Riba

© 2014 M.U.K presents. All rights reserved.

Chapter #9:Riba© 2014 M.U.K presents. All rights reserved.

MAJOR KINDS OF RIBA

Riba al-byooh

البيوع ربا

(Riba in Exchange transactions)

Riba al-Dyoon

الديون ربا

(Riba in Debt transactions)

Two kinds Other names

الفضل ربا القران ربا

النساء ربا الجاهلية ربا

Definition of Riba al-Dyoon or Riba in loan transactions:

Any thing chargeable in addition to the principle amount as contractual obligation in loan transactions is called Riba al-Dyoon .

Three main points of definition:

Riba is an increase or excess above the principle amount.This increase is payable as a contractual obligation or as a

condition in contract.This increase is against a specified period of time.

RIBA AL-DYOON(RIBA IN DEBT TRANSACTIONS)


Example:A gives loan to B 100Rs. for three month on the

condition that B will return 105Rs..it is not allowed because this 5 rupees is excess to principal as condition

Note: If 5 rupees increase was not a condition in contract but B voluntarily gives 5 rupees in excess at the time of payment, it will not be considered as riba and it is allowed and it is admirable.


RIBA AL-DYOON(RIBA IN DEBT TRANSACTIONS)

THREE PRACTIACAL FORM OF RIBA AL-QURAN


There are three practiacal forms of riba al-Quran which were used in Arab:

Principal amount + amount of interest payable after a fixed period of time

Riba or interest is payable at monthly basis and principal amount is paid at fixed time.

They sell commodity on credit on future date and if amount is not paid on due date, seller increase the amount payable and give more time.

HADITH RELATED TO RIBA AL-QURAN


The prophet(S.A.W.S)is reported to have said in in his farewell address:

1. Be aware all riba out standing from the riba prevalent during the pre Islamic era is void. You are entitled to your principal money. Neither shall you oppress nor shall you be oppressed.

2. Be aware all riba of pre-Islamic era is annulled and the first claim of riba I cancel is that of my uncle.

HADITH RELATED TO RIBA AL-QURAN


The prophet(S.A.W.S)is reported to have said in in his farewell address:

3. From Jabir, who said: "the messenger of Allah(P.B.U.H)cursed the one who charges riba, he who gives it the one who records it and the two witness saying that they are all equal.

RIBA AL-BYOOH (RIBA IN EXCHANGE TRANSACTIONS)


the messenger of Allah(P.B.U.H) said: Gold for gold, silver for silver, wheat for wheat, barley for barley, dates for dates, salt for salt like for like in equal weights from hand to hand. If those species differ then sell as you like as long as it is from hand to hand.

TWO SUB KINDS OF RIBA ALBYOOH

Riba al-fadl الفضل riba by way of) رباexcess):

It is in homogeneous commodities:

Riba al-nasa النساء :(riba of dely) ربا

It is in both homogeneous and Heterogeneous commodities

KINDS OF USURIOUS TRANSACTION ACCORDING TO HADITH

homogeneous commodities:A barter transaction in which two commodities (which

are measurable or weighable) of same kind are exchanged then, transaction is allowed only when it is

Rule:1. Equality of measure 2. Transaction must Hand to hand/at spot transactions

In other words: in homogeneous commodities

3. excess is not allowed4. delay or future delivery is not allowed


1. If you exchange 1kg wheat of high quality with 2 kg wheat of low quality, this excess is not allowed.

2. If you A sell 1kg low quality wheat to B with 1 kg high quality wheat, but condition is that A deliver today and B will deliver after 2 month .although quantity is same but this delay is not allowed.

3. If sell exchange 1000 rupees new note against 1010 rupees old notes, this excess is not allowed


Heterogeneous commodities:A barter transaction in which two different

commodities are exchanged then, transaction is allowed with same quantity or excess both are allowed but

Rule:Transaction must Hand to hand (mean excess is

allowed but delay or future delivery is not allowed)


Example:1. A transaction of money for money of different

domination e.g.1 dollar with 105 rupees, this is allowed when exchange is hand to hand.

• If one person gives dollar today and other person will give 105 Rs. after 2 week, this delay is not allowed and considered as riba.

1. If you A sell 1kg wheat to B with 2 kg dates, this excess is allowed at spot,

• but if A deliver today and B will deliver after 2 month then this delay is not allowed and considered as riba.

UNDERLYING CAUSE OF PROHIBITION OF RIBA AL-FADAL

1. More knowledgeable person exploit will exploit less knowledgeable person.

2. It opens a way of monopoly.3. To increase the use of money4. Exchange rate will give benefit to one and loss

to another.it is a kind of gharar.

OTHER KINDS OF RIBA

1. Bay al-inah( العينة (بيع2. Bay al-Wafa( الوفاء (بيع3. Hatt wa ta-jjal( وتعجل (حط4. Tawaraq(تورق)

BAY AL-INAH

One person sells some object at credit for a price and then re-purchase it at less price for cash

Two situations:1stA sells commodity for 100

of six month at credit purchaseB

Then purchase at 80Rs. At cash

Receive 80 Rs.

In actual A gives 80 Rs. loan,creditor

debtor of 80 Rs.

A will get 100 after six month

20 Rs. Is interest

BAY AL-INAH

2nd situation:A sells commodity at 80 Rs,for cash

B purchase and gives 80 Rs .

Then purchase at Rs.100 for six month credit

In actual A receive Rs. 80 loanA is debtor

B gives Rs.80 loan creditor

A give 100 after six month B will get 100

20 Rs. Is interest

1. Sale is used as cover for riba. 2. Two sales in one.

BAY AL-WAFA

One person who needs money sells a property at cash and promise to purchase it in future at same price, buyer gets benefits from that property that period

Not allowed because in real it is case of pledge and benefit from pledge property is not allowed.

HATT WA TA-JJAL

Discount against time is not allowedExample: A sell a commodity at one year credit and says if you pay with in 6 month you will get 5% discount. Three opinions about Hatt wa ta-jjal:1. Allowed(hadeeth)2. not allowed(because money against

time)3. Allowed if it is not condition in contractExample: A sell a commodity at one year credit and says if you pay with in 6 month you will get 5% discount. It is not allowed.

HATT WA TA-JJAL

• Example: A sell a commodity at one year credit for Rs.1000 and says if you pay with in 6 month you will get 5% discount. It is not allowed.

• if it was not a condition and creditor give some discount at the earlier time of payment.it is allowed.

INDEXATION OF LOAN

• If Debtor gives some extra amount to creditor to compensate the effects of inflation, and normally CPI(consumer index number) is used to measure inflation.

• It is not allowed:1. CPI(consumer index number) is not good

measure to measure inflation2. False argument for taking interest3. Law of indemnity says: debtor is not responsible

for creating inflation, why how we make him responsible to compensate its effects.

Riba

Economy & Finance