Is Interest Haram? If you don’t know that truth, you will suffer.
Interest in business has spread widely in the world. The banking system is mainly interesting dependent. If you take a loan from the bank, you must pay Interest. On the other hand, there are NGO loans. It also depends on Interest. So the question for ordinary Muslim people is – Is Interest Haram?
This article will explore why Interest is Haram, Why and when interest haram, the types of transactions considered riba, and the alternative financial practices allowed in Islamic finance.
You will get to know the horror of usury and how badly society based on usury is making the entire life system of people miserable.
I hope this article will be considered informative and valuable to the readers by incorporating the research of Islamic scholars from ages and the rationale behind usury being unacceptable in the Islamic world.
Is Interest Haram?
Yes, Interest is Haram in Islam. Because it is the worst and mostly Haram in Islam. It is a haram recognized by the Qur’an, Hadith, Ijma, and Qiyas, the four pillars of Islam. There is no disagreement among Islamic scholars on this matter.
Interest is a deadly curse for society and the state in Islamic finance. Usury is strictly Haram in Islam. In terms of Shariah, taking and paying usury is a sin.
Since usury is used as a tool of exploitation, the Holy Qur’an and Hadith strongly warn against usury.
Interest destroys the mutual sympathy of believers, destroys humanity, and gives rise to unlimited greed and selfishness. The level of desire increases so much that usurers don’t hesitate to steal people’s lives and dignity.
So that the ordinary people are more affected; sad but true usury has become an epidemic in the present era. The whole world is under its Rahugras today. The evils of Interest are everywhere in society.
Regarding interest haram, the great Lord Rabbul Alamin said in the Qur’an, “I have made business lawful and declared usury haram.” (Surah Al-Baqabara: verse 275)
In another verse, ‘O believers! Do not take usury at a compound rate, and fear Allah to attain welfare.
Why Interest is Haram?
There are many reasons and acceptable arguments for declaring Islamic interest haram. This part of the article will explain why Interest is haram in Islam. We insert the grounds from the Qur’an Hadith and quotes from Islamic scholars.
Interest is Haram in the Quran.
Allah Ta’ala has declared interest haram in the Holy Qur’an in rigorous words. When Allah Ta’ala says something haram, it is not proper for Muslims to inquire into the reasons behind why it is haram.
Muslims follow exactly what Allah Ta’ala commands and avoid unquestioningly what He forbids. This is characteristic of Muslims.
In the Holy Quran, Allah has declared an interest as haram; that is why the internet is haram. Below are some verses of the Holy Qur’an which claim Interest in Haram.
Allah Ta’ala says,
اَلَّذِیۡنَ یَاۡکُلُوۡنَ الرِّبٰوا لَا یَقُوۡمُوۡنَ اِلَّا کَمَا یَقُوۡمُ الَّذِیۡ یَتَخَبَّطُهُ الشَّیۡطٰنُ مِنَ الۡمَسِّ ؕ ذٰلِکَ بِاَنَّهُمۡ قَالُوۡۤا اِنَّمَا الۡبَیۡعُ مِثۡلُ الرِّبٰوا ۘ وَ اَحَلَّ اللّٰهُ الۡبَیۡعَ وَ حَرَّمَ الرِّبٰوا
Translation: ‘Those who take usury will rise (from the grave) like him whom Satan touches and drives mad. This is because, as they say, business is like interest. But Allah has made trade lawful and usury forbidden.’ (Surah Baqarah: Verse 275)
Interest is Haram in the Hadith
One of the reasons why Interest is haram is that Rasulullah SAW has very strongly declared interest haram in the Hadith. Muslims consider Hadith the second foundation of Islam after the Holy Quran. So, Interest cannot be accepted by Muslims.
Abu Huraira agreed. Narrated by Rasulullah ﷺ said:
الرِّبَا سَبْعُونَ حُوبًا أَيْسَرُهَا أَنْ يَنْكِحَ الرَّجُلُ أُمَّهُ
The sin of usury has seventy levels. The lowest level among them is marrying one’s mother (jena). (Ibn Majah 2274)
In another hadith, Abdullah Ibn Hanzala Razi. Narrated by Rasulullah ﷺ said:
دِرْهَمٌ رِبًا يَأْكُلُهُ الرَّجُلُ وَهُوَ يَعْلَمُ أَشَدُّ مِنْ سِتَّةٍ وَثَلَاثِينَ زَنْيَةً
Knowingly taking an interest in one dirham is a greater sin in the sight of Allah than committing adultery with 36 women. (Musnad Ahmad 21450)
In another hadith, the Prophet ﷺ said,
الرِّبا وئنْ كتُرَ, فَنَّ عاقِبتَه تَصيرُ على قُلٍّ
No matter how high the amount of Interest (advancement) is, it is bound to decrease eventually. (Ahmad 3754 Ibn Majah 2279)
Here are some more reasons for the prohibition of Interest
- It exploits the poor and vulnerable by charging them high-interest rates on loans, trapping them in a cycle of debt.
- It promotes inequality by allowing the rich to accumulate more wealth at the expense of the poor.
- Encourages hoarding and discourages investment, as people would rather earn money through Interest than invest in productive activities.
- It is a form of injustice as it rewards people for owning money instead of creating value.
- It can lead to economic instability and financial crises, as seen in the recent global financial crisis.
- Goes against the principle of risk-sharing in Islamic finance, as interest-based transactions shift all the risk to the borrower.
- It is considered a major sin in Islam, as it is mentioned in the Quran and Hadith that Allah has declared war against those who engage in usury.
Overall, Interest is considered haram in Islam because it goes against the principles of fairness, justice, and compassion central to the Islamic faith. Instead, Islam encourages ethical and socially responsible financial practices that promote the well-being of individuals and society.
Opinions of Islamic Scholars on Interest
Imam Nabbi. He said, “All Muslims agree on the prohibition of usury; However, there is disagreement among them regarding its definition and principles. In the case of Usury Haram, the Prophet Sallallahu Alayhi Wa Sallam specified the names of six things. They are gold, silver, wheat, barley, dates, and salt.
Companion Zahiri said there is no interest in anything other than these six things. Their decision is based on their traditional principle of accepting extrinsic value in evidence.
Other than Sahab, Zahiri said Interest is not limited to these six things. Instead, the order of all included in these six causes is the same. However, they disagreed about the reasons for prohibiting these six types of things.
Imam Shafi’i. He thinks that ‘Illat’ in gold and silver is the value of Edua. So, measurable and other things will not be included between the two due to the absence of Illat. And the rest of the four things are bad; they are food. For this, every food item will be included in the Interest.
Imam Malek. Agreed with Imam Shafi’i regarding gold and silver. However, regarding the remaining four, he said the worst among them is that they should be preserved and eaten.
Imam Abu Hanifa. The Illat of gold and silver is Mawjuni or weighing, and the Illat of the other four is Maqili or measuring (of grain). So, this rule of Interest is applicable in every Makili and Mozuni case.
Alternative Finance of Interest in Islam
Islamic finance provides several alternative financial practices based on equity, justice, and risk-sharing principles. These include:
- Musharakah: A partnership between two or more parties in which each party contributes capital and shares the profits and losses of the venture.
- Mudarabah: A form of investment in which one party provides the capital and the other provides expertise and management skills. The profits are shared according to a pre-agreed ratio.
- Murabahah: A form of financing in which the lender purchases the asset and then sells it to the borrower at a higher price. The profit margin is agreed upon in advance.
- Ijarah: A form of leasing in which the lessor leases an asset to the lessee for a specified period and rent. At the end of the lease period, the lessee can purchase the asset at a pre-agreed price.
FAQs
What is Interest (Riba) in Islam?
Interest, or Riba, is the extra benefit received from a loan in Islam. It is a tool to exploit poor people. So, Riba is forbidden in Islam.
Why is interest forbidden in Islam?
Charging interest is unfair and exploitative, as it leads to discrimination and financial oppression. In contrast, Islam encourages fair and just economic practices.
Is all interest forbidden in Islam?
Yes, Islam prohibits all forms of usury – on loans, savings or any financial transaction involving extra profit.
What about interest in conventional banking?
Conventional banking methods often involve interest. Thereby making them incompatible with Islamic principles. Islamic finance avoids fixed interest and relies on profit-loss sharing.
Are there any exceptions to the prohibition on interest?
Scholars differ on this point, but generally, there is no exception for earning or paying interest. Some argue for exceptions in extreme cases, but this is a matter of interpretation.
How can Muslims manage financial transactions without interest?
Islamic finance offers options such as profit-loss sharing, trade-based financing, and leasing arrangements. Islamic banks provide services in compliance with Sharia principles.
What is the consequence of working with usury in Islam?
Engaging in interest-based transactions is a violation of Islamic principles. It can affect a person’s spiritual and moral well-being. Scholars emphasize avoiding such practices.
Can Muslims use conventional banking services?
Muslims can use conventional banking services for basic needs. But they should be encouraged to seek Sharia-compliant alternatives whenever possible.
How can one ensure that their financial transactions are by Islamic principles?
Consult Islamic scholars. Also, use Shariah-compliant financial products and services. And prioritize ethical and fair financial practices in all transactions.
