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Riba, known as “sood” in Urdu and also commonly known as interest in English, is the cost borne by someone taking a loan. As the person repays the loan, he has to pay a fixed extra amount when returning the money. In simple terms, a person taking a loan of an amount of 1000 of any currency with a 10% interest rate will repay 1000 + 10% extra = 1100.

Islam wholly rejects the concept of riba. In Surah Ali ‘Imran, Allah instructs the believers to abstain from the consumption of interest and fear Allah in order to attain success.

Therefore, it is a matter of grave concern that the current worldwide banking system relies entirely on a riba-based system. Commercial banks lend money to people with interest. Similarly, customers who deposit money in banks also earn interest on their money. Riba has so profoundly seeped into the system that it has become a completely “normal” and accepted part of modern economies.

For Muslims, what is standard in the world or not, does not matter. The only criterion for right and wrong is what has been prescribed by Allah and the Prophet (PBUH) in the Quran and Sunnah. Hence, we must realize the dangers of dealing with interest. We must do all we can to stay away from any involvement in Riba.

What does Allah say about Interest?

Whenever one reads a verse about the prohibition of interest, it’s immediately noticeable that the warnings are very harsh. Allah’s warnings in the Quran (Riba in Quran) show the gravity of dealing with any kind of interest. In Surah Al-Baqarah, Allah tells the believers to give up whatever they are owed in interest, warning them of a war from Allah and the Prophet (PBUH) if they do not give up usury.

This is an immensely strong statement that will undoubtedly shock any believer who cares to abide by Allah’s commands. Muslims aim to obey Allah and His Prophet (PBUH) and value their instructions. Going to “war” with the Lord and Creator of this universe is unfathomable. Allah describes riba as a form of wrongdoing. In Surah Al-Baqarah, Allah says that on the last day, the consumers of usury can only stand like one being beaten by Satan into madness; this indicates the severity of the punishment for riba.

What did the Prophet (PBUH) say about it?

There are many Hadith on Riba. According to a Hadith in Sahih al-Bukhari and Muslim, the Prophet (PBUH) told us to avoid seven devastating things, which are the association of partners with Allah in worship, the practicing of magic, taking someone’s life without an Islamically valid reason, eating up an orphan’s property, consuming interest, running away from the battlefield, and slandering women who are chaste and noble believers.

Here, the Prophet (PBUH) branches the consumption of riba alongside other major sins such as shirk and murder. This further emphasizes the gravity of dealing with interest. He considers these actions harmful. All these actions have a severely negative impact on society.

In Sahih Muslim, there is a Hadith telling us that the Prophet (PBUH) cursed those who deal with interest, including the one who takes it, the one who gives it, the person who records it, as well as the two witnesses, declaring that they are all equally at fault.

This is another crucial Hadith that shows who all are held responsible when it comes to dealing with interest. The persons who lend the money and take back interest, the givers of interest, and everyone who acts as witnesses for such a transaction are all blameworthy. Not only that, but he says that they are all equal; hence, they are all equally responsible.

How does riba affect the poor?

The Islamic point of view regarding actions is a pragmatic one. If actions contain more harm than benefit, then they are haram. For example, in Surah Al-Baqarah, it is mentioned that there is immense sin in wine and gambling but also some value. However, their sin outweighs their value. So, even if anyone can pinpoint something beneficial gained from interest, ultimately, the harm outweighs it.

The biggest harm of interest is that it is very unfair on the borrower. If someone borrows money, they are usually in a position of need. Riba compels them to pay back an amount that they may not be able to handle. Furthermore, it will put them in a position of even greater need going forward.

As a result of this, riba, in the long run, promotes inequality. Those who have money are the ones who can afford to lend it. As a result of interest, they keep piling up more wealth. Meanwhile, the needy ones who need to borrow have to keep giving up more and more of their money. The rich get richer, while the poor get poorer.

A side-effect of this skewed balance in society leads to further decay for the poor and the needy. As the rich get richer and eventually accumulate massive amounts of wealth, more and more products are created to fulfill their ever-increasing demands. As a result, things that are needed by the poor are neglected. This causes extreme malaise and discontent.

Such a high level of polarization in society can cause the weaker sector to become desperate. Desperation is often what results in people turning towards criminal activities. Hence, the community as a whole suffers immense damage.

How does riba affect the middle and higher classes?

For people who aren’t struggling to survive, riba is usually a means to attain luxuries. Someone may be able to get by with what they earn, but they can’t get the car they desire or the newest piece of technology. Thus, such people either take out massive loans or turn to things such as credit cards. These serve to finance what they can’t afford.

The resulting problem is that once again, people become trapped in a web. They have to earn extra to pay off the loan. Additionally, being in debt and continually being mindful of such things has a negative psychological impact. If they fail to make their payments on time, the interest rate may rise further. This means that eventually, you need to repay even more on top of the original loan.

Not all people stuck in this web get out of it. Indeed, many people suffer from greed, and once the process is begun, they can’t stop. Eventually, the outcome is that people exhaust all their resources and enter bankruptcy. Consequently, companies and creditors may even take possession of the person’s belongings and properties. The result is ruin for a person, both in this world and in the Hereafter.

What are the effects of riba (Interest) on countries and nations?

To answer this question, we only have to look at the state of many of the Muslim countries today. The debt-trap has resulted in severe damage to countries all around the world. Seemingly well-meaning international “programs” and banks offer countries money to fulfill their needs. However, the states don’t generate enough revenue to be able to pay back the interest.

As a result of this, nations have to take further loans to pay off previous loans, in an endless cycle. Eventually, the most significant impact of this is on a nation’s people. Governments have to spend all their money on debt, and little is spent on domestic affairs. This leads to weakened education and health sectors, ever-increasing poverty, and can eventually be a cause for many deaths as the country struggles to survive and nears bankruptcy.

For third world countries, this is akin to a death sentence. These countries often have extremely corrupt rulers who are already not interested in the betterment of their people. Now, stuck in the debt-trap, they will do the bare minimum for their people. The country, as a result, loses its sovereignty with world “powers” being able to do as they wish with the weakened nation.

The Islamic banking system

People often complain that riba is the way of life and that there is no alternative. However, this isn’t the case. There is an Islamic banking system that is continually gaining traction. Banks that function according to this system do not go against Shariah policies.

These banks function with Islamically allowable dealings. Profit-sharing, partnerships, and other similar halal methods exist, which enable companies to make money. In such cases, customers may not always make a profit on their deposits (which serve as investments). Sometimes, they may even lose money. However, the loss or profit will be halal.

Islamic banks have different acceptable ways of earning money. They are flourishing in many Islamic countries and are bound to increase in number as people realize the ills of the riba-based banking system. May Allah provide us with the strength and means to be safe from these haram riba-based institutions. Aameen.