Does the Word 'Riba' Only Refer to Excessive Interest?

This is part 2 of 5 of our series highlighting key arguments and refutations from Mufti Taqi Usmani and others in the "Historic Judgment on Interest" delivered at the Supreme Court of Pakistan in 1999.

Argument

“The word 'riba' refers only to usurious loans against which creditors charged excessive rates of interest entailing exploitation. Modern banking interest cannot be termed 'riba' if interest rates are not excessive or exploitative.”

Refutation

This argument seeks support in the verse:

“O ye who believe! Devour not usury, doubled and multiplied; but fear Allah; that ye may (really) prosper.” [Al-Imran 3:130]

It inaccurately purports that riba is prohibited only when the rate is excessive and not otherwise.

The argument neglects the fact that the verses of the Quran on the subject are to be studied in juxtaposition with one another. The Quran deals with riba in four different chapters and no verse contradicts another on the same subject. From the verses mentioned earlier in the series:

“O those who believe fear Allah and give up what remains of riba, if you are believers.” [Al-Baqarah 2:278]

Based on this verse, any and every amount above the principal is to be given up.

Further based on the following verse:

“And if you repent (from the practice of riba) then you are entitled to get back your principal.”

Repentance from practicing riba is only possible if all the extra amount is given up where the lender is entitled only to the principal amount lent.

The study of the verses of Al-Imran and Al-Baqarah together show that the words “doubled and multiplied” are not restrictive in their meaning or considered as the only conditions for the prohibition of riba but rather these words are used to refer to the worst form of riba widespread at the time.

The Quran interpreted in the light of the Prophetic ahadith sheds further light.

Ibn Abi Hatim reports from the Prophet (Alah bless him and give him peace):

"Listen, every amount of interest that was due in Jahiliyya is now declared void for you in its entirety. You are entitled only to your principal whereby neither you wrong nor be wronged. And the first liability of interest declared to be void is the interest of Abbas ibn Abd-ul-Muttalib which is hereby declared void in its entirety."

The Prophet (Allah bless him and give him peace) declares the entire amount exceeding the principal invalid — clarifying in no uncertain terms that creditors are entitled to no more than the principal.

Sayyidina Abu Hurairah reports from the Prophet (Allah bless him and give him peace):

"If the creditor received a goat as mortgage from the debtor, the creditor may use its milk to the extent he has spent in providing fodder to the goat. However, if the milk is more than the price of the fodder, the excess is riba."

Sayyidina Anas Ibn Maalik reports from the Prophet (Allah bless him and give him peace):

"If one of you has advanced a loan and the debtors offer the creditor a bowl (of food), he should not accept it, or if the debtor offers him a ride of his animal (cattle) the debtor must not take the ride unless this type of gift has been a usual practice between them before advancing the loan."

Sayyidina Ali (Allah be pleased with him) reports from the Prophet (Allah bless him and give him peace):

"Every loan which derives a benefit is a kind of riba."

The directives of the Quran and Sunnah address this second erroneous contention by making explicitly clear that any amount over and above the principal — be it little or much - is riba and clearly prohibited.

In the upcoming part in this series we examine the next Argument:

“The third argument differentiates between consumption loans and commercial loans. It contends that "riba" used in the Quran is restricted to the increased amount charged on consumption loans extended to the poor for their day to day needs. As far as modern commercial loans go, they were not practiced in the days of the Prophet (Allah bless him and give him peace), nor has the Quran addressed them when prohibiting 'riba'. Even the basic philosophy underlying the prohibition of 'riba' cannot be applied to these commercial and productive loans where the debtors are not poor people. In most cases they are wealthy and use loans to generate profits. Any increase charged from them cannot be termed injustice which was the basic cause of the prohibition of 'riba'.”

Previous part of this series can be accessed here:

Part 1 of 5: Is the Definition of Riba Ambiguous?

Source: The Historic Judgment on Interest, Mufti Taqi Usmani, et al., Supreme Court of Pakistan

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