Riba (Interest) in Islam

Riba (usury/interest) is one of the most severely prohibited acts in Islamic law. The Quran warns against it in the strongest terms: "O you who believe, fear Allah and give up what remains of riba, if you are truly believers. And if you do not, then be warned of a war from Allah and His Messenger" (Quran 2:278-279). The Prophet (peace be upon him) cursed the one who consumes riba, the one who pays it, the one who records it, and the two witnesses to it, saying: "They are all alike" (Sahih Muslim).

Types of Riba

Islamic scholars identify two main types of riba. Riba al-Nasiah (riba of delay) is the most common form: charging interest on a loan, where additional money is owed simply for the passage of time. This is the riba of the pre-Islamic era (riba al-jahiliyyah). Riba al-Fadl (riba of excess) applies to the exchange of specific commodities. The Prophet specified six items (gold, silver, wheat, barley, dates, and salt) that must be exchanged in equal quantities when traded for the same type: "Gold for gold, silver for silver, wheat for wheat, barley for barley, dates for dates, salt for salt, like for like, hand to hand" (Sahih Muslim). Any excess constitutes riba.

Why Riba Is Prohibited

The prohibition of riba is rooted in principles of justice and fairness. Interest guarantees profit to the lender regardless of the outcome, placing the entire risk on the borrower. This creates economic imbalance, concentrates wealth, and exploits those in need. Islam promotes risk-sharing (as in musharakah and mudarabah) where profit and loss are shared equitably. The Quran contrasts riba with charity: "Allah destroys riba and gives increase for charities" (Quran 2:276). Riba is seen as the opposite of generosity, breeding greed, exploitation, and social division.

Islamic Alternatives

Islamic finance has developed halal alternatives to interest-based transactions. Murabaha (cost-plus sale) allows the bank to purchase an item and sell it to the client at a known markup. Ijara (leasing) allows the use of an asset for a fee. Musharakah (partnership) involves joint investment with shared profits and losses. Mudarabah is a silent partnership where one party provides capital and the other labor. Sukuk (Islamic bonds) represent ownership in tangible assets rather than debt instruments. These instruments facilitate the same economic functions as conventional finance while adhering to the principle that money should not generate money without real economic activity.

Modern Riba and Scholarly Consensus

The Islamic Fiqh Academy, the permanent committee of scholars in Saudi Arabia, and virtually all classical and contemporary scholars affirm that modern bank interest is riba and thus prohibited. Some modern reformists have attempted to argue otherwise, but this position contradicts the clear consensus (ijma) of the ummah across all four madhabs. Muslims are advised to use Islamic banks where available and to avoid interest-based transactions to the greatest extent possible.