Riba

Definition:
The literal meaning of Riba is increase. Legally, Hanbalis defined it as an increase in specific item. But, the Hanafis define it as “an increase in one good for another in an exchange, without a compensation for the increase”. Hanafis’ definition of Riba, includes Riba Al-Nasiah and defective sales.

Prohibition of Riba
From the Holy Quran:
•“That which you give as Riba to increase the people’s wealth increases not with God; but that which you give in charity, seeking the goodwill of God, multiplies manifold.” (Surah al-Rum, 39)
•“And for their taking Riba although it was forbidden for them, and their wrongful appropriation of other people’s property. We have prepared for those among them who reject faith a grievous punishment.” (Surah al-Nisa’, 161)
•“O believers, take not doubled and redoubled Riba, and fear Allah so that you may prosper. Fear the fire which has been prepared for those who reject faith, and obey Allah and the Prophet so that you may get mercy.” (Surah Al-e-Imran, 130)
From the Holy prophet (pbuh) tradition:
•From Anas ibn Malik (Gbpwh): “The Prophet said: ‘When one of you grants a loan and the borrower offers him a dish, he should not accept it; and if the borrower offers a ride on an animal, he should not ride, unless the two of them have been previously accustomed to exchanging such favours mutually’.”
•Zaid B. Aslam reported that interest in pagan times was of this nature: “When a person owed money to another man for a certain period and the period expired, the creditor would ask: ‘you pay me the amount or pay the extra’. If he paid the amount, it was well and good; otherwise the creditor increased the loan amount and extended the period for payment again.”

Types of Riba
Riba is divided into two main kinds namely:
i.Riba duyun: Riba in lending and borrowing; and
ii.Riba buyu’u: Riba in trading transaction

Riba Duyun (Riba in lending and borrowing) are:
Riba Duyun is the increase in the amount of money loaned. This increase is either:
•Imposed by the lender on the borrower in the loan contract.
•Promised by the borrower to the lender in the loan contract.
•Charged because of borrower default in payment.

Riba Duyun has two types:
iii.Riba Qardh: Riba that is imposed from the beginning.
iv.Riba Jahiliyah: Riba that is only imposed after default.

Riba Buyu’u (Trading transactions)
This kind of Riba may occur out of an exchange between two Ribawi materials in the same kind where the necessary rules are not observed.

Riba Fadhl It is the trading of one set of goods that are eligible for Riba for another set of the same goods, with an increase of one compensation over the other

Riba Nasiah or Riba Yad the addition of the premium which is paid to the lender in return for his waiting as a condition for the loan and is technically the same as interest.
Thus, trading goods of some genus for goods of the same or another genus with an increase in the measure (by volume or weight) in compensation for deferment fall under this de.nition. Examples include trading one volume of wheat for one and a half volumes to be paid in two months, trading one volume of wheat for two volumes of barley to be paid in three months.