INTRODUCTION TO RIBA OR INTEREST

Islam is a complete code of life; Islam has its own political, social, and economic systems that guide human in all stages and spheres of life. History of Islam tells us that the first economic system in Islam was established in the period of Al-Khilafa Al-Rashidah. The Holy Quran has instructed emphatically to Muslims to not acquire properties of each other’s. Equal distribution of income and Socio economic justice and wealth are essential parts of the Islamic philosophy. Islam Strictly prohibits Riba, it is also known as usury or interest. Muslim and Islamic based countries have made the Islamic banks that are free from Riba. The purpose of this is to spread and aware people from the meaning and concepts of Riba or interest and its prohibition in Islam.

RIBA OR INTEREST:
           In modern nations with secular economic systems, Riba or interest plays a vital role, even in the Western and modern world people cannot think about any economic system without riba.
 Riba is strictly prohibited in Islam as it appears clearly in the Holy Quran. There is full unanimity among all the Islamic schools of thought on the prohibition of interest or Riba. Quran is the source of guidance in Islam in all matters and for all Muslims, and it is a fact that Islam has completely forbidden the practice of riba in society. The modern economic banking system is structured on the basis of a fixed payment that is called interest. That’s why the modern system of banking is in conflict and far different from the principles of Islam that strictly prohibit Riba. Islam focuses on equitable and fair and among all people. To charge interest or riba from person who is constrained to borrow in order to meet his essential and necessity consumption requirement is also considered an exploitative act in Islam. Charging of riba on taking loans for any productive purposes is also forbidden because it is not a form of equitable transaction.

DEFINING RIBA 
         The word Riba has been used many times in the Holy Quran on different occasions. Riba word has been extracted from Raba. That means increase addition. In Shariah, “riba” is the premium that borrower should pay to the lender along with principal amount. Riba is the excess amount on the principal amount.

CLASSIFICATION OF RIBA

Riba is classified in two types.

* The first type of Riba is called Riba An Nasiyah or Riba Al Jahilliyah.

* The second type is called Riba Al Fadl or Riba Al Bai.

      RIBA AN NASIYAH
    Riba An Nasiyah is defined a s excess, which results from

Pre-determined interest which lender receives over and above the principle.

   

      RIBA AL FADL

              Riba Al Fadl is an excess compensation without any consideration resulting from the sales of good.

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