It's Haram! (Prohibited)
That's usually the first thing a Muslim might say when asked about Riba. It is the Arabic term for "interest" or "usury". Yet the English word does not truly capture the essence of Riba and its significance to the Muslim world and Islamic finance.
Historically, the concept of Riba and its prohibition dates back to the time of our Prophet Muhammed (SAW). In the early days of Islam, the practice of usury was widespread. It was considered a way to gain wealth and power usually by exploiting the poor and vulnerable. This is because the essence of Riba is to profit off of money without any real exchange of goods and services. In other words, it boils down to making money off of money.
ٱلَّذِينَ يَأْكُلُونَ ٱلرِّبَوٰا۟ لَا يَقُومُونَ إِلَّا كَمَا يَقُومُ ٱلَّذِى يَتَخَبَّطُهُ ٱلشَّيْطَـٰنُ مِنَ ٱلْمَسِّ ۚ ذَٰلِكَ بِأَنَّهُمْ قَالُوٓا۟ إِنَّمَا ٱلْبَيْعُ مِثْلُ ٱلرِّبَوٰا۟ ۗ وَأَحَلَّ ٱللَّهُ ٱلْبَيْعَ وَحَرَّمَ ٱلرِّبَوٰا۟ ۚ فَمَن جَآءَهُۥ مَوْعِظَةٌۭ مِّن رَّبِّهِۦ فَٱنتَهَىٰ فَلَهُۥ مَا سَلَفَ وَأَمْرُهُۥٓ إِلَى ٱللَّهِ ۖ وَمَنْ عَادَ فَأُو۟لَـٰٓئِكَ أَصْحَـٰبُ ٱلنَّارِ ۖ هُمْ فِيهَا خَـٰلِدُونَ (٢٧٥)
Those who consume interest cannot stand [on the Day of Resurrection] except as one stands who is being beaten by Satan into insanity. That is because they say, "Trade is [just] like interest." But Allāh has permitted trade and has forbidden interest. So whoever has received an admonition from his Lord and desists may have what is past, and his affair rests with Allāh. But whoever returns [to dealing in interest or usury] - those are the companions of the Fire; they will abide eternally therein. (2:275)
Prophet Muhammed (SAW) urged us to stay away from Riba as it goes against our Islamic values of justice, fairness, and social responsibility. Islamic finance, done in the right way, aims to promote wealth distribution that creates an equitable society.
To give an example: If I need money to start a business or attend university, in a perfect Islamic finance-driven world, I can borrow money from a lender and their only expectation is that I pay my exact borrowed amount in full.
Let's say I borrow $10,000, then the expectation from my lender is that I return that $10,000 without any interest associated. If I decide that I want to pay back $10,500 because I appreciate my lender for providing me with funds, then that in itself is not considered Riba.
So you see, part of Riba also has to do with intentions, which is a major part of Islam. As a lender, I do not intend to receive more than what I give to this person in need. I give in accordance with my Islamic values of charity and fairness and if I am given more because that person is grateful, then so be it!
The "rich get richer" and the "poor get poorer"
In today's society, interest is charged when you go for any conventional loans. If I borrow money from the bank, then there is the expectation that I will be paying back that money with interest added to it. The same concept applies to student loans, mortgages, personal loans, buy-now-pay-later methods, late credit card payments, and more. Interest is baked into so many transactions and we have come to accept this as the norm without question.
Interest is what cripples many people in our society and has played a hand in the great debt crises that we face today. About 80% of Americans have some type of consumer debt with balances that are an average of $38,000 not including mortgage debt. (1)
Someone can be making all of their suggested monthly payments on time and still see an ever-increasing debt balance that will take years to cover because of the power of interest. Over time, this really does feed into the broken record player saying, "The rich get richer and the poor get poorer."
You might be thinking: "Well Hawa, how am I to survive in this world as a Muslim if Riba is baked into every part of financial services we have in conventional finance?"
Don't worry!
With the rise of Shariah-compliant financial products, the internet that fosters websites like this one, and Muslims coming out to educate one another on the ways to infuse Islamic teachings into how we do finance, I believe there are multitudes of ways to live in accordance with our values.
Stay tuned for more information to come!
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