Understanding the Definition of 'Interest' of Money in Islam
Understanding the definition of 'interest' (riba) in Islam is crucial for individuals and businesses that operate within the Islamic legal framework. This article delves into the ethical and legal implications of riba, providing a comprehensive overview of its definitions and classifications as per Shariah.
What is the Judgment of Riba (Usury)?
Riba, or usury, is unequivocally forbidden in Islam. This forbiddance extends to several scenarios, including stipulating it, consuming it, accepting it, writing it in a contract, or witnessing to it. The religious text of the Quran and the sayings of Prophet Muhammad (PBUH) further reinforce this notion.
“Allah permits selling but has forbidden usury. It is also mentioned in a SaHeeH Hadith narrated by Muslim: The Messenger of Allah cursed the consumer of riba the one who authorizes it, the one who writes it, and the one who witnesses it.”
What is Riba?
According to the Shariah, Riba encompasses four main types, each with specific characteristics:
Riba al-QarD (Usury of a Loan)
Riba al-QarD only applies to loans. It arises when a lender stipulates additional benefits beyond the repayment of the loan. These additional benefits do not necessarily have to be monetary. For example, if you lend someone $100 and they agree to pay you $101, the additional $1 is considered a benefit stipulated for yourself, constituting riba. Similarly, if you stipulate any kind of non-monetary benefit, such as discounts at their store, priority in purchasing merchandise, or access to their car, you are still guilty of Riba al-QarD.
Riba al-FaDl (Usury of Excess)
Riba al-FaDl applies to trades of items within the same category, such as gold for gold or wheat for wheat, where items of the same type and measure are exchanged in exchange for each other. If the measures are not equal, or the trade is not completed in person, without delay, riba is committed.
Riba al-Nasaa’ (Usury of Delay)
Riba al-Nasaa’ occurs when two parties trade items within the same category but of different types. For example, trading gold for silver, or wheat for rice. To avoid riba, both parties must complete the trade in person without a stipulated delay. If delivery or exchange is delayed, even by a small amount of time, it falls under this category.
Riba al-Yad (Usury of the Hand)
Riba al-Yad involves trades within the same category but of different types, similar to Riba al-Nasaa’, but the focal point here is the actual transfer of goods. Both parties must exchange what is due before separating. If they do not, it constitutes Riba al-Yad, which is also termed 'usury of the hand' as the transaction must occur 'hand-to-hand'.
These conditions are explained in the Hadith narrated by Muslim from Ubadah bin as-Samit:
"I heard the Messenger of Allah (PBUH) forbid the sale of gold for gold, silver for silver, wheat for wheat, barley for barley, dates for dates, and salt for salt, unless it’s equal for equal and hand to hand. Whoever increases or seeks to increase has committed riba. But if they differ in type, then sell however you want as long as it’s hand-to-hand."