What is riba in islam

Riba is an Islamic concept generally referring to growth, excess or increase. In other words, the term refers to interest paid on loans or gained on bank deposits.

Riba can also mean the pursuit of illegal, exploitative business or trade gains by assessing exorbitant rates of interest — usury, in other words. While riba is mentioned indirectly throughout the sacred text, specific passages capture an enduring message.

That message synthesises passages like the following, along with several others that reinforce the overall meaning:. It can be quite a challenge to interpret sacred texts from ancient times in ways that apply to life today. All forms of Islamic finance prohibit riba. There are two types of riba. The first type, the most common, is a loan contract Riba al-Nasiyah , whereby any amount over the original loan amount charged by the lender.

This type applies only to commodities like rice, wheat, oil, sugar, etc. If two people exchange the same product in unequal amounts, the extra would be riba. Quite a few Muslims today have only vague if any notions about the concept of riba. Even so, others consider it essential. Riba is considered socially destructive by economists, sociologists, religious scholars, and other learned people of various faiths due to the social inequities it promotes and enables.

To put it simply, riba keeps poor people poor and rich people rich. The poor are saddled with constantly replenishing debt. Meanwhile, the rich build wealth using primarily the funds they have already accumulated — which only grows due to interest accrual. Muslims have hardly been the first to see that riba or the equivalent in other faiths and cultures is unethical and perpetuates gaps in wealth and privilege. This means things can only become worse, not better.

Loans should be charitable acts not riba. Islam encourages fair and equitable trade because it involves an equivalent exchange. One party has goods or services to sell, while another has money to pay. This type of trade encourages economic interdependence, thereby justifying the profit from the sale. With a fair exchange, you take a risk, even though there is no guarantee of increased wealth without contingent liability.

In Islam, a loan is seen as an act of charity, not an opportunity for increased wealth. Its purpose is to help someone in need. Loans qard never bear interest. Although most modern-day Muslims acknowledge that riba is prohibited, not all agree on what exactly that means.

Is there a standard for determining what is riba and therefore haram and what is halal? Here are a few examples of how these issues have been resolved. We know that when it comes to Islamic investment, Islamic principles require that stock investors share in profit and loss, that they receive no interest riba , and that they do not invest in businesses prohibited by Islamic law.

We only invest what you entrust to us in an Islamically compliant, government-registered superannuation fund. It is also called known as Riba Al Bai. Riba Al Fadl is defined as excess compensation, without any consideration, resulting from a sale of goods. However, sell gold for silver anyway, you please on the condition, it is hand-to-hand and sell barley for date anyway, you please on the condition, it is hand-to-hand. Full lecture on Riba in Islamic banking is covered in the Islamic banking course , Islamic finance courses and Islamic banking diploma.

CIFE is an excellent program that covers all the important topics, one need to understand the complete Islamic Banking and Insurance system. It has given insight into the Islamic Finance and developing techniques required to further strengthen this field.

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Recommendations on Poverty Alleviation. A Summary on Poverty Alleviation Seminar. Waqf - Overview. The Origins of Waqf. Economics of Waqf. How a Waqf functions. Waqf Founders. Waqf vs Trusts. The Ten Conditions of Waqf. History of Cash Waqfs. Cash Waqf: Maliki Position. Cash Waqf: Hanafi Position. Original Capital of Endowment corpus. Centralization of the Waqf System. Taxation of Waqfs in India. Cash Waqfs in the Ottoman Economy. Cash Waqfs in Central Asia.

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Speculation, Uncertainty, Interest, and Unemployment. Islamic Bank as Finance House. How Islamic banking narrows the gap between the rich and poor. Money and Capital Reconsidered. Speculation and on Demand for Money in an Islamic Economy. Supply of Money Unidentified. Extended Model. Introduction to Islamic Economic System. The importance of the economic goals. The real nature of wealth and property. Difference between Islam, Capitalism and Socialism.

Factors of Productions in Islam: Capitalist View. Factors of Production: The Socialist View. Factors of Production: The Islamic View. Islamic Economic Theory. Socialism and Islam. Islam and Capitalism. Distribution of Wealth in Islam. Riba in Hadith. Types of Riba. Riba An Nasiyah - Explained. Riba Al Fadl - Explained. Commercial Interest and Usury. Simple and Compound Interest. Islamic Contracts. Valid Sale in Islamic Finance.

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