2. Classification of Riba

7/27/2019 2. Classification of Riba

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Classification of Riba


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

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

CLASSIFICATION OF RIBA


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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)



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Riba-un-Nasiyah or Riba-al-Jahiliya

Real and primary form of riba.Premium paid to the lenderin 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.



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Riba-al-Fadl

Excess taken in exchange of specific

commodities which are homogeneous.

Legal definition differs in every fiqh.



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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 equivalent wheat

sell salt in exchange of equivalent salt

sell barley in exchange of equivalent barley



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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)(Kanz ul Amaal)



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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



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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).



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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



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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



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Present day Islamic scholars on Riba-al-Fadl

If two characteristics i.e. weight and use as medium

of exchange is present then the followingtransactions are not allowed

a deferred sale of goods having weight and

homogeneous nature

a sale of unequal goods having weight and

homogeneous nature



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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


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First Law

CONDITIONS OF EXCHANGE

Any difference in value/quality should be ignored

The commodities should be exchanged in equalamounts (equal weight and volume).

No direct exchange of commodities of the same kind

A person should sell his commodity against cash atthe market value and buy someone elses commodity

in exchange of cash proceeds at the market value.



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Second law

Exchange of a product with its raw material

is allowed under certain conditions



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Second Law

CONDITIONS OF EXCHANGE

If the characteristics of the product has been

totally changed by the industry, then differentamounts 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.



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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



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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

TYPES OF RIBA


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Regarding validity of Commercial Interest there aretwo schools of thought on this issue.

A detailed analysis of their arguments is discussedas follows:

RIBA: Present Day Arguments


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Argument 1: Riba as practiced during the days of theProphet (SAW) was only Usury.

Islam when prohibiting something does not only prohibitthe prevalent form, but all forms that might erupt in future.The changed state does not change the ruling.E.g. Liquor, Pork, Corruption/Immorality: Todays modernand sophisticated forms does not change their rulings.

The same applies to interest and gambling.

First School


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2) Argument 2: Commercial interest did not exist in the daysof Prophet (SAW).

This claim is wrong as both forms of interest existed inIslamic and pre Islamic history. Some examples:

The tribe of Umr bin Aamir used to take interest from the tribe ofMughairah. (Dar ul Mansoor b y Ibn J areeh)

The tribe of Thaqeef advanced cash as well as commodities oninterest to the natives of Taif, the tribe of Mughairah and thebusiness community of Makkah. (Encyclo pedia of Is lam)

H.Abbas and H. Khalid bin Waleed (RA) formed a company withjoint capital whose prime business was cash advancement oninterest. (Jamai ul Bayan)

Hazrat Usman (RA) (pre-Islamic times) lent money on interest.(Tareekh e Tabree)

First School


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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 lossand the other gets profit but also prohibits one party

getting confirmed profit and the other party unconfirmed

profit from the same investment.

Second School


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4) Argument 2: There is a Quranic verse O believers do

not devour one anothers possession wrongfully; rather

than that, let there be trading by mutual consent (Al Nisa

vers e 29).Wrongful devouring only arise if the consent

of one of the parties is absent but in commercial interestthe mutual consent is present of both parties, so its not

Riba.

Mutual consent is not the criteria to render anything halal

which is haram.

Second School


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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

TYPES OF RIBA


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During the pre-Islamic era, when a borrower used to failto pay back the principal and interest charged on him,then the lender used to extend the loan on the conditionthat 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 fromsuch practices:

O believers, take not doubled and redoubled interest,and fear God so that you may prosper. (Surah Al Imran,

verses 130-1)

Revelation


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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 theprincipal amount only. Neither hurt someone nor get hurt

by someone. And the first riba to be completely

eliminated is Abbas bin Mutalibs. (Ibn e Kathir)

Revelation

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2. Classification of Riba

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