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Interest (Riba) in Islam

Interest or (Riba) is an Arabic word that means “to increase or to exceed.” It refers to the charging of interest on loans or financial transactions. This practice is considered forbidden, or haram, in Islamic law because it is seen as exploitative and unfairly burdensome for the borrower.

Islamic law (Shari’a) states all Muslims must be equal. Islam came to unite Muslims as one unity (Ummah); thus, increasing the differences among Muslims goes against the teachings of Islam. Therefore, taking interest is forbidden in Islam simply because the concept of interest exploits the poor. 

Moreover, interest (Riba) is perceived as greed, which, again, goes against Islamic teachings, which promote giving to charities and helping those less fortunate at its core values. 

Islamic law has many Verses in the Holly Qur’an and many Hadith context as well, which clarifies the importance of not accepting (Riba) for what it hold of harm to those who receive it and those who deal with it. 

Riba in Qur’an

Allah Almighty says in the Holly Qura’an…

“Whatever loans you give, ˹only˺ seeking interest at the expense of people’s wealth1 will not increase with Allah. But whatever charity you give, ˹only˺ seeking the pleasure of Allah—it is they whose reward will be multiplied.” __ Surah Ar-Rum – verse 39.

“Those who consume interest will stand ˹on Judgment Day˺ like those driven to madness by Satan’s touch. That is because they say, “Trade is no different than interest.” But Allah has permitted trading and forbidden interest. Whoever refrains—after having received warning from their Lord—may keep their previous gains, and their case is left to Allah. As for those who persist, it is they who will be the residents of the Fire. They will be there forever.” __ Surah Al Baqarah – verse 275.

“Allah has made interest fruitless and charity fruitful. And Allah does not like any ungrateful evildoer.” __ Surah Al Baqarah – verse 276.

“O believers! Fear Allah, and give up outstanding interest if you are ˹true˺ believers.” __ Surah Al Baqarah – verse 278.

Interest in Hadith

Islam has stated clearly his teachings against Interest; it is forbidden in all its forms. Here are some of the hadith texts reported by the companions of our Beloved Prophet ﷺ. 

{Allah’s Messenger (ﷺ) cursed the one who accepts usury, the one who gives it, the one who records it, and the two witnesses to it, saying, “They are all the same.} __  Reported by Muslim.

Abu Hurairah (May Allah be pleased with him) said:

{The Prophet (ﷺ) said, “Avoid the seven destructive things.” It was asked: (by those present): “What are they, O Messenger of Allah?” He replied, “Associating anyone or anything with Allah in worship; practicing sorcery, killing of someone without a just cause whom Allah has forbidden, devouring the property of an orphan, eating of usury, fleeing from the battlefield and slandering chaste women who never even think of anything touching chastity and are good believers.”}

__  Reported by Al-Bukhari and Muslim

Narrated Abu Hurairah (RA):

{The Prophet (ﷺ) said, “Certainly a time will come when people will not bother to know from where they earned the money, by lawful means or unlawful means.” __ Sahih al-Bukhari.

It was narrated from Ibn Mas’ud that the Prophet (ﷺ) said:

{“There is no one who deals in usury a great deal (to increase his wealth), but he will end up with little (i.e., his wealth will be decreased).”} __ Sunan Ibn Majah.

Types of Riba

Islam clarifies two types of Riba; Riba al-Nasiyah, and Riba al-Fadl.

  • Riba al-Nasiyah (Riba in a loan contract) – Refers to interest paid on delayed transactions. For instance, if a person lends you ($5000), and you have to pay him back over a while ($6000), we call this additional ($1000) Riba as a result of the delay, and that’s Riba al-Nasiyah.
  • Riba al-Fadl (Riba in a sale or exchange contract) – Refers to interest paid through goods. For instance, if a person lends you (10) bars of gold and asks you to pay him back (11) bars of gold, this additional bar of gold is considered a type of Riba al-Fadl.

How to get Rid of Interest (Riba)

Allah Almighty says in Surah At-Tawba Verse 103 {Take from their wealth ˹O Prophet˺ charity to purify and bless them, and pray for them—surely your prayer is a source of comfort for them. And Allah is All-Hearing, All-Knowing.} 

Giving charity purifies and blesses the Muslims’ wealth. Therefore, when you give Sadaqah with the intention of cleaning and purifying your wealth from the Riba money, Allah will accept and bless you and increase your wealth in return. 

Most Western banks automatically pay account holders any interest accrued on the money they hold. Therefore, many Muslims find themselves accruing interest by default when using commercial or personal accounts.

Islamic law has allowed Muslims to purify their wealth from filthy money like (Riba Money) and achieve equality among Muslims, as its teachings say. This means; those who receive Riba money instead of profits from the interest money will donate the interest money to charities to serve the poor in the Muslim community, and that’s the core value of Islamic teachings.

You can donate your interest money to charities to help the poor and needy live better. However, it is crucial to tell those in charge that your donated money is “Interest money” so they can spend it wherever Islamic law has allowed it to be spent. Remember, Riba money is “Haram.”

Therefore, it is not permissible to spend interest money on buying Qura’an copies or building a masjid with that money.

If you want to give it directly to someone’s “needy or poor” family, you know, you can either give it cash as it is or buy some essential supplies for them like, clothes, food, medicines, school supplies, etc. 

Give your Riba as a Zakat

Although Islam considers both Sadaqa and Zakat an act of charity, however, Sadaqa (charity) and Zakat are not the same. In order to give Zakat money, you must first fulfill a set of conditions for your Zakat to be accepted by Allah Almighty. At the top of these conditions is;

  • You must own the money to give out its Zakat.
  • The money paid as Zakat must be pure from “filthy money” such as interest money.

Our beloved Prophet has taught us that by saying, “Allah Almighty is Good and accepts only what is good.” – Reported by Abu-Huraira.  

Therefore interest money – which you do not own, to begin with – is filthy money (Haram), and filthy money has one way only to be purified, which is giving it as Sadaqah, but it is never accepted as Zakat. Allah Almighty says in the Qur’an{O believers! Donate from the best of what you have earned and of what We have produced for you from the earth. Do not pick out worthless things for donation, which you yourselves would only accept with closed eyes. And know that Allah is Self-Sufficient, Praiseworthy.} — Surah Al-Baqarah – Verse 267. 


What is interest Riba in Islam?

Riba means “to increase” or “to exceed” and is commonly used for unequal exchanges or charges for borrowing. Such practice is forbidden under Islamic law.

What is the difference between Riba and interest?

Riba and interest are the same; the only difference they have is the linguistic difference, Riba – an Arabic word – comes from the Islamic jurisprudence and means (to increase or exceed), and Interest – an English word – comes from the discipline of economics and finance, with the same meaning. 

What kind of riba is haram?

Riba Al-Fadl, Riba Al-Fadl. 

Why is Riba not Allowed in Islam?

Riba is forbidden because it goes against the principles of social justice and equitable transactions at the center of Islamic finance.