Riba is an Arabic word, and if translated, it means ‘Interest.’ There are two types of Riba – Riba al-Nasi’ah (the interest of delay) and Riba al-Fadl (the interest of excess). They are both considered haraam in Islam as they cause damage to the individual or party that takes a loan. Interest makes it almost impossible for the loan money to be repaid, putting the burden on the taker’s shoulders.
All these things are considered to be Riba in Islam:
And whatever you give for Riba in order that it may increase in people’s wealth, it will not increase in the sight of Allah; and whatever you give for Zakat, seeking Allah’s pleasure, it is they who are the multipliers (to get manifold reward)’ (Surah Ar Rum – 30:39)
وَمَا آتَيْتُم مِّن رِّبًا لِّيَرْبُوَ فِي أَمْوَالِ النَّاسِ فَلَا يَرْبُو عِندَ اللَّهِ وَمَا آتَيْتُم مِّن زَكَاةٍ تُرِيدُونَ وَجْهَ اللَّهِ فَأُولَٰئِكَ هُمُ الْمُضْعِفُونَ
The Prophet Muhammad (PBUH) forbade taking and giving interest on several occasions. Two such occasions are mentioned below.
As prevention is the best cure, it is better to avoid taking Riba altogether, so it is important to have knowledge of where one’s money is coming from. However, if Riba accumulates, it should be disposed of in a way that does not benefit the individual. This can be done by donating it to charitable causes or by using it for public welfare projects without seeking any reward or benefit in return.
Some of the categories of people or projects that can be given the riba money include
Interest money should be disposed of in a way that does not benefit the individual, such as donating it to charitable causes or using it for public welfare projects.
Interest money can be given to the poor and needy, debtors, Islamic charities, and public welfare projects that benefit the community.
Interest (Riba) is forbidden in Islam because it exploits borrowers, creates wealth disparities, guarantees profit without risk, and violates Quranic teachings. Its prohibition aims to promote fairness, justice, and ethical financial practices.
What distinguishes Riba from interest? Fundamentally, there isn’t a distinction. “Riba” is the term used in Islamic contexts, while interest is the conventional term. For any inquiries or concerns regarding Islamic finance, it’s advisable to seek guidance from an expert in Islamic finance principles.
