Riba and its types
Monday, 4 June 2012
Mohammed Haider Ali Miah
The word 'Riba' means express, increase or addition, which correctly interpreted according to shariah terminology, implies any excess compensation without due consideration. This definition of Riba is derived from the Holy Quran and is unanimously accepted by the all Islamic scholars.
There are two types of Riba: Riba An Nasiyah and Riba Al Fadl.
Riba An Nasiyah is defined as excess, which results from predetermined interest which a lender receives over and above the principal (Ras ul Maal).
Riba Al Fadl is defined as excess compensation without any consideration resulting from a sale of goods.
During the dark ages, only the first form (Riba An Nasiyah) was considered to be Riba. However, the Holy prophet also classified the second form (Riba Al Fadl) as Riba.
The first and primary type is called Riba An Nasiyah or Riba Al Jahiliya.
The second type is called Riba Al Fadl, Riba An Naqd or Riba Al Bai.
Since the first type was specified in the Quranic verses before the sayings of the Holy Prophet, this type was termed as Riba al Quran. As the second type was not understood by the Quranic verses alone but also had to be explained by the Holy Prophet, it is also called Riba al Hadees.
Riba An Nasiyah: This is the real and primary form of Riba. Since the verses of Quran has directly rendered this type of Riba as haram, it is called Riba Al Quran. Since only this type was considered Riba in the dark ages, it has earned the name of Riba Al Jahiliya. Imam Abu Bakr Hassas Razi has outlined a complete and prohibiting legal definition of Riba An Nasiyah in the following words:
"That kind of loan where specified repayment period and an amount in excess of capital is predetermined."
One of the hadith quoted by Ali ibn at Talib (RAA) has defined Riba An Nasiyah in similar words. The Holy Prophet said:
"Every loan that draws interest is Riba."
The famous Sahabi Fazala Bin Obaid has also defined Riba in similar words:
"Every loan that draws profit is one of the forms of Riba"
The famous Arab scholar Abu Ishaq az Zajjaj also defines Riba in the following words:
"Every loan that draws more than its actual amount."
The fact that Riba An Nasiyah is categorically haram has never been disputed in the Muslim community.
Riba Al Fadl: The second classification of Riba is Riba Al Fadl. Since the prohibition of this Riba has been established on Sunnah.
Riba Al Fadl actually means that excess which is taken in exchange of specific homogenous commodities and encountered in their hand-to-hand purchase & sale as explained in the famous hadith:
The Prophet said, "Sell gold in exchange of equivalent gold, sell silver in exchange of equivalent silver, sell dates in exchange of equivalent dates, sell wheat in exchange of equivalent wheat, sell salt in exchange of equivalent salt, sell barley in exchange of equivalent barley, but if a person transacts in excess, it will be usury (Riba). However, sell gold for silver anyway you please on the condition it is hand-to-hand (spot)."
These six commodities can only be bought and sold in equal quantities and on spot. An unequal sale or a deferred sale of these commodities will constitute Riba.
Riba related all Quranic verses: "That which you give as interest to increase the people's wealth increases not with Allah; but that which you give in charity, seeking the goodwill of Allah, multiplies manifold."- (Sura al-Rum, verse 39)
"And for their taking interest even though it was forbidden for them and their wrongful appropriation of other people's property. We have prepared for those among them who reject faith a grievous punishment."- (Sura al-Nisa, verse 161)
"O believers, take not doubled and redoubled interest, and fear Allah so that you may prosper. Fear the fire which has been prepared for those who reject faith and obey Allah and the Prophet so that you may receive mercy."- (Sura al-Imran, verse -130-2)
"Those who benefit from interest shall be raised like those who have been driven to madness by the touch of the Devil; this is because they say: 'Trade is like interest' while Allah has permitted trade and forbidden interest. Hence those who have received the admonition from their Lord and desist, may keep their previous gains, their case being entrusted to Allah; but those who revert shall be the inhabitants of the fire and abide ."- (Sura al-Baqarah, verse -275)
"Allah deprives interest of all blessing but blesses charity; He loves not the ungrateful sinner."- (Sura al-Baqarah, verse -276)
"Those who believe, perform good deeds, establish prayer and pay the zakat, their reward is with their Lord; neither should they have any fear, nor shall they grieve."- (Sura al-Baqarah, verse -277)
"O believers, fear Allah and give up what is still due to you from the interest (usury), if you are true believers."- (Sura al-Baqarah, verse -278)
"If you do not do so, then take notice of war from Allah and His Messenger. But, if you repent, you can have your principal. Neither should you commit injustice nor should you be subjected to it."- (Sura al-Baqarah, verse -279)
"If the debtor is in difficulty, let him have respite until it is easier, but if you forego out of charity, it is better for you if you realize."- (Sura al-Baqarah, verse -280)
"And fear the Day when you shall be returned to the Lord and every soul shall be paid in full what it has earned and no one shall be wronged."- (Sura al-Baqarah, verse -281)
Riba related Hadiths: From Jabir (RAA) -"The Prophet (Saw), may cursed the receiver and the payer of interest, the one who records it and the two witnesses to the transaction and said:" They are all alike [in guilty]"-. (Muslim, Kitab al-Musaqat, Bab la'ni akili al-riba wa mu'kilihi; also in Tirmizi and Musnand Ahmad).
From Jabir Ibn Abdallah (RAA) - "Giving a report on the Prophet's (Saw) Farewell Pilgrimage said: The Prophet (Saw), addressed the people and said "All of the riba of Jahiliyyah is annulled. The first riba that I annual is our riba, that accruing to 'Abbas Ibn Abd al-Muttalib [the Prophet's uncle]; it is being cancelled completely." - (Muslim, Kitab al-Hajj, Bab Hajjati al-Nabi (Saw), may also in Musnand Ahmad).
From Abdallah Ibn Hanzalah(RAA) - "The Prophet (Saw) said: "A dirham of riba which a man receives knowingly is worse than committing adultery thirty-six times" - (Mishkat al- Masabih, Kitab al-Buyu, Bab al-riba, on the authority of Ahmad and Daraqutni). Bayhaqi has also reported the above hadith in Shu'ab al-imam with the addition that "Hell befits him whose flesh has been nourished by the unlawful".
From Abu Hurayrah (RAA) - "The Prophet (Saw) said: On the night of Ascension I came upon people whose stomachs were like houses with snakes visible from the outside. I asked Gabriel who they were. He replied that they were people who had received interest." - (Ibn Majah, Kitab al-Tijarat, Bab al-taghlizi fi al-riba; also in Musnand Ahmad).
From Abu Hurayrah (RAA) - "The Prophet (Saw) said: Riba has seventy segments, the least serious being equivalent to a man committing adultery with his own mother" - (Ibn Majah).
From Abu Hurayrah (RAA) - "The Prophet (Saw) said: There will certainly come a time for mankind when everyone will take riba and if he does not do so, its dust will reach him." - (Abu Dawud, Kitab al-Bayu' Bab fi ijtinabi al-shubuhat; also in Ibn Majah).
From Abu Hurayrah (RAA) - "The Prophet (Saw) 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" - (Mustadrak al-Hakim, Kitab al-Buyu).
Dr Mohammed Haider Ali Miah is the Additional Managing Director of EXIM Bank, Dhaka. haider@eximbankbd.com
The word 'Riba' means express, increase or addition, which correctly interpreted according to shariah terminology, implies any excess compensation without due consideration. This definition of Riba is derived from the Holy Quran and is unanimously accepted by the all Islamic scholars.
There are two types of Riba: Riba An Nasiyah and Riba Al Fadl.
Riba An Nasiyah is defined as excess, which results from predetermined interest which a lender receives over and above the principal (Ras ul Maal).
Riba Al Fadl is defined as excess compensation without any consideration resulting from a sale of goods.
During the dark ages, only the first form (Riba An Nasiyah) was considered to be Riba. However, the Holy prophet also classified the second form (Riba Al Fadl) as Riba.
The first and primary type is called Riba An Nasiyah or Riba Al Jahiliya.
The second type is called Riba Al Fadl, Riba An Naqd or Riba Al Bai.
Since the first type was specified in the Quranic verses before the sayings of the Holy Prophet, this type was termed as Riba al Quran. As the second type was not understood by the Quranic verses alone but also had to be explained by the Holy Prophet, it is also called Riba al Hadees.
Riba An Nasiyah: This is the real and primary form of Riba. Since the verses of Quran has directly rendered this type of Riba as haram, it is called Riba Al Quran. Since only this type was considered Riba in the dark ages, it has earned the name of Riba Al Jahiliya. Imam Abu Bakr Hassas Razi has outlined a complete and prohibiting legal definition of Riba An Nasiyah in the following words:
"That kind of loan where specified repayment period and an amount in excess of capital is predetermined."
One of the hadith quoted by Ali ibn at Talib (RAA) has defined Riba An Nasiyah in similar words. The Holy Prophet said:
"Every loan that draws interest is Riba."
The famous Sahabi Fazala Bin Obaid has also defined Riba in similar words:
"Every loan that draws profit is one of the forms of Riba"
The famous Arab scholar Abu Ishaq az Zajjaj also defines Riba in the following words:
"Every loan that draws more than its actual amount."
The fact that Riba An Nasiyah is categorically haram has never been disputed in the Muslim community.
Riba Al Fadl: The second classification of Riba is Riba Al Fadl. Since the prohibition of this Riba has been established on Sunnah.
Riba Al Fadl actually means that excess which is taken in exchange of specific homogenous commodities and encountered in their hand-to-hand purchase & sale as explained in the famous hadith:
The Prophet said, "Sell gold in exchange of equivalent gold, sell silver in exchange of equivalent silver, sell dates in exchange of equivalent dates, sell wheat in exchange of equivalent wheat, sell salt in exchange of equivalent salt, sell barley in exchange of equivalent barley, but if a person transacts in excess, it will be usury (Riba). However, sell gold for silver anyway you please on the condition it is hand-to-hand (spot)."
These six commodities can only be bought and sold in equal quantities and on spot. An unequal sale or a deferred sale of these commodities will constitute Riba.
Riba related all Quranic verses: "That which you give as interest to increase the people's wealth increases not with Allah; but that which you give in charity, seeking the goodwill of Allah, multiplies manifold."- (Sura al-Rum, verse 39)
"And for their taking interest even though it was forbidden for them and their wrongful appropriation of other people's property. We have prepared for those among them who reject faith a grievous punishment."- (Sura al-Nisa, verse 161)
"O believers, take not doubled and redoubled interest, and fear Allah so that you may prosper. Fear the fire which has been prepared for those who reject faith and obey Allah and the Prophet so that you may receive mercy."- (Sura al-Imran, verse -130-2)
"Those who benefit from interest shall be raised like those who have been driven to madness by the touch of the Devil; this is because they say: 'Trade is like interest' while Allah has permitted trade and forbidden interest. Hence those who have received the admonition from their Lord and desist, may keep their previous gains, their case being entrusted to Allah; but those who revert shall be the inhabitants of the fire and abide ."- (Sura al-Baqarah, verse -275)
"Allah deprives interest of all blessing but blesses charity; He loves not the ungrateful sinner."- (Sura al-Baqarah, verse -276)
"Those who believe, perform good deeds, establish prayer and pay the zakat, their reward is with their Lord; neither should they have any fear, nor shall they grieve."- (Sura al-Baqarah, verse -277)
"O believers, fear Allah and give up what is still due to you from the interest (usury), if you are true believers."- (Sura al-Baqarah, verse -278)
"If you do not do so, then take notice of war from Allah and His Messenger. But, if you repent, you can have your principal. Neither should you commit injustice nor should you be subjected to it."- (Sura al-Baqarah, verse -279)
"If the debtor is in difficulty, let him have respite until it is easier, but if you forego out of charity, it is better for you if you realize."- (Sura al-Baqarah, verse -280)
"And fear the Day when you shall be returned to the Lord and every soul shall be paid in full what it has earned and no one shall be wronged."- (Sura al-Baqarah, verse -281)
Riba related Hadiths: From Jabir (RAA) -"The Prophet (Saw), may cursed the receiver and the payer of interest, the one who records it and the two witnesses to the transaction and said:" They are all alike [in guilty]"-. (Muslim, Kitab al-Musaqat, Bab la'ni akili al-riba wa mu'kilihi; also in Tirmizi and Musnand Ahmad).
From Jabir Ibn Abdallah (RAA) - "Giving a report on the Prophet's (Saw) Farewell Pilgrimage said: The Prophet (Saw), addressed the people and said "All of the riba of Jahiliyyah is annulled. The first riba that I annual is our riba, that accruing to 'Abbas Ibn Abd al-Muttalib [the Prophet's uncle]; it is being cancelled completely." - (Muslim, Kitab al-Hajj, Bab Hajjati al-Nabi (Saw), may also in Musnand Ahmad).
From Abdallah Ibn Hanzalah(RAA) - "The Prophet (Saw) said: "A dirham of riba which a man receives knowingly is worse than committing adultery thirty-six times" - (Mishkat al- Masabih, Kitab al-Buyu, Bab al-riba, on the authority of Ahmad and Daraqutni). Bayhaqi has also reported the above hadith in Shu'ab al-imam with the addition that "Hell befits him whose flesh has been nourished by the unlawful".
From Abu Hurayrah (RAA) - "The Prophet (Saw) said: On the night of Ascension I came upon people whose stomachs were like houses with snakes visible from the outside. I asked Gabriel who they were. He replied that they were people who had received interest." - (Ibn Majah, Kitab al-Tijarat, Bab al-taghlizi fi al-riba; also in Musnand Ahmad).
From Abu Hurayrah (RAA) - "The Prophet (Saw) said: Riba has seventy segments, the least serious being equivalent to a man committing adultery with his own mother" - (Ibn Majah).
From Abu Hurayrah (RAA) - "The Prophet (Saw) said: There will certainly come a time for mankind when everyone will take riba and if he does not do so, its dust will reach him." - (Abu Dawud, Kitab al-Bayu' Bab fi ijtinabi al-shubuhat; also in Ibn Majah).
From Abu Hurayrah (RAA) - "The Prophet (Saw) 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" - (Mustadrak al-Hakim, Kitab al-Buyu).
Dr Mohammed Haider Ali Miah is the Additional Managing Director of EXIM Bank, Dhaka. haider@eximbankbd.com