Can you explain Riba?

Riba, also known as usury or interest, is an Islamic concept that refers to any excess or increment that a lender receives in a loan agreement. It is considered prohibited in Islam, as it is seen as exploiting the financial needs of others and creating economic imbalance.

The Quran explicitly forbids Riba in several verses. For example, in Surah Al-Baqarah (2:275-279), Allah says, "Those who consume interest cannot stand [on the Day of Resurrection] except as one stands who is being beaten by Satan into insanity. That is because they say, 'Trade is [just] like interest.' But Allah has permitted trade and has forbidden interest. So whoever has received an admonition from his Lord and desists may have what is past, and his affair rests with Allah."

Islamic scholars have defined two types of Riba: Riba al-Fadl and Riba al-Nasi'ah. Riba al-Fadl refers to the prohibition of unequal exchange in a barter transaction, where the quantity or quality of a product is superior to its equivalent value. Riba al-Nasi'ah refers to the prohibition of charging or receiving interest on loans or credit transactions.

Muslims are encouraged to engage in ethical forms of business and financial transactions that promote fairness, social justice, and mutual benefit. Islamic finance offers alternative ways to meet financial needs, such as profit-sharing arrangements, equity-based partnerships, and rental agreements that comply with Shariah principles.

It is essential to note that modern financial systems and economies heavily rely on interest-based transactions, which makes it challenging for Muslims to entirely avoid interest. However, efforts are being made to develop Islamic finance institutions and products that align with Islamic principles and provide viable alternatives to conventional banking systems. Muslims are encouraged to seek out these alternatives as much as possible to abide by the teachings of Islam and avoid involvement in Riba.