Why Interest Is Prohibited Riba? an Economic Perspective

WHY INTEREST IS PROHIBITED RIBA?

AN ECONOMIC PERSPECTIVE

Ismail Nizam

SUMMARY

[The article begins with a brief introduction which states the shari’ah standpoint on the issue of Interest-Riba equivalence as a dispute settled in the history of Islamic scholarship. It also provides a snapshot of the Ummah’s awareness on the subject of Riba and its prohibition in primary sources of Islamic Shari’ah. This Ummatic level awaress is followed by a short, yet true description of our society’s attitude towards Islam, interest and Riba. The reasons for Riba consumption in our society are heighlighted. The whole article is focused on a single form of interest, i.e, interest on loans. Other forms of interest are deliberately excluded from the discussion. Individual concepts within the title are discussed and clarified before the elaboration on the subject as a whole. The terms interest and Riba are explained as concepts in both theory and practice with examples. The details of Riba prohibition are explained with authentic Shari’ah sources. It distinguishes the kinds of loan that is encouraged from that which is forbidden. Finally, the subject as a whole is discussed by providing economic evidences, and facts. The question in the titled is answered with economic arguments, logic, and facts. The key points are summarised in the conclusion, and the needed future effort on this subject are described briefly].

INTRODUCTION

The issue of Interest-Riba equivalence is now undisputed among Islamic scholars. It is a dispute that was settled a long time ago in our Islamic scholastic history. It is arrogance to go around confusing the issue. The Ummah would probably have heard the statement “ interest is Riba ”. Majority of Ummah’s populace is also likely to have come across with Qur’anic verses