Ribā

This entry explores the discussions surrounding ribā. In Islamic writings, it is typically understood as an excessive gain or interest that lacks a corresponding benefit or compensation in a transaction, or an unreciprocated surplus granted to one party in the transaction. In the era of Jahiliyyah, characterized by rampant economic injustice, ribā was employed as a means of exploiting the impoverished individuals. The Quran contains verses that outline regulations about debt, specifically highlighting the differentiation between bay’ –trade– and ribā. During the analysis of ribā’s definitions in Islamic schools of jurisprudence, particular attention is given to the etymological origins of the notion. The concept of riba, which describes the actions that take place as a result of the creditor collecting more than the receivable after debt and/or exchange, is discussed with its different definitions, etymological origins, and various approaches in Islamic jurisprudence schools. The topic has been analyzed from the standpoint of Islamic jurisprudence, focusing on two primary categories: ribā al-nasiah and ribā al-fadl. The ban of ribā in Islamic sources is derived from the Quran and the Sunnah. The prohibition of ribā in commercial activities occurred through a series of steps, including indirect criticism, counsel to refrain from ribā, and ultimately, the implementation of specific regulations prohibiting it. Despite the historical origins of the ban of ribā in the early days of Islam, ongoing discussions persist in the present day. While some Islamic scholars classify ribā and interest under the same category in terms of action and outcome, there are others who disagree with this viewpoint. Contemporary ulama have emphasized the significance of financial capital and proposed the need to distinguish between usurer interest and the interest charged by the modern banking system. These disputes also exemplify diverse methodologies about financial practices in the Islamic world.