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CLASSIFICATION OF RIBA

(a) Riba-un-Nasiyah or Riba-al-

Jahiliya

(b) Riba-al-Fadl or Riba-al-Bai


CLASSIFICATION OF RIBA

Riba-un-Nasiyah or Riba-al-Jahiliya

“that kind of loan where specified

repayment period and an amount

in excess of capital is

predetermined”. ( Imam Abu Bakr

Jassas Razi)
CLASSIFICATION OF RIBA

Riba-un-Nasiyah or Riba-al-Jahiliya

Real and primary form of riba.Premium


paid to the lender in return for his
waiting/giving or taking of every excess
amount in exchange of a loan at an agreed
rate irrespective of whether it is low or
high.
CLASSIFICATION OF RIBA

Riba-al-Fadl
 Excess taken in exchange of

specific commodities which

are homogeneous.

 Legal definition differs in

every fiqh.
CLASSIFICATION OF RIBA

Hadith prohibiting Riba-al-Fadl


 ‘sell gold in exchange of
equivalent gold
 sell silver in exchange of
equivalent silver
 sell dates in exchange of
equivalent dates
 sell wheat in exchange of
CLASSIFICATION OF RIBA

Hadith prohibiting Riba-al-Fadl


 Sell barley in exchange of equivalent
barley but if a person transacts in excess,
it will be riba.
 However sell gold for silver anyway you
please on the condition it is hand-to-
hand(spot sales) and sell barley for date
anyway you please on the condition it is
hand-to-hand(spot sales)
CLASSIFICATION OF RIBA

Imam Abu Hanifa on Riba-al-Fadl


 Commodities
must have two
common characteristics
 Weight

 Volume

 Includes all commodities having

weight or volume and are being

exchanged
CLASSIFICATION OF RIBA

Imam Shafi on Riba-al-Fadl


 Commodities must have two common
characteristics
 be a medium of exchange

 be edible

 Includes all commodities that are

edible or can be used as a medium of

exchange(currency).
CLASSIFICATION OF RIBA

Imam Maalik on Riba-al-Fadl


 commodities must have two
common characteristics
 can be preserved

 be edible

 includes all commodities that

are edible and can be preserved


CLASSIFICATION OF RIBA

Imam Ahmad Bin Hanbal on Riba-


al-Fadl
 First
citation conforms to the
opinion of Imam Abu Hanifa
 Second citation conforms to the
opinion of Imam Shafi
 Third citation includes three
characteristics at the same time
i.e. edible, weight and volume
CLASSIFICATION OF RIBA

Present day Islamic scholars on Riba-al-


Fadl
 If two characteristics i.e. weight and use as
medium of exchange is present then the
following transactions are not allowed
 a deferred sale of goods having weight

and homogeneous nature


 a sale of unequal goods having weight

and homogeneous nature


THE LAWS OF RIBA AL FADL

First law

 Exchange of any of the six

commodities with itself but

differing in quality, is allowed

only under certain conditions


THE LAWS OF RIBA AL FADL
First Law
 CONDITIONS OF EXCHANGE
– Any difference in value/quality should
be ignored
– The commodities should be exchanged
in equal amounts (equal weight and
volume).
– No direct exchange of commodities of
the same kind
– A person should sell his commodity
against cash at the market value and
buy someone else’s commodity in
exchange of cash proceeds at the
THE LAWS OF RIBA AL FADL

Second law
 Exchange of a product with its

raw material is allowed under

certain conditions
THE LAWS OF RIBA AL FADL

Second Law
 CONDITIONS OF EXCHANGE
 If the characteristics of the product has been
totally changed by the industry, then different
amounts can be exchanged.
 If little difference has been made

 either the exchange should be in equal


weights
 or one of the commodities should be sold in

the market and the cash proceeds used to


buy the then one.
THE LAWS OF RIBA AL FADL

Third Law
 Exchange of any of the six commodities
with one another is allowed in unequal
amounts but the payment should not
be deferred

 Provided that the general conditions

of a sale contract are fulfilled


TYPES OF RIBA
 Tijarti Sood(Commercial
interest)
 interest
paid on loan taken for
productive and profitable
purpose

 Sarfi Sood (Usury)


 interest paid on loan taken for
personal need and expenses
Riba: Present day arguments

Regarding validity of Commercial Interest there are two


schools of thought on this issue.

A detailed analysis of their arguments is discussed as


follows:
First School

Argument 1: “Riba as practiced during the


days of the Prophet (SAW) was only Usury”.

 Islam when prohibiting something does not


only prohibit the prevalent form, but all
forms that might erupt in future. The
changed state does not change the ruling.
E.g. Liquor, Pork, Corruption/Immorality:
Today’s modern and sophisticated forms
does not change their rulings.
 The same applies to interest and gambling.
First School

2) Argument 2: “Commercial interest did not


exist in the days of Prophet (SAW).”

 This claim is wrong as both forms of interest


existed in Islamic and pre Islamic history.
Some examples:
 The tribe of Umr bin Aamir used to take
interest from the tribe of Mughairah.
 The tribe of Thaqeef advanced cash as well
as commodities on interest to the natives of
Taif, the tribe of Mughairah and the business
community of Makkah.
 H.Abbas and H. Khalid bin Waleed (RA)
formed a company with joint capital whose
prime business was cash advancement on
Second School :

3) Argument 1: The present day banking since


no-one is exploited or faces injustice,
therefore it cannot be called Riba.”

 Islam has not only prohibited that one party


faces a loss and the other gets profit but
also prohibits one party getting confirmed
profit and the other party unconfirmed profit
from the same investment.
Second School:

4) Argument 2: There is a Qura’nic verse “O


believers do not devour one another’s
possession wrongfully; rather than that, let
there be trading by mutual consent” (Al
Nisa verse 29). “Wrongful devouring” only
arise if the consent of one of the parties is
absent but in commercial interest the
mutual consent is present of both parties,
so its not Riba.

 Mutual consent is not the criteria to render


anything halal which is haram.
TYPES OF RIBA

 Riba al Nasiah is also classified as:


 Sood-e-Mufrad( Simple Interest)
 interest calculated only on the initial

investment

 Sood-e-Murakkab(Compound Interest)
 reinvestment of each interest payment

on money invested to earn more interest


 During the pre-Islamic era, when a
borrower used to fail to pay back the
principal and interest charged on him,
then the lender used to extend the loan on
the condition that the interest will also
become part of the loan (essentially
Compound Interest). The following verses
of Quran were revealed in order to stop
the people from such practices:

 “O believers, take not doubled and


redoubled interest, and fear God so that
you may prosper.” (Surah Al ‘Imran,
The following hadith also proves that both
simple and compound interest are
forbidden:

 “Listen! all Riba liable to you in the pre-


Islamic days have been completely
eliminated. You have to pay back the
principal amount only. Neither hurt
someone nor get hurt by someone. And
the first riba to be completely eliminated
is Abbas bin Mutalib’s.