Islam & the Modern World · Wealth, Riba & the Economy
What riba actually is
In short
- 1.The Qur'an permits trade and forbids riba in the same sentence (Q 2:275).
- 2.The distinction is risk: a trader can lose, a lender at interest cannot.
- 3.It is the structure that is prohibited, not the size of the rate.
The claim being examined
People assume riba just means very high interest, so ordinary bank lending seems untouched by it.
The Islamic position
Riba is a guaranteed return on money itself, regardless of the rate; Islam permits profit from real trade and risk, not from lending money at a price.
Analysis
Get the definition right before arguing anything else. Q 2:275 sets the contrast plainly: God has permitted trade and forbidden riba. Classical jurists divided riba into riba al-nasi'ah, the increase stipulated for deferral on a loan, and riba al-fadl, unequal exchange in certain commodity types, based on the hadith of the six commodities (Sahih Muslim 1587). The operative principle is that money in Islamic law is a medium of exchange rather than a commodity that earns of itself; return is legitimate when it is attached to ownership, effort or genuine risk. That is why partnership contracts (mudarabah, musharakah), leasing (ijarah) and cost-plus sale (murabahah) are permitted while a fixed charge for the use of money is not. Two honesty points. First, contemporary Islamic finance is criticised — including by Muslim economists such as Mahmoud El-Gamal in Islamic Finance: Law, Economics and Practice (2006) — for replicating conventional lending through formal devices, and you should concede that some products are questionable rather than defend the industry wholesale. Second, the four schools differ on the scope of riba al-fadl, so present the range rather than one view as the Islamic position.
From the Qur'an
وَأَحَلَّ اللَّهُ الْبَيْعَ وَحَرَّمَ الرِّبَا
God has permitted trade and forbidden riba.
لَكُمْ رُءُوسُ أَمْوَالِكُمْ لَا تَظْلِمُونَ وَلَا تُظْلَمُونَ
You are entitled to your principal — you do no wrong and are not wronged.
From the Bible
Hebrew
If you lend money to any of my people with you who is poor, you shall not exact interest from him.
Read it in their BibleFrom the Sunnah
Gold for gold, silver for silver... like for like, hand to hand; whoever gives more or asks for more has dealt in riba.
Sources
Mahmoud El-Gamal, Islamic Finance: Law, Economics and Practice (2006) · Ibn Rushd, Bidayat al-Mujtahid, Kitab al-Buyu' · Qur'an 2:275; Sahih Muslim 1587
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