Riba: its types and effects

The prohibition of riba

Riba is forbidden by the Quran ("Allah has permitted trade and forbidden riba", sura al-Baqara 275), by the Sunnah (it is one of the seven destructive sins, al-Bukhari 2767; the Prophet cursed the one who consumes riba, the one who pays it, its scribe and its two witnesses: "they are all equal", Muslim 1598), and by consensus: Ibn Qudamah reports the scholars' agreement on both types, and al-Zarkashi specifies consensus on the riba of delay and the majority's agreement on the riba of surplus.

The two types of riba

• The riba of delay (nasi'a): that of the Jahiliyya. At the due date the creditor says to the debtor: "you pay, or you increase"; every extension raises the debt. Imam Malik also cites accelerating payment against a discount: it is riba without disagreement. Ibn al-Qayyim calls it the manifest riba: forbidden for the immense harm it causes, the needy person's wealth being swallowed up with no benefit to him.
• The riba of surplus (fadl): exchanging two quantities of the same riba good with a difference, or with deferred settlement. Forbidden, says Ibn al-Qayyim, as a path toward the manifest riba: its prohibition is a preventive means.

The goods concerned

Gold for gold, silver for silver, wheat for wheat, barley for barley, dates for dates, salt for salt: equal for equal, hand to hand. Whoever gives more or asks more has engaged in riba; taker and giver are equal in it.al-Bukhari 2177, Muslim 1584

The six goods named by the hadith are the base: Hanafis, Malikis, Shafi'is and Hanbalis extend the rule to everything measured or weighed by the legal standard, and for the Shafi'is to all food. What has no legal measure or weight, and is not food, does not enter the riba of surplus according to these schools.

The wisdom of the prohibition

al-Razi lists the reasons: riba takes a person's wealth without compensation, the sanctity of one's wealth joining the sanctity of one's blood; it discourages work and crafts, since the owner of money can grow it without effort; it cuts off the mutual kindness of lending; it enables the rich to take extra wealth from the weak.

The effect of riba on the contract

The majority of jurists annul and reverse any contract stained with riba, even if concluded in ignorance: the Prophet said to two Companions who had exchanged three vessels of gold for four: "you have engaged in riba, return" (reported by Malik in the Muwatta). Bilal had exchanged dates of unequal quality: "this is riba, do not do it; sell, then buy" (al-Bukhari 2188, Muslim 1594). Abu Hanifa alone holds that the riba falls and the sale stands.

Practical note

The frontier is stable across eras: an increase stipulated on money is riba, whatever its name; profit on real goods sold is trade. The Quranic verse settles the classification before any product label.