What is riba? We translate it as interest. But in Islamic finance, riba is a little bit broader and a bit more technical than interest.
And it is true that what we call interest is the primary manifestation of riba. It was something that was common and predominant in many societies, including pre-Islamic Arabia. If I gave you a 1000 dollars or whatever, I would demand a 1100 after two months, and if you are late a 1200, and if you are later than that a 1300… this is the standard form of riba.
Declaring War against God and His Messenger
Now technically speaking there are other types of riba in Islam, but this is the most common one that we are still aware of, and it is still commonly practiced to this day.
When Islam came, the Prophet Muhammad explicitly forbade riba. The Quran equated riba with declaring war against God and His messenger.
There is no other sin in Islam that has been equated with declaring war against God. It’s as if you are waging war against your own creator.
There is no sin that has that has that strict language attached to it.
And there are many evils in Islam that you are not supposed to do. You are not supposed to murder, you are not supposed to steal… There are many sins, and each one has its punishment, there is no question about it.
But this specific punishment of declaring war against God and His messenger, no other sin has been given that description. And Allah mentions in the Quran that of the wisdom of prohibiting riba:
So that wealth doesn’t become a plaything that remains amongst the rich amongst you. (59:7)
The Essence of Injustice
So wealth shouldn’t just remain amongst the rich. You see from an Islamic perspective, riba or interest is the essence of economic injustice.
A rich person will lend money to a poor person with guaranteed return. And the poor person might fail in the business, and the rich person is profiting off of the fact that he is rich. That’s it. He is literally profiting, simply because he has money in his bank account and the poor person needs the money. And he goes here is the money, and I demand much more money back.
That is why it is the essence of injustice.
From an Islamic perspective, if you want money from a rich person, you need to make him an investor, you need to make him convinced that you are worthy of an investment and he shares the profit and the loss.
In Islam, guaranteed profit is a big problem, because no body knows the future other than God. When you guarantee a profit, then essentially you are making sure that the rich person becomes richer and the poor person is taking a major risk, because he or she is poor. And that’s why Allah says, ‘wealth should not be a play item among the rich amongst you’.
Wealth should be trickled down, it should be taken down to the poor, and it should go down so that everybody benefits from it.
The injustice of interest essentially ensures that the rich become richer and the poor, generally speaking, become poorer and poorer.
One of the Major Sins
That is why the Prophet Muhammad (peace be upon him) forbade interest and he called it of the major sins. In one hadith, he said:
Avoid the seven deadly sins.
And of those seven deadly sins in that list is murder, in that list is worshiping of false Gods and Idol, and in that list is riba.
Can you believe murder and riba are in the same list? That is enough of a warning for us.
The Islamic Model
So every Muslim should be very careful about earning money through riba, and no Muslim should ever give his or her money to somebody and demand more back as a contract of riba.
If you feel that somebody needs money, the shariah has many ways to do that, either you give them as a loan and you take the money back, or you give them as a charity, or if its a business, invest; and share the profit and loss, “I am going to get this much profit, and I am also going to share that much loss if the loss takes place.”
That’s why entrepreneurs and business people need to sell their business plans, make sure its rock solid and investors can then see for themselves and they have to then become partners, that is the Islamic model.
As for the model that is common in the west where the rich guaranteed a profit of off their riches, we say this is economic injustice and Allah and His messenger has forbidden it in the strictest of terms and it is of the major sins of our religion.