1 Ramadan: Trade VS Riba (2024)

FAQs

What is the difference between trade and riba? ›

Trade transaction is executed immediately an item is exchanged and money (profit) earned. In a riba-based transaction the debtor has to consume the money, reproduce it (if lucky) and then pay it plus interest. Even so, the interest can still be compounded until paid in full.

Those who devour usury will not stand except as stand one whom the Evil one by his touch Hath driven to madness. That is because they say: "Trade is like usury," but Allah hath permitted trade and forbidden usury.

Imam Abu Yousuf: you cannot transact in riba with a non-Muslim or a Muslim in dar al-harb or dar al-Islam. This is the position of all the other schools, prominent among them Imam Shafii. Many of the most prominent Hanafi books will typically side with Imam Abu Hanifa on this issue[3].

The main problem with Riba is that from the very start it represents an unfair situation for one of the two parties in a business transaction or loss. Regardless of the circ*mstances, Muslims consider that the very concept of an interest rate is inherently unjust either to the lender or the receiver.

However, Muslim scholars have explained two types of riba based on general texts of the Quran and a number of Ahadith (sayings) of the Prophet Muhammad ﷺ. There are two types of riba: riba in loan contract (Riba al-Nasiyah) riba in sale or exchange contract (Riba al-Fadl)‍

Riba is a concept in Islamic banking that refers to charged interest. It has also been referred to as usury, or the charging of unreasonably high interest rates. Riba is prohibited under Sharia law to ensure equity in commerce. Islam aims to encourage charity and helping others through kindness.

According to Sunan Ibn Majah, the Muhammad declared the practice of riba worse than "a man committing zina (fornication) with his own mother". In that hadeeth, he said that there are 70 sins of riba. Of these, the minimum sin is to commit adultery with oneself's mother, and the greatest riba is dishonoring any Muslim.

Like the Quran, the Bible also shuns Riba or interest and gives commands to stay away from this element while doing transactions. In Deuteronomy 23:19, it says: “You shall not charge interest on loans to your brother, interest on money, interest on food, interest on anything that is lent for interest.”

𝗜𝗷𝗮̄𝗿𝗮𝗵 (i.e., rent-only mortgage – the alternative to the conventional “interest-only” mortgage): The bank buys the property you want to buy and you pay them rent with the condition that you buy the house from them at the end of the term.

Is paying riba also haram? ›

Yes. Allah emphatically forbidden riba in all its forms and declared its practice equal to disbelief in Him. Prophet Muhammad, on him be peace, has also specified it and prohibited it in clear terms. There is consensus among Muslim scholars, moreover, on the illegality of dealing in riba.

Narrated by Abu Hurayrah The Prophet said: "Allah 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." B. Riba an Nasiyah 1.

Just remember, Allah is the most merciful. If you know exactly what this word mean you would stop doing the riba, and ask Allah to forgive you and most likely he will forgive you. It is up to him.

Understand how Zakat serves as an ethical alternative to usury (Riba). The above Quranic verse makes it clear that nay wealth gained through the payment or receipt of interest does not increase in value in the eye of Allah.

A common answer for the question above is that taking bank loans with interest is forbidden. This is the opinion for majority of the scholars. Because according to the Quran and sayings of Prophet Muhammad peace be upon Him, transactions involving Riba are forbidden and impermissible.

Generally, there are two types of trade—domestic and international. Domestic trades occur between parties in the same countries. International trade occurs between two or more countries. A country that places goods and services on the international market is exporting those goods and services.

Because from the Islamic legal point of view, the usury and interest are claimed not be different, consequently there is no difference between riba and interest. To claim lawfulness, the Islamic bank, therefore, must be characterised with “interest-free” bank.

Islamic principles require that investors share in profit and loss, that they receive no interest (riba), and that they do not invest in a business that is prohibited by Islamic law, or sharia.

It can be understood from the above verses of the Quran and the sayings of the Prophet Muhammad ﷺ that riba is very severe sin and prohibited strictly. The committing of riba or involving interest-based transactions is considered as equivalent to being at war with God and His Prophet Muhammad ﷺ.