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Interest - Riba
In Islam, the most common form of Riba, or interest, is the additional charge on borrowed money, often seen in loans or deposits. The Arabic term 'Riba' means 'to exceed,' indicating the extra amount added to the borrowed sum.
Islam strictly prohibits both receiving and paying interest. However, many people may unintentionally accumulate interest through their bank accounts. So, what should one do with this interest money?
Since it is not permissible to use interest for personal benefit, it is recommended to donate these funds to charity. While this action does not earn religious merit, it provides a shariah-compliant way to dispose of these haram funds.
O you who have believed, do not consume usury, doubled and multiplied, but fear Allah that you may be successful. – (Qur'an 3:130)
What is Riba?
Riba, often translated as usury or interest, refers to the practice of charging excessive or exploitative interest on loans. In Islam, Riba is strictly prohibited as it leads to exploitation and injustice. The prohibition of Riba is a fundamental principle designed to promote fairness and equity in financial transactions.
Why should you avoid Riba?
All Muslims are required to avoid engaging in Riba in any form. This includes both paying and receiving interest on loans. Muslims are encouraged to seek alternative financial arrangements that comply with Islamic principles, such as profit-sharing, trade, and investment partnerships.
How to avoid Riba?
To avoid Riba, Muslims should:
- Engage in trade and commerce that is free from interest.
- Opt for Islamic financing options, such as profit-sharing (Mudarabah) and joint ventures (Musharakah).
- Utilize interest-free loans (Qard Hasan) for personal or business needs.
- Consult with Islamic financial experts to ensure compliance with Sharia.
This verse emphasizes the importance of avoiding Riba and adhering to ethical financial practices. By rejecting Riba, Muslims uphold the principles of justice, fairness, and social responsibility.
Through the prohibition of Riba, Islam aims to create a balanced and just economic system where wealth is circulated fairly and everyone has the opportunity to prosper. By adhering to this principle, Muslims contribute to the establishment of a more equitable and compassionate society.
