"God deprives interest of all blessing but blesses charity; He loves not the ungrateful
sinner." (276)
"Those who believe, perform good deeds, establish prayer and pay the zakat, their
reward is with their Lord; neither should they have any fear, nor shall they grieve."
(277)
"0, believers, fear Allah, and give up what is still due to you from the interest
(usury), if you are true believers." (278)
"If you do not do so, then take notice of war from Allah and His Messenger. But,
if you repent, you can have your principal. Neither should you commit injustice
nor should you be subjected to it." (279)
"If the debtor is in difficulty, let him have respite until it is easier, but if
you forego out of charity, it is better for you if you realize." (280)
"And fear the Day when you shall be returned to the Lord and every soul shall be
paid in full what it has earned and no one shall be wronged. " (281).
RIBA IN HADITHS
General
From Jabir : The Prophet, , may cursed the receiver and the payer of interest,
the one who records it and the two witnesses to the transaction and said: "They
are all alike [In guilt]." (Muslim, Kitab al-Musaqat, Bab la'ni akili al-riba wa
mu'kilihi; also in Tirmidhi and Musnad Ahmad)
Jabir ibn 'Abdallah , giving a report on the Prophet's Farewell Pilgrimage, said:
The Prophet, , addressed the people and said "All of the riba of Jahiliyyah is annulled.
The first riba that I annul is our riba, that accruing to 'Abbas ibn 'Abd al-Muttalib
[the Prophet's uncle]; it is being cancelled completely." (Muslim, Kitab al-Hajj,
Bab Hajjati al-Nabi, ; may also in Musnad Ahmad)
From 'Abdallah ibn Hanzalah : The Prophet, , said: "A dirham of riba which
a man receives knowingly is worse than committing adultery thirty-six times" (Mishkat
al-Masabih, Kitab al-Buyu', Bab al-riba, on the authority of Ahmad and Daraqutni).
Bayhaqi has also reported the above hadith in Shu'ab al-iman with the addition that
"Hell befits him whose flesh has been nourished by the unlawful."
From Abu Hurayrah : The Prophet, , said: "On the night of Ascension I came
upon people whose stomachs were like houses with snakes visible from the outside.
I asked Gabriel who they were. He replied that they were people who had received
interest." (Ibn Majah, Kitab al-Tijarat, Bab al-taghlizi fi al-riba; also in Musnad
Ahmad)
From Abu Hurayrah : The Prophet, , said: "Riba has seventy segments, the
least serious being equivalent to a man committing adultery with his own mother."
(Ibn Majah)
From Abu Hurayrah : The Prophet, , said: "There will certainly come a time
for mankind when everyone will take riba and if he does not do so, its dust will
reach him." (Abu Dawud, Kitab al-Buyu', Bab fi ijtinabi al-shubuhat; also in Ibn
Majah)
From Abu Hurayrah : The Prophet, , said: "God would be justified in not
allowing four persons to enter paradise or to taste its blessings: he who drinks
habitually, he who takes riba, he who usurps an orphan's property without right,
and he who is undutiful to his parents." (Mustadrak al-Hakim, Kitab al-Buyu')
Riba an Nasiyah
From Usamah ibn Zayd : The Prophet, , said: "There is no riba except in
Nasiyah [waiting]." (Bukhari, Kitab al-Buyu', Bab Bay' al-dinari bi al-dinar nasa'an;
also Muslim and Musnad Ahmad) "There is no riba in hand-to-hand [spot] transactions."
(Muslim, Kitab al-Musaqat, Bah bay'i al-ta'ami mithlan bi mithlin; also in Nasa'i)
From Ibn Mas'ud : The Prophet, , said: "Even when interest is much, it is
bound to end up into paltriness." (Ibn Majah, Kitab al-Tijarat, Bab al-taghlizi
fi al-riba; also in Musnad Ahmad)
From Anas ibn Malik : The Prophet, , said: "When one of you grants a loan
and the borrower offers him a dish, he should not accept it; and if the borrower
offers a ride on an animal, he should not ride, unless the two of them have been
previously accustomed to exchanging such favours mutually." (Sunan al-Bayhaqi, Kitab
al-Buyu', Bab kulli qardin jarra manfa'atan fa huwa riban)
From Anas ibn Malik : The Prophet, , said: "If a man extends a loan to someone
he should not accept a gift." (Mishkat, on the authority of Bukhara's Tarikh and
Ibn Taymiyyah's al-Muntaqa)
From Abu Burdah ibn Abi Musa : I came to Madinah and met 'Abdallah ibn Salam
who said, "You live in a country where riba is rampant; hence if anyone owes you
something and presents you with a load of hay, or a load of barley, or a rope of
straw, do not accept it for it is riba." (Mishkat, reported on the authority of
Bukhari)
Fadalah ibn 'Ubayd said that "The benefit derived from any loan is one of the different
aspects of riba." (Sunan al-Bayhaqi) This hadith is mawquf implying that it is not
necessarily from the Prophet; it could be an explanation provided by Fadalah himself,
a companion of the Prophet, .
Riba al-FadI
From 'Umar ibn al-Khattab : The last verse to be revealed was on riba and
the Prophet, , was taken without explaining it to us; so give up not only riba but
also raibah [whatever raises doubts in the mind about its rightful-ness]. (Ibn Majah,)
The Prophet, , said, "Sell gold in exchange of equivalent gold, sell silver in exchange
of equivalent silver, sell dates in exchange of equivalent dates, sell wheat in
exchange of equivalent wheat, sell salt in exchange of equivalent salt, sell barley
in exchange of equivalent barley, but if a person transacts in excess, it will be
usury (riba). However, sell gold for silver anyway you please on the condition it
is hand-to-hand (spot) and sell barley for date anyway you please on the condition
it is hand-to-hand (spot)."
From Abu Sa'id al-Khudri : The Prophet, , said: "Do not sell gold for gold
except when it is like for like, and do not increase one over the other; do not
sell silver for silver except when it is like for like, and do not increase one
over the other; and do not sell what is away [from among these] for what is ready."
(Bukhari, Kitab al-Buyu', Bab bay'i al-fiddati bi al-fiddah; also Muslim, Tirmidhi,
Nasa'i and Musnad Ahmad)
From 'Ubada ibn al-Samit : The Prophet, , said: "Gold for gold, silver for
silver, wheat for wheat, barley for barley, dates for dates, and salt for salt -
like for like, equal for equal, and hand-to-hand; if the commodities differ, then
you may sell as you wish, provided that the exchange is hand-to-hand." (Muslim,
Kitab al-Musaqat, Bab al-sarfi wa bay'i al-dhahabi bi al-waraqi naqdan; also in
Tirmidhi)
From Abu Sa'id al-Khudri : The Prophet, , said: "Gold for gold, silver for
silver, wheat for wheat, barley for barley, dates for dates, and salt for salt -
like for like, and hand-to-hand. Whoever pays more or takes more has indulged in
riba. The taker and the giver are alike [In guilt]." (Muslim, ibid; and Musnad Ahmad)
From Abu Sa'id and Abu Hurayrah : A man employed by the Prophet, , in Khaybar
brought for him janibs [dates of very fine quality]. Upon the Prophet's asking him
whether all the dates of Khaybar were such, the man replied that this was not the
case and added that "they exchanged a sa' [a measure] of this kind for two or three
[of the other kind]". The Prophet, , replied, "Do not do so. Sell [the lower quality
dates] for dirhams and then use the dirhams to buy janibs. [When dates are exchanged
against dates] they should be equal in weight." (Bukhari, Kitab al-Buyu', Bab idha
arada bay'a tamrin bi tamrin khayrun minhu; also Muslim and Nasa'i)
From Abu Sa'id : Bilal brought to the Prophet, , some barni [good quality]
dates whereupon the Prophet asked him where these were from. Bilal replied, "I had
some inferior dates which I exchanged for these - two sa's for a sa'." The Prophet
said, "Oh no, this is exactly riba. Do not do so, but when you wish to buy, sell
the inferior dates against something [cash] and then buy the better dates with the
price you receive." (Muslim, Kitab al-Musaqat, Bab al-ta'ami mithlan bi mithlin;
also Musnad Ahmad)
From Fadalah ibn 'Ubayd al-Ansari : On the day of Khaybar he bought a necklace
of gold and pearls for twelve dinars. On separating the two, he found that the gold
itself was equal to more than twelve dinars. So he mentioned this to the Prophet,
, who replied, "It [jewellery] must not be sold until the contents have been valued
separately." (Muslim, Kitab al-Musaqat, Bab bay'i al-qiladah fiha khara-zun wa dhahab;
also in Tirmidhi and Nasa'i)
From Abu Umamah : The Prophet, , said: "Whoever makes a recommendation for
his brother and accepts a gift offered by him has entered riba through one of its
large gates." (Bulugh al-Maram, Kitab al-Buyu', Bab al-riba, reported on the authority
of Ahmad and Abu Dawud)
From Anas ibn Malik : The Prophet, , said: "Deceiving a mustarsal [an unknowing
entrant into the market] is riba." (Suyuti, al-Jami' al-Saghir, under the word ghabn;
Kanz al-'Ummal, Kitab al-Buyu', al-Bab al-thani, al-fasl al-thani, on the authority
of Sunan al-Bayhaqi)
From 'Abdallah ibn Abi Awfa : The Prophet, , said: "A najish [one who serves
as an agent to bid up the price in an auction] is a cursed taker of riba." (Cited
by Ibn Hajar al-'Asqalani in his commentary on al-Bukhari called Fath al-Bari, Kitab
al-Buyu', Bab al-najsh; also in SuyutT, al-Jami al-Saghir, under the word al-najish
and Kanz al-'Ummal, op. cit., both on the authority of Tabarani's al-Kabi
TYPES OF RIBA
Definition of Riba or Interest
The word "Riba" means excess, increase or addition, which correctly interpreted
according to Shariah terminology, implies any excess compensation without due consideration
(consideration does not include time value of money).
This definition of Riba is derived from the Quran and is unanimously accepted by
all Islamic scholars. There are two types of Riba, identified to date by these scholars
namely 'Riba An Nasiyah' and 'Riba Al Fadl'.
'Riba An Nasiyah' is defined as excess, which results from predetermined
interest (sood) which a lender receives over and above the principle (Ras ul Maal)
'Riba Al Fadl' is defined as excess compensation without any consideration
resulting from a sale of goods. 'Riba Al Fadl' will be covered in greater detail
later.
During the dark ages, only the first form (Riba An Nasiyah) was considered to be
Riba. However the Holy Prophet also classified the second form (Riba Al Fadl) as
Riba.
The meaning of Riba has been clarified in the following verses of Quran:
"O those who believe, fear Allah and give up what still remains of the Riba if you
are believers. But if you do not do so, then be warned of war from Allah and His
Messenger. If you repent even now, you have the right of the return of your capital;
neither will you do wrong nor will you be wronged." Al Baqarah 2:278-9
These verses clearly indicate that the term Riba means any excess compensation over
and above the principal which is without due consideration. However, the Quran has
not altogether forbidden all types of excess; as it is present in trade as well,
which is permissible. The excess that has been rendered haram in Quran is a special
type termed as Riba. In the dark ages, the Arabs used to accept Riba as a type of
sale, which unfortunately is also being understood at the present times. Islam has
categorically made a clear distinction between the excess in capital resulting from
sale and excess resulting from interest. The first type of excess is permissible
but the second type is forbidden and rendered Haram.
"Seized in this state they say: 'Buying and selling is but a kind of interest',
even though Allah has made buying and selling lawful, and interest unlawful." Al
Baqarah 2:275
Classification of Riba
1. The first and primary type is called Riba An Nasiyah or Riba Al Jahiliya.
2. The second type is called Riba Al Fadl, Riba An Naqd or Riba Al Bai.
Since the first type was specified in the Quranic verses before the sayings of the
Holy Prophet , this type was termed as Riba al Quran. However the second type was
not understood by the Quranic verses alone but also had to be explained by the Holy
Prophet , it is also called Riba al Hadees.
Riba An Nasiyah
This is the real and primary form of Riba. Since the verses of Quran has directly
rendered this type of Riba as haram, it is called Riba Al Quran. Similarly since
only this type was considered Riba in the dark ages, it has earned the name of Riba
Al Jahiliya. Imam Abu Bakr Hassas Razi has outlined a complete and prohibiting legal
definition of Riba An Nasiyah in the following words:
"That kind of loan where specified repayment period and an amount in excess of capital
is predetermined."
One of the ahadith quoted by Ali ibn at Talib (RAA) has defined Riba An Nasiyah
in similar words. The Holy Prophet said:
"Every loan that draws interest is Riba."
The famous Sahabi Fazala Bin Obaid has also defined Riba in similar words:
"Every loan that draws profit is one of the forms of Riba"
The famous Arab scholar Abu Ishaq az Zajjaj also defines Riba in the following words:
"Every loan that draws more than its actual amount"
Riba An Nasiyah refers to the addition of the premium which is paid to the lender
in return for his waiting as a condition for the loan and is technically the same
as interest. The prohibition of Riba An Nasiyah is one of those issues which have
been confirmed in the revealed laws of all Prophets (AS). Some of the old testaments
has rendered Riba as haram (See Exodus 22:25, Leviticus 25:35-36, Deutronomy 23:20,
Psalms 15:5, Proverbs 28:8, Nehemiah 5:7 and Ezakhiel 18:8,13,17 & 22:12). The
Quran has also stated the prohibition of Riba in various verses, has warned those
who persist in practicing it of a war which is certain to be declared on them by
Allah Himself and His messenger and has seriously threatened those engaged as writer,
witness and dealer in Riba transactions. These verses and ahadith will be discussed
at length in a separate chapter called "The prohibition of Riba in the light of
Quran and hadith".
According to the above definition of Riba An Nasiyah, the giving and taking of any
excess amount in exchange of a loan at an agreed rate is included in interest irrespective
whether at a high or low rate. It has been proven through ahadith that the Holy
Prophet paid excess at the loan repayment time but since this excess was not paid
through an agreed rate, it cannot be called interest. This clarifies that the word
"draws" in the hadith definition" The loan that draws interest is Riba." has been
used to highlight the giving and taking of excess amount through an agreed rate
in the loan contract. Due to this, Imam Abu Bakr Hasas has added the word "condition"
to the definition.
The fact that Riba An Nasiyah is categorically haram has never been disputed in
the Muslim community.
In short, the Riba of today which is supposed to be the pivot of human economy and
features in discussions on the problem of interest is nothing but this Riba, the
unlawfulness of which stands proved on the authority of the seven verses of the
Quran, of more than forty ahadith and of the consensus of the Muslim community.
Wisdom behind the prohibition of Riba An Nasiyah
First of all, we should realize that there is nothing in the entire creation of
the world, which has no goodness or utility at all. But it is commonly recognized
in every religion and community that things which have more benefits and less harms
are called beneficial and useful. Conversely, things that cause more harm and less
benefit are taken to be harmful and useless. Even the noble Quran, while declaring
liquor and gambling to be haram, proclaimed that they do hold some benefits for
people but the curse of sins they generate is far greater than the benefits they
yield. Therefore, these cannot be called good or useful; on the contrary, taking
these to be acutely harmful and destructive, it is necessary that they be avoided.
The case of Riba An Nasiyah is not different. Here the consumer of Riba does have
some casual and transitory profits apparently coming to him, but its curse in this
world and in the Hereafter is much too severe as compared to this benefit. The Riba
consumer suffers such a spiritual and moral loss that it virtually takes away the
great quality of being 'human' from him. An intelligent person who compares things
in terms of their profit and loss, harm and benefit can hardly include things of
casual benefit with an everlasting loss in the list of useful things. Similarly
no sane and just person will say that personal and individual gain which causes
loss to the whole community or group is useful. In theft and robbery for example,
the gain of the gangster and the take of the thief is all too obvious but it is
certainly harmful for the entire community since it ruins its peace and sense of
security.
Riba Al Fadl
The second classification of Riba is Riba Al Fadl. Since the prohibition of this
Riba has been established on Sunnah, it is also called Riba Al Hadees.
Riba Al Fadl actually means that excess which is taken in exchange of specific homogenous
commodities and encountered in their hand-to-hand purchase & sale as explained
in the famous hadith:
The Prophet said, "Sell gold in exchange of equivalent gold, sell silver in exchange
of equivalent silver, sell dates in exchange of equivalent dates, sell wheat in
exchange of equivalent wheat, sell salt in exchange of equivalent salt, sell barley
in exchange of equivalent barley, but if a person transacts in excess, it will be
usury (Riba). However, sell gold for silver anyway you please on the condition it
is hand-to-hand (spot) and sell barley for date anyway you please on the condition
it is hand-to-hand (spot)."
This hadith enumerates 6 different commodities namely:
1) Gold
2) Silver
3) Dates
4) Wheat
5) Salt
6) Barley
These six commodities can only be bought and sold in equal quantities and on spot.
An unequal sale or a deferred sale of these commodities will constitute Riba. These
six commodities in fiqh terminology are called "Amwal-e-Ribawiya". Does this hadith
apply only to the items mentioned in it? Does it concern sales of barley or wheat
but not rice? Of dates but not raisins? A complete legal definition differs in every
fiqh. Scholars such as Taoos and Qatada hold that Riba Al Fadl includes these specified
types only, however a majority of Islamic scholars believe that some other commodities
should also be included. In order to answer the question, which other commodities
should be included, some fiqhs hold that the characteristics which are common amongst
these items can be used as basis (illat) for Riba Al Fadl. An illat is the attribute
of an event that entails a particular divine ruling in all cases possessing that
attribute; it is the basis for applying analogy. Ribawi goods are therefore goods
that exhibit one of the efficient causes occasioning application of Riba rules.
Various schools define these causes differently:
Imam Abu Hanifa
Imam Abu Hanifa sees only two common characteristics namely:
1) Weight
2) Volume
Meaning all these six goods are sold by either weight or volume. Therefore all those
commodities, which have weight or volume and are being exchanged, with the same
commodity will fall under the rules of Riba Al Fadl.
Imam Shafi
The two characteristics observed by Imam Shafi are:
1) Medium of Exchange or
2) Eatable
Therefore this law will apply on everything edible or having the natural ability
of becoming a medium of exchange (currency).
Imam Maalik
Imam Maalik identified the following two characteristics:
1) Eatables and
2) Preservable
Imam Ahmad Bin Hanbal
Three citations have been related to him:
i) First citation conforms to the opinion of Imam Abu Hanifa.
ii) Second citation conforms to the opinion of Imam Shafai.
iii) Third citation includes three characteristics at the same time namely edible,
weight and volume.
After a detailed study of the above schools of thought, it has been declared by
Islamic scholars that if a commodity bears both of the two characteristics namely;
it has weight and can be used as a medium of exchange, then the following two kinds
of transactions are not allowed when the same goods are being exchanged:
A deferred sale of goods (A deferred sale is when the goods are returned/or paid
for after some undetermined period)
· A sale of unequal quantities of the same goods
However, when only one of the two characteristics is present to term the sale as
Riba Al Fadl, then exchange of unequal goods are allowed but deferred sale is not
allowed.
Wisdom behind the prohibition of Riba Al Fadl
The prohibition of Riba Al Fadl is intended to ensure justice and remove all forms
of exploitation through 'unfair' exchanges and to close all back-doors to Riba An
Nasiyah because in the Islamic Shariah, anything that serves as a means to the unlawful
is also unlawful.
The laws of Riba Al Fadl
After closely analyzing the meaning and interpretation of the above ahadith and
their explanation in further ahadith along with issues raised in reference work
of Hanafi fiqh, the following rules and laws governing Riba Al Fadl are derived:
1. It is evident that the exchange of homogeneous commodities will only be required
if they differ in quality and characteristic e.g. different genus of rice and wheat,
superior quality gold and inferior quality gold, mineral salt and sea salt etc.
The exchange of any of these six commodities with itself, but differing in types/quality
(which is called barter in modern terminology), even when considering market rate,
is prohibited in unequal amount. The reason being that by exchanging these commodities
in unequal amounts there is a fear of developing the rationale in a person eventually
leading to interest (sood) based earnings and illegal benefits. Such transactions
might also lead to defrauding. For example, a shrewd trader may claim that a kilogram
of a specific brand of wheat is equivalent to 3 kilograms of the other kind because
of the excellence of its quality, or this unique piece of gold ornament is equivalent
in value to twice its weight in gold; in such transactions there undoubtedly is
defrauding of people and harm to them.
As a step to prevent this state, the Shariah has made it a law that exchange of
any of these six commodities with itself but differing in quality, is allowed in
only one of the following forms:
a) Any difference in value/quality should be ignored and the commodities should
be exchanged in equal amounts (equal weight and volume).
b) Instead of direct exchange of commodities of the same kind, a person should sell
his commodity against cash at the market value and buy someone else's commodity
in exchange of cash proceeds at the market value.
2. One of the ways of transacting commodities of the same kind is that a person
has a raw material and someone else has a product made of that material and both
decide to exchange their product. In this case, one has to see whether:
a) The characteristics of this product has been totally changed by the industry:
For eg. the remarkable changes that transform raw cotton into cloth or iron into
machinery. In this case, it is permissible to transact lesser amount of cloth against
greater amount of raw cotton or raw iron having more weight against machinery having
lighter weight.
b) Little difference has been made to its original form after its formulation: For
eg. gold which changes its shape in the form of jewelry. In this case, the Shariah'h
holds that such a transaction should not happen in the first place or if it does,
the exchange should be in equal weights in order to discourage unfair deals. Another
alternative would be to sell gold against cash and the cash proceeds are used to
buy the needed jewelry. This is because it is not possible in a barter transaction,
except for an expert, to visualize the fair equivalent of one commodity in terms
of all other goods. Hence, the equivalent may be established only approximately
thus leading to some injustice to one or the other party. The use of money could
therefore help reduce the possibility of an unfair exchange.
3. Different commodities can be unequally exchanged but deferred payment is not
allowed. For eg. one kg wheat can be sold against 2 kg date or one gram of gold
can be exchanged against 4 grams of silver on the condition that they are spot transactions
reason being that such a transaction will surely be carried on the market rate.
For eg. a person who wants to exchange silver for gold on spot will only transact
as per the market rate. However, if the transaction is on credit, there is a possibility,
no matter how minor, of stepping into interest that cannot be ignored. For eg. a
buyer who has traded 80 tolas silver on credit today on the understanding that it
will be exchanged against 2 tolas gold after a month has in fact no means to find
in advance that 40 tolas silver will be equivalent to one tola gold after a month.
Therefore this ascertaining of value in advance actually signifies its roots in
interest and gambling. Similarly the seller who has accepted credit has in fact
yielded to gambling by hoping that the ratio of gold and silver might come down
from 1:40 to 1:35. The law of exchanging different commodities only at spot has
been established due to this reason.
The general conditions of sale, however, should be borne in mind while making a
trade transaction so that the goods are specified in addition to the cash aspect
of the transaction. The correct way of specifying is that gold and silver should
be under the possession of the sellers or delivered at the place of contract because
both goods have the original (natural) price, which cannot be specified until they
are delivered.
This rule applies to only exchange of gold and silver. Other goods can be exchanged
against each other without delivery and can be specified any other way but will
be restricted to cash transaction.
For eg. Zaid made a spot sale of one kg wheat to Bakar with 2 kg salt against future
delivery after having identified their goods, this transaction is allowed in Shariah
since it meets both conditions:
Ÿ The transaction is on spot.
Ÿ It is also specified.
However, if Zaid was selling one tola gold to Bakar against 40 tola silver, then
it is necessary that both take delivery of their purchased goods at the place of
contract because without delivery, goods cannot be specified.
To sum up, the Hanafi jurists maintain that in case of commodities that weigh or
measure, it is illegal to transact unequally or on credit. But in case of different
commodities unequal exchange is legal but credit remains illegal; the transaction
in this case too should be spot.