THE DEFINITION AND TYPES OF "RIBA" (INTEREST) IN THE LIGHT OF QURAN, HADITH, AND FOUR SCHOOLS OF ISLAMIC JURISPRUDENCE

Abstract

The divine scripture (i.e. the Holy Quran) and the noble sayings of Prophet Muhammad (Peace be upon him) primarily identify the legal status (i.e. clear prohibition) of interest (Riba), and economic   destruction caused by it at aggregate level, whereas a six-commodities barter trade narration is an exception in Sunnah. These primary sources are silent about the definition of Riba since it was clear at that time. However, the dominance of conventional interest-based global financial and economic system led to disputes among liberal, conservative, and mainstream scholars in the definition of Riba. Moreover, the injunctions from four classical schools of thoughts in Islamic jurisprudence have dissimilarities in defining Riba. While on the other hand, attempts to remove Riba from Pakistan have been demolished by sending the case back to Federal Shari’ah Court in 2002 where the debates are –with long time delays- carried out from scratch i.e., how to define Riba?

Therefore, this paper attempts to address these issues by trying to come up with a comprehensive definition of Riba, after examining the views of prominent scholars of four schools of thoughts and the Sunnah of Prophet Muhammad (peace be upon him). We considered narrations and the views of scholars and concluded that it is comprehensive to define Riba or usury as, “an excess (in terms of quantity, time of delivery, or both) that is made obligatory by agreement in a financial transaction for one party only, provided both considerations in the transaction are either currencies, the ma’kili (measured in terms of volume), or maw’zoni (measured in terms of weight) commodities. If the transaction is a loan, then the spot or delayed deliveries of either commodity is not interest, provided the amount or quantity of loans are equal; and if the financial matter is other than loan and the genus of commodities exchanged is different, then inequality in quantity is not interest provided both commodities are exchanged at the same time (spot exchange)”.