Riba & Its Types

Riba' The word â€Å"Riba† means excess, increase or addition, which correctly interpreted according to Shariah terminology, implies any excess compensation without due consideration (consideration does not include time value of money). Types of Riba: 1. Riba' AnNisi'ah: This is the stipulated interest which the lender takes from the borrower in consideration of the time given to the borrower to pay back the capital. It is HARAM based on the Quran and the Sunnah and the consensus of Muslim scholars. . Riba' Al Fadl:   This applies to barter (exchanging one commodity for another), where   commodities of the same type are exchanged in unequal amounts, especially the exchange of precious metals and foodstuffs, it is HARAM, by the Sunnah and the concensus of scholars; as it paves the way for Riba' nNasi'ah. Numerous ahadith have demonstrated the prohibition with regard to gold, silver, wheat, barley, dates, and salt. The Prophet sallaAllahu ‘alayhi wa sellem said, â€Å"Gold for gold, and silver for silver, and wheat for wheat, and barley for barley, and dates for dates, and salt for salt, like for like, equal for equal, from hand to hand (the transaction must be completed before the two sides leave each other). But if the types are different then sell as you wish, as long as it is hand to hand. †Ã‚   (Muslim) The Prophet sallaAllahu ‘alayhi wa sellem also said, â€Å"Whoever gives more or asks for more (than what he gave) commits an act of Riba', the given and the taken are equivalent (in the sin). (Muslim) The Prophet sallaAllahu ‘alayhi wa sellem said, â€Å"Prohibited selling food (of the same variety) except equivalent in weight and hand to hand. † (Muslim) â€Å"Do not sell gold for gold unless equivalent in weight (and from hand to hand), and do not sell less amount for greater amount or vice versa, and do not sell silver for silver unless equivalent in we ight (and from hand to hand), and do not sell less amount for greater amount or vice versa and do not sell gold or silver that is not present at the moment of exchange for gold or silver that is present. †Ã‚   (agreed upon) To lend a bank money or borrow from it on the condition of a payment of a fixed annual or monthly percentage rate of interest, say 2%, or more or less, is a form of PROHIBITED RIBA'. â€Å"†¦ whereas Allah has permitted trading and forbidden Riba' (usury)†¦ †Ã‚   2:275 Poverty isn't an excuse for Riba'. Mudaraba: which is a form of partnership where one person invests money and the other invests his skill and effort, and they share the profit or loss of the enterprise, so Islam did not impose any hardship on the people (by prohibiting Riba') but rather it provided them with a viable alternative to it, among them are the following: . Qard Hasan (a beautiful loan): Istead of a Muslim loaning his money on interest which causes pollution and blight on all his property and oppresses the borrower, Islam encourages him to make the loan Qard Hasan, and promised him a gracious reward for it;   Allah said, â€Å"Who is he that will lend to Allah a goodly loan so that Her ma y multiply it to him many times? †Ã‚   2:245 2. Giving an extension to a person who cannot repay the loan on time because of financial difficulty, until he gets back on his feet. And Islam encourages the lender to forgive the loan altogether in this circumstance;   Allah said, â€Å"And if the debtor is in a hard time (has no money), then grant him time till it is easy for him to repay, but if you remit it by way of charity, that is better for you if you did but know. † 2:280 3. Mutual Aid by all means: This encompasses mutual aid on a social level, in industry and in agriculture, and social security by financing farmers and industrialists and craftsmen in order to enable them to produce effectively. This returns a benefit to the whole Ummah. Also, opening schools and buidling hospitals and homes for the elderly and the incapacitated and all other items alike fall under the mutual aid mentioned in the verse†¦ â€Å"†¦ help you one another in Al Birr and atTaqwa (virtue, righteousness and piety);†¦ †Ã‚   5:2                    The society which realizes these means will proceed, in the shade of this comprehensive mutual aid, happily and far removed from the distress of Riba'. . We should not forget the payment of Zakat to those who deserve it. This will have a major impact on getting rid of Riba'. BEWARE:   from putting your money in a *nonIslamic bank*. Even if you don't take interest on it, the bank takes your money and loans it out to gain interest. So you are helping the Riba' system, and are indirectly responsible and beware from taking loans from those banks.