by Mr./Mrs. YOUSSOUF FOFANA. Two types of interest we learnt in chapter 4 is Simple interest and compound interest where
Simple interest is generally charged for borrowing money for short periods of time
Compound interest is similar but the total amount due at the end of each period is calculated and further interest is charged against both the original principal but also the interest that was earned during that period.
Riba, which means not only usury, but all forms of unearned income, “it simply an unjust gains in trade or business, generally through exploitation” and it has been strictly prohibited by Islam, Riba is forbidden in Islamic economic and considered as a major sin. Muslim scholars have categorized it in two types: “riba al-nasi’ah”, and “riba al-fadl”. Where Riba al-nasi’ah refers to the interest on loans; its prohibition essentially implies that the fixing in advance of a positive return on a loan as a reward for waiting is not permitted in Islam. Riba al-fadl is the excess over and above the loan paid in kind.* It lies in the payment of an addition by the debtor to the creditor in exchange of commodities of the same kind.
Riba is considered amongst the Seven Heinous Sins namely

  • Believing in gods other than Allah.
  • Magic.
  • Murder.
  • Riba/usury.
  • Unlawfully taking orphans' money.
  • Fleeing the battlefield.
  • Accusing chaste, pious women.******************************************** *********************************

(Q3:v130) O you who have believed, do not consume usury, doubled and multiplied, but fear Allah that you may be successful
Mohammad said in his farewell sermon: "God has forbidden you to take Riba; therefore all riba obligations shall henceforth be waived. Your capital, however, is yours to keep.
Mohammad cursed the one who deals with Riba. From Jabir: Mohammad cursed the receiver and the payer of riba, the one who records it and the two witnesses to the transaction and said: "They are all alike [in guilt]." Islamic Shari’ah considers Riba as a tool of oppression and a means to unjustly take others' money by exploiting their needs and circumstances. Hence it forbids a Riba based system altogether and promotes Charity as an alternative. Therefore, Mohammad said: "God has judged that there shall be no riba".
The Qur'an mentions that the person who deals with Riba will stand on judgement day as one who is beaten by Satan into insanity. Qur'an makes it clear to us that "trade" and "riba" are not the same, and that God forbade "riba" and allowed "trade". It further states that whoever accepts the guidance of God must immediately stop dealing in Riba, and those who return to Riba after God’s guidance has reached are dwellers in fire, because God destroys "Riba" and he will reward those who give to charity.
In legalizing trade and condemning interest, Islam considers that there are fundamental differences between the nature of profit resulting from interest charges and that earned by trade. In interest-based transactions, there may be no equitable division of profit between the buyer who makes a profit on the sale of good purchased, and the seller who derives a profit in consideration of the labour and time spent in procuring the goods. Moreover, there could be no end for an interest-based transaction, since there could always be interests of unpaid interests as long as the principle amount loaned is not fully returned. This could, in extreme cases, create un-repayable debt for generations.
The crimes of dealing in Riba are so serious that God has declared war against those who deal in Riba. Mohammad has cursed anyone who deals with Riba, the one who takes it, the one who pays it and the one who records it, as their sins are considered equal under the Quran.
Riba is considered to be a greater sin, for Muslims, than that of eating pork or drinking alcohol. Mohammad declared the practice of Riba worse than adultery: worse than "to a man committing adultery with his own mother".
Culminating with the verses in Suratul Baqarah: Those who benefit from interest shall be raised like those who have been driven to madness by the touch of the Devil; this is because they say: "Trade is like interest" while God has permitted trade and forbidden interest…God deprives interest of all blessings but blesses charity…O believers, fear God, and give up the interest that remains outstanding if you are believers. If you do not do so, then be sure of being at war with God and His messenger. But, if you repent, you can have your principal... (Quran 2:275-280)
*
[edit] Prohibition of riba
The Qur'an deals with riba in 12 verses, the word appearing eight times in total, three times in 2:275, and once in 2:276, 2:278, 3:130, 4:161 and 30:39.[10]
The Mekkan verse in Surah al-Rum was the first to be revealed on the topic: And whatever Riba you give so that it may increase in the wealth of the people, it does not increase with Allah (Quran 30:39)
The others are Medinan verses: And because of their charging Riba while they were prohibited from it (Quran 4:161) Those who believe do not eat up Riba doubled and redoubled (Quran 3:130)
Culminating with the verses in Surah Baqarah: Those who benefit from interest shall be raised like those who have been driven to madness by the touch of the Devil; this is because they say: "Trade is like interest" while God has permitted trade and forbidden interest…God deprives interest of all blessings but blesses charity…O believers, fear God, and give up the interest that remains outstanding if you are believers. If you do not do so, then be sure of being at war with God and His messenger. But, if you repent, you can have your principal... (Quran 2:275-280)
The jurists do not consider the first two verses as clear prohibitive verses on the matter, whereas the latter two have been understood to prohibit Muslims from riba.
Tabari quotes a number of Tabi’een who state the verse from Surah al-Rum refers to a gift whereas al-Jawzi quotes Hasan al-Basri as stating it refers to riba.[11] Either way, there is insufficient indication from this verse that riba is prohibited, if it does indeed refer to riba.
The second verse refers to the Jews and their taking of riba, which leaves it unclear if such a prohibition applies to the Muslims.
The next verse is seen by many as prohibiting riba, including Ibn Hajar al-Asqalani.[12] However it appears that recourse to some traditions relating to Amr ibn Aqyash are required for the prohibition as the verse itself could be interpreted as expressing a preference against interest.
The verses from Surah Baqarah are seen as categorically forbidding riba. The backdrop to these verses was the dispute between Banu Thaqif and Banu Amr ibn al-Mughirah over riba due on loans between them. As such, the jurists historically agreed on the prohibition of riba from these verses and termed it riba al-nasia, distinguishing it from the interest in exchanging like goods in different quantities, mentioned in a number of narrations, riba al-fadl.



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