1. PROHIBITION OF RIBA IN ISLAM

2. RIBA - Commonly referred as Sood (in Urdu)
Riba means excess, increase or addition
Riba in banking implies any excess compensation without due consideration
It Is a premium paid to the lender in return for his waiting as a condition for the loan.
In the words of Prophet (SAW) “Every loan that draws interest is riba”.
Definition of Riba
The word “Riba” means excess, increase or addition, which correctly interpreted according to Shariah terminology, implies any excess compensation without due consideration.
Here consideration does not include time value of money.
This definition of Riba is derived from the Quran and is unanimously accepted by all Islamic scholars.

3. ISLAMIC BANKING PROHIBITION OF RIBA IN QURAN Ar-Rome, Verse 39
Al-Nisa', verse 161
Al Imran, Ayat 130
Al Baqarah Verses
Definition of Riba
The word “Riba” means excess, increase or addition, which correctly interpreted according to Shariah terminology, implies any excess compensation without due consideration.
Here consideration does not include time value of money.
This definition of Riba is derived from the Quran and is unanimously accepted by all Islamic scholars.

4. First Revelation about Riba
“That which you give as interest to increase the peoples' wealth increases not with God; but that which you give in charity, seeking the goodwill of God, multiplies manifold.” (Surah Rome, Verse 39)
Another verse of Quran which prohibits riba is in Surat Al- Baqarah, Ayat 276
The fact stated in this verse is a truism from a moral and spiritual as well from an economic and social viewpoint. For, although wealth apparently multiplies through interest and shrinks as a result of charity, in actual fact the opposite is the case. By God’s decree, the law of nature is such that interest not only serves as a strain on moral and spiritual well- being and social and economic growth, it also causes actual regression and decline. Charity, however leads to the growth and expansion of man’s moral and spiritual qualities and to the growth of human society and economic. Charity here includes such acts as lending money to people with stipulation that they should return it if they can, and at their convenience).
The second verse is from Surah-e Al Imran, Ayat 130.
The major cause of setback suffered at Uhud was that precisely at the moment of their victory the Muslims succumbed to the desire for wordily possessions, and and turned to collecting booty rather than completing their task of crushing the enemy. Hence God thought fit to raise a barrier against this excessive adoration of money, and to urge them to give up usury which keeps man constantly absorbed in considering ways and means of amassing wealth and generally whets his appetite for money.

5. Ar-Rum 39
Quran prepares grounds and minds of people to bring the change slowly and gradually.
Encourages people to have permanent return in the Hereafter in mind.
Apparently the saving increases with the interest earned, but in fact its not an increase because inflation eats it up.
Swelling of our body is not a sign of health. It is indeed a sickness!

6. Second Revelation
“And for their taking interest even though it was forbidden for them, and their wrongful appropriation of other peoples' property. We have prepared for those among them who reject faith a grievous punishment ” (Surah al-Nisa', verse 161)
Another verse of Quran which prohibits riba is in Surat Al- Baqarah, Ayat 276
The fact stated in this verse is a truism from a moral and spiritual as well from an economic and social viewpoint. For, although wealth apparently multiplies through interest and shrinks as a result of charity, in actual fact the opposite is the case. By God’s decree, the law of nature is such that interest not only serves as a strain on moral and spiritual well- being and social and economic growth, it also causes actual regression and decline. Charity, however leads to the growth and expansion of man’s moral and spiritual qualities and to the growth of human society and economic. Charity here includes such acts as lending money to people with stipulation that they should return it if they can, and at their convenience).
The second verse is from Surah-e Al Imran, Ayat 130.
The major cause of setback suffered at Uhud was that precisely at the moment of their victory the Muslims succumbed to the desire for wordily possessions, and and turned to collecting booty rather than completing their task of crushing the enemy. Hence God thought fit to raise a barrier against this excessive adoration of money, and to urge them to give up usury which keeps man constantly absorbed in considering ways and means of amassing wealth and generally whets his appetite for money.

7. An Nisa 161
Underlines the general principle that whoever disobeys Allah and declares lawful what He has declared unlawful, will be exposed to severe punishment.
Muslims are told not to follow the footsteps of Jews, otherwise be prepared for the same consequences.
Allah takes away the blessings of this world.

8. Third Revelation
“Believers! Do not swallow riba, doubled and redoubled, and be mindful of Allah so that you may attain true success” ( Al Imran, Ayat 130)
Another verse of Quran which prohibits riba is in Surat Al- Baqarah, Ayat 276
The fact stated in this verse is a truism from a moral and spiritual as well from an economic and social viewpoint. For, although wealth apparently multiplies through interest and shrinks as a result of charity, in actual fact the opposite is the case. By God’s decree, the law of nature is such that interest not only serves as a strain on moral and spiritual well- being and social and economic growth, it also causes actual regression and decline. Charity, however leads to the growth and expansion of man’s moral and spiritual qualities and to the growth of human society and economic. Charity here includes such acts as lending money to people with stipulation that they should return it if they can, and at their convenience).
The second verse is from Surah-e Al Imran, Ayat 130.
The major cause of setback suffered at Uhud was that precisely at the moment of their victory the Muslims succumbed to the desire for wordily possessions, and and turned to collecting booty rather than completing their task of crushing the enemy. Hence God thought fit to raise a barrier against this excessive adoration of money, and to urge them to give up usury which keeps man constantly absorbed in considering ways and means of amassing wealth and generally whets his appetite for money.

9. Ale-e-Imran 130
Only a handful disobeyed the orders of the Prophet (SAW) by leaving their strategic points at Battle of Uhud but the consequences were suffered by all.
Control over human tendency to multiply the wealth through any means. If one develops liking for interest, he increasingly indulges in it and does not remain satisfied with simple interest.
People misinterpret that only compound interest is forbidden whereas a number of Quranic verses prohibit simple interest.

10. Ale-e-Imran 130
The words “doubled and redoubled interest” are used to highlight the shameful aspect of compound interest and not to limit the scope of riba only to compound interest.
Similar to Allah’s command “Do not bargain on my orders for paltry gains in this world”. If one gains the entire world at the cost of hereafter, it is an immeasurable loss - a paltry gain.
It does not mean that it is prohibited to obtain paltry gains but permissible to obtain a hefty price.

11. Fourth Revelation
Surah Al
Baqarah
Verses

12. Fourth Revelation
Those who take riba (usury or interest) will not stand but as stands the one whom the demon has driven crazy by his touch. That is because they have said: Trading is but like riba. So, whoever receives an advice from his Lord and stops, he is allowed what has passed, and his matter is upto Allah. And the ones who revert back, those are the people of Fire. There they remain forever.
Al Baqarah 275

13. Al Baqarah 275
Similarity between a Riba consumer and a mad person: Both are insensitive to other’s sufferings.
What does Riba do? Create monopolies & open doors to selfishness, greed, injustice and oppression
Islam on the other hand encourage highest moral ethics, universal brotherhood, collective welfare and prosperity, social fairness and justice.
The above verse carries three strong expressions:
a) Haram b) People of Fire c) Forever dwellers
Let bygones be bygones: Don’t do it in future.
He who repeats and justifies legitimacy of Riba is only rejecting faith in Allah.
We now understand the gradual process of creating an awareness among people against Riba. If a child innocently picks a deadly device like a sharp knife, will you suddenly pull it from his hand? No! because it may injure him badly. Riba is considered as deadly for us! It’s prohibition was not enforced through a sudden jerk, rather in stages, with wisdom.

14. Fourth Revelation Al Baqarah 276-77
Allah destroys riba and nourishes charities. And Allah does not like any sinful disbeliever.
Surely, those who believe and do good deeds, establish Salah and Zakah have their reward with their Lord, and there is no fear for them,nor shall they grieve.
Al Baqarah

15. Al Baqarah 276-77 There is no blessing in money earned through Riba.
While charity may reduce wealth but provides bliss, peace and satisfaction.

16. Fourth Revelation Al Baqarah 278-79
O those who believe, fear Allah and give up what still remains of the riba if you are believers.
But if you don not, then listen to the declaration of war from Allah and His Messenger. And if you repent, yours is your principal. Neither you wrong, nor be wronged.
Al Baqarah

17. Quranic view Al Baqarah 278-279
If you are indeed believers: Prove your claim with deeds.
Threat in the strongest words : Not used for any other crime.
Principle amount should be paid back.
Islam’s emphasis on justice: Deal not unjustly and you shall not be dealt with unjustly.
After revelation of this verse, Prophet (SAW) in his last sermon at Haj-e-tul-Wada which is called the charter/blue print of Islam declared: “Interest claim in respect of transactions during the days of ignorance are null and void and would not be claimed. To begin with, we forego the entire interest amount due to my uncle Abbas bin Mutalib”.

18. Wisdom of prohibition
To prevent individual gains that cause loss to the whole community. Bank caters loans only to rich sector. Entire capital is utilized for the benefit of few. Community gets poorer.

19. Point to remember:
Islam does not distinguish between interest paid on loan for productive and profitable purposes and interest paid on loan taken for personal need and expenses and prohibit all types impartially.

20. Riba: Selected Ahadith
Prohibition of Riba in Ahadith
Riba: Selected Ahadith
From Hazrat Jabir Ibn-e-Abdullah (RA): The Prophet, may peace be on him, cursed the receiver and the payer of interest, the one who records it and the witnesses to the transaction and said: "They are all alike [in guilt]." (Muslim, Tirmidhi and Musnad Ahmad)
From Hazrat Abu Hurayrah (RA): The Prophet, peace be on him, said: "Riba has seventy segments, the least serious being equivalent to a man committing adultery with his own mother." (Ibn Majah)

21. Riba: Selected Ahadith
From Hazrat Amr bin Al Aas (RA): “When interest based dealing becomes common among people, they will start facing draught and shortage of food. And when bribery becomes norm among people they will live under constant fear of their enemy”.
From Hazrat Abu Hurayrah (RA) : The Prophet, peace be on him, 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, Ibn Majah)

22. Prohibition of Interest in Other Religions
The prohibition of Interest is not limited to Islam, but it is shared by Judaism and Christianity.
Some of the old testaments have rendered riba as haram (See Exodus 22:25,
Leviticus 25:35-36, Deutronomy 23:20, Psalms 15:5, Proverbs 28:8,
Nehemiah 5:7 and Ezakhiel 18:8,13,17 & 22:12).
Agibi Bank was established circa 700 B.C. in Babylonian
and functioned exclusively on equity basis.

23. Ahadith on Seriousness of Riba
It has been reported by Hazrat Abu Hurairah that the Prophet (PBUH) said: “Refrain from seven things which are deadly”. The companions asked him, what are these? He said,
“To associate partners with Allah
To cast spells
To kill someone without a reason valid in the eyes of Allah
To devour interest
To devour the property of an orphan
To run away from the battle field
To falsely implicate innocent and chaste women of vulgarity”

24. Hazrat aun Bin Juhaifah has reported the prophet to have said
Cursed the women who get themselves tattooed and those who perform this act,
Those who charge and pay interest.
He (PBUH) stopped his followers from earnings obtained through the sale of dogs and the earnings of a prostitute.
He also cursed those who draw pictures.

25. Hazrat Abu Hurairah has reported the prophet to have said
“Four categories of people are such that Allah has made it binding upon himself to refuse them admission to paradise or to let them enjoy its bounties.
The first is the one who is a habitual drinker of alcoholic drinks,
The second is the one who devours interest,
The third is the one who devours the wealth of an orphan,
And the fourth is the one who is disobedient to his parents. “

26. Hazrat Abdullah Ibn-e Masood has reported that the prophet said:
“The ills of interest are a little over seventy, and it is as bad as associating partners with Allah.”
Hazrat Hanzala Bin Abdullah reported that the prophet said “ Devouring a dirham of interest is worse than committing adultery thirty six times, provided one is aware that he is utilizing money earned by way of interest.”

27. Hazrat Ibn-e-Abbas has reported that the prophet instructed not to sell any edible fruits before they were fully ripe.
He (PBUH) also said that when interest and adultery come in vogue in any society, then it is like they have invited Allah’s wrath upon themselves.

28. Hazrat Abu Hurairah is reported to have said
“The Prophet said that when he reached the seventh stage of the heavens, on the night of Mairaj, and looked overhead, he (PBUH) saw lightning and heard thunder. He (PBUH) then said that I passed on a people whose stomachs were large like houses, and they were full of snakes which were visible from outside. I asked Gabriel as to whom these people were and he said that these are the ones who devour interest.

29. Hazrat abdulah Ibn-e-Masood narrated that the Prophet said “ as the day of judgement comes closer, interest, adultery and consumption of liquors will become common”

30. Hazrat Anas has said that when you lend to someone and he then sends you food as a gift, do not accept it, or if he offers you a ride, do not accept his offer except if the two of you had such relationship prior to the lending of money.
Hazrat Ali has reported that the prophet said, “when Allah intends to destroy a people, interest-based business becomes popular among them”

31. The Difference Between Riba And Sood
What is called Riba in Quran is called Sood in Urdu
This gives the impression that Riba and Sood are one and the same
However, the difference is as follows:
Riba carries a general and wider connotation
Sood is a form of Riba

32. Sood refers to
Lending of money
For a specified period
At a specific rate
This is indeed Riba
However, Riba is not limited to Sood
It has a much wider connotation
The actual reach of the Riba prohibition goes far beyond compensation for lending money
It includes many transactions of sale and purchase where there is no element of credit

33. In the days of ignorance, Riba was generally considered what is
today called Sood
The Prophet elaborated on the meaning of Riba
And included certain transactions where there was no element of credit
Various forms of Riba were in vogue in Arabia when the prophet was sent
Most common practice was:
To lend a specific amount of money
For a specific period
At a known rate
If the borrower paid on time, only the agreed amount was charged
Otherwise the interest would be increased

34. Hence, even before the revelation of the Quran, Riba
was considered to be
A gain made out of lending of money
Almost 8 years after Hijra, verses in respect of Riba were revealed, and Riba was categorically prohibited
After these verses were revealed,
Everyone realized that these related to profit on loans, and gave it up.

35. However, subsequently, the Prophet included in the definition
of Riba, a kind of trade which was not previously considered Riba
The second kind of Riba, in the words of the Prophet was :
Gold for Gold, silver for silver, wheat for wheat, barley for barley, dates for dates and salt for salt; like for like,equal for equal and hand to hand, if the commodities differ, then you may sell as you wish, provided that the exchange is hand-to-hand

36. Summary of discussion The obvious meaning of Riba i.e.
Charging interest on loans or credit
Was well-known even in the days of jahilayyah
The Prophet specified a new dimension to the issue
That certain type of sale & purchase transactions also fall under the domain of Riba
This is why scholars generally mention two kinds of Riba
The first is called – Riba Al Nasia OR
Riba Al Jahiliyyah OR
Riba Al Quran
The second is called Riba al Fadl OR
Riba al Hadith