Linguistic Definition of the Arabic word "ribaa":
"an increase"
Islamic Definition:
Something extra taken without anything in its exchange (according to Islamic legal standards) as a condition for one of the parties in a transaction of property for property.
Its judgment:
Prohibited, and one of the large sins.
The warning against ribaa
Allah threatened those who take ribaa with war and those who deny its prohibition with eternal torment. The Prophet (may Allah raise his rank) cursed those who give it, receive it, record it, or bear witness to it.
The wisdom in its prohibition:
- It leads to taking the property of Muslims, which has sanctity, without something in exchange.
- Riba lets a person make money without producing anything, which reduces efforts in the production of goods and services.
- Prohibiting ribaa makes it easy for people to give loans out of charity.
- Ribaa often traps the debtor in a vicious circle of higher loans and interest.
… and Allah knows best.
Ribaa can be said to be of at least 4 kinds:
- Obvious ribaa:
- Taking a loan with interest in exchange for a delayed return of the loan. This is the ribaa of the jaahiliyyah mentioned in the Quran. The interest taken is for the time of the loan, and time cannot be sold in Islam; it is an extra without anything in its exchange.
- A similar type of ribaa is taking a loan on the condition of any benefit to the lender.
- Ribaa of something extra in sales:
- Selling things that are sold by weight or volume and of the same kind with a difference in weight or volume or a delay in delivery (or specification). E.g. salt for salt, or cow's milk for cow's milk.
- Selling gold for gold, silver for silver, or currency for the same kind of currency with a difference in amount or without physically exchanging the goods before leaving the place of transaction. It has been related from Umar "if the other party jumps before exchanging, jump with him."
- Note that things sold by piece or area are not of the type of property that cannot be sold with uneven amounts. It is allowed to sell 2 cloths for 1 cloth or 2 eggs for 1 egg.
- Ribaa of credit in sales:
- Selling things that are of the same kind with a delay in delivery (or specification). E.g. one may sell a cow for 2 cows; a cloth for 2 cloths; an egg for 2 eggs, but without delaying delivery or specification.
- Selling something that is sold by weight for something of another kind that is also sold by weight with a delay in delivery (or specification). E.g. If selling sugar for salt, one may have a difference in weight between the two, but no delay in delivery or specification.
- Selling something that is sold by volume for something of another kind that is also sold by volume with a delay in delivery (or specification). E.g. cow's milk for goat's milk.
- Ribaa of corrupt or invalid sales-transactions: This is a large chapter of Islamic jurisprudence that needs separate treatment under buying and selling.