CHAPTER 2

THE CONCEPTS OF INTEREST RIBAUSURY

2.1 INTRODUCTION

2.2 DEFINITION OF RIBA

PRESENTED BY :-HAFIZAH BINTI BAHARUDIN

( 213)

INTRODUCTION

• Riba or interest is forbidden in Islamic economic jurisprudence fiqh and considered as a major sin "Allah has permitted trading and forbidden Riba." (2:275)

• Riba is a prominent source of unjustified advantage,

because Shariah does not consider money as a commodity

• The existence of interest in today’s global economic system is an issue of great importance to Muslims. As the world continues down the path of globalizations.

• As muslims, our main concern when it comes to financial transactions is to avoid Riba in any of its forms, despite the fact that the basic foundation of the world economics and finance today is that of riba and dealing in usury.

• The Prophet has foretold us of a time when the spread of riba would be so overwhelming that it would be extremely difficult for the muslim to avoid it. This situation calls for muslims to be extra cautious before deciding on what money payment of financial methods to use in any personal or business transaction.

• To make sure that we are safe from Riba, we have to learn

which transactions lead to it.

THE DEFINITION OF RIBA

• The literal meaning of Al-Riba as it is used in the arabic language means to excess or increase.

• In this sense riba has the same meaning as interest in accordance with the consensus of all jurists without any exception.

• In the Islamic terminology interest means effortless profit or that profit which comes free from compensation or that extra earning obtained that is free of exchange

Riba has been described as a loan with the condition that the borrower will return to the lender more than and better than the quantity borrowed.

So the Holy Qur’an and the Hadith do not make any such difference between usury and interest. Interest and usury both are taken as synonymous for the Arabic word riba.

2.3 THE PROHIBITION OF RIBA

PRESENTED BY :-NOOR A’DILAH BINTI ZABIDI

(213)

PROHIBITION OF RIBA IN THE HOLY QURAN

In several verses of the Holy Qur’an, Allah s.w.t has mentioned the consequences of riba.

The Qur’an did not declare the prohibition of riba in the early stage of revelation, rather we find that the complete prohibition of interest came sequentially.

In the Qur’an, the term riba signifies an unlawful and forced addition to the payback value of money or goods lent from one person to another.

In the Qur’an Allah(swt) says:

 “That which ye lay out for increase through the property of (other) people, will have no increase with Allah: But that which ye lay out for charity, seeking the countenance of Allah (will increase): it is these who will get a recompense multiplied”. (30:39)

“That they took riba (usury), through they were forbidden and that they devoured men’s substance wrongfully – We have prepared for those among men who reject faith a grievous punishment.” (4:161)

PROHIBITION OF RIBA IN THE HADITH

Jabir reported: The Prophet (saw), cursed the receiver and the payer of interest, the one who records it (the contract) and the two witnesses to the transaction and said, “they are all alike (in guilt).”

Abu Hurayrah (ra) narrated that the Prophet (saw) said: “”God would not allow four persons to enter paradise or to taste its blessings: he who drinks wine, he who takes riba, he who usurps an orphan’s property without right and he who is undutiful to his parents.”

2.4 TYPES AND CLASSIFICATION OF RIBA

PRENSENTED BY :-FATIN AMALINA BINTI MOHD. SHAH

( 213949 )

• Riba are divided into two types:-

TYPES OF RIBA

Riba Al-nasiah

Riba Al-fadl

THE DIFFERENCES OF RIBA AL-NASIAH AND RIBA AL-FADL

RIBA AL-NASIAH

Refer to time period

Have additional of the premiumKnown as ‘riba hutang’Example: conventional bank loan

RIBA AL-FADL

The exchange of commodities of the same kind.Exchange against themselves with unequal proportion.Known as ‘riba jualan’Example: gold for gold, silver for silver, wheat for wheat.

Imam Abu Hanifa on Riba Al-Fadl

• Commodities must have two common characteristics:-– Volume– Weight

• Includes all commodities having weight or volume and are being exchange.

IMAM SHAFI ON RIBA AL-FADL

• Commodities must have two common characteristics:-– Be a medium of exchage– Be edible

• Includes all the commodities that are edible or can be used as a medium of exchange (currency)

IMAM MALIK 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

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 Syafi

• Third citation includes the three characteristics at the same time; edible, weight and volume

2.5 THE DIFFERENCES BETWEEN RIBA AND PROFIT

CONCLUSION

PRESENTED BY :-NORAIN BINTI ABDULLAH

( 213986 )

RIBA The Arabic word riba linguistically means “an addition to, or

an increase of, a thing over and above its original size or amount.” In the Qur’an, the term riba signifies an unlawful and forced addition to the payback value of money or goods lent from one person to another.

PROFITA financial benefit that is realized when the amount of revenue gained from a business activity exceeds the expenses, costs and taxes needed to sustain the activity. Any profit that is gained goes to the business's owners, who may or may not decide to spend it on the business.

RIBA AND PROFIT IN ISLAMIC PERSPECTIVE

• Islamic banking has the same purpose as conventional banking except that it operates in accordance with the rules of Shariah, known as Fiqh al-Muamalat (Islamic rules on transactions). The basic principle of Islamic banking is the sharing of profit and loss and the prohibition of riba (usury). Common terms used in Islamic banking include profit sharing (Mudharabah), safekeeping (Wadiah), joint venture (Musharakah), cost plus (Murabahah), and leasing (Ijarah).

THE DIFFERENCES BETWEEN RIBA AND PROFIT

RIBAHaram

Derive from debt (al-nasiah) and trading (al-fadl)The debtors cannot settle the transaction on equal terms with the creditor because of his weaker position.

There is no limit to the interest the creditor may charge on his money.

The transaction in trade comes to an end as soon as the items and its price change hands. After this the buyer is not required to return anything to the seller.

Halal

Derive from trading

The buyer purchases the items he needs and the seller gets profit for the time, labour and brains he employs in providing that items to the buyers.The profit which the debtor make on money of the creditors has after all its own limits.The transaction in trade comes to an end as soon as the items and its price change hands. After this the buyer is not required to return anything to the seller.

PROFIT

CONTINUE…..

RIBARiba is the premium paid by the borrower to the lender along with principal amount as a condition for the loanRiba is prefixed, and hence, is no uncertainty on the part of either the givers or the takers of the loans

Riba cannot be –ve, it can at best be very low or 0.

PROFITProfit is the difference between the value of production and the cost of production

Profit is post-determined, and hence, its amount is not known until the activity is done.

Profit can be +ve, 0 or even –ve.

CONCLUSION

• RIBA IS PROHIBITED IN SYARIAH OF ISLAM• PROFIT IS THE HALAL WAY TO MAKE INVESTED• Riba was prohibited just to prevent the

creation of "extra liability/demand“.• Riba (interest, usury) is a mechanism and

dangerous weapon.• Nature is the Limit in Islam; any thing not

natural is prohibited, stopped, and declared illegal.

PROFIT

THANK YOU