below:

Riba al-Nasi'ah (Excessive Interest):

Riba al-Hadith (Verbal Interest):

Riba al-Sarf (Interest on Currency Exchange):

You might also like