Wisdom Behind Prohibition Of Interest Riba in Islam

The article discusses “Wisdom behind prohibition of interest Riba in Islam. Rationale behind the prohibition of interest (Riba). Why Riba is prohibited in Islam? Financial wisdom behind prohibition of interest. What is the financial and social wisdom behind prohibition of interest? What is the financial wisdom behind prohibition of interest? Wisdom behind prohibition of interest Riba in Islam.”

Wisdom Behind Prohibition Of Interest Riba in Islam

Interest is charge of extra amount of money for the use of loanable funds. Islam has not only recognized this practice as evil but has also strictly prohibited it. Islam has used the word of Ribba or Usury for it.

Islamic Studies CSS MCQs

During the life time of Holy Prophet Muhammad (PBUH) two forms of Ribba transactions were in practice. One was Riba-al-Fadal and the other was Riba-al-Nasiah. Riba-al-Fadal was practiced in barter system while Riba-al-Nasiah was practiced in monetary transactions.

wisdom behind prohibition of interest riba in islam

Islam has prohibited all forms of Ribawi transactions and has told the followers to refrain from such transactions.

Rationale Behind The Prohibition Of Interest

Rationale behind the prohibition of interest based transactions is not beyond the wisdom of common man. Some of the rationales behind the prohibition of interest in Islam are given below.

Sign Of Moral Bankruptcy: If funds are borrowed for consumption purposes then charging of interest is clearly a sign of moral bankruptcy and inhuman behavior.

Social And Economic Effects Of Zakat

Source Of Economic Exploitation: In case the funds are borrowed for investment purposes, even then the prohibition is irrational. In common practice, the percentage of risk and uncertainty are shared equally by both the investors but in interest base system the creditor is guaranteed for a sure return. Thus the institution of interest is nothing but a source of social injustice and a medium of economic exploitation.

Not An Ordinary Sale Purchase Transaction: The followers of interest based transactions in past and even today have argument for their interest transaction that there is no difference between usury and ordinary sale-purchase transactions. The very basis of resemblance between the two transactions according to them is profit motive. If a person could be allowed to earn money by investing his savings in trade and business then he could do so equally by lending out his money to another party and share in the profit. Apparently this type of arguments makes sense however the two transactions differ a lot.

Not A Factor Of Production: During the process of production, money losses its original shape but retain the value when reproduced. Therefore it is not a factor of production rather it is a part and parcel of the very person of the entrepreneur. It cannot be hired out like all other real factors. The payment of interest as a predetermined reward against the use of liquid money for sometimes is therefore illogical. Islam does not considered money a separate factor of production and cannot allow a predetermined reward for a person merely on the claim that he or she is the financier of the business.

Principles Of Taxation In Islam

Moral And Social Reasons Of Prohibition: Apart from the major differences in sale and purchase and usury contracts, Islam also prohibits interest based transactions on moral and social grounds. It develops miserliness, greed and selfish attitude in the society. It blocks the circulation of wealth by hoarding and speculation. T            his selfish attitude of the few money owners causes hatred and aggression in society and which ultimately lead to the destruction of the society.

Conclusion

Islam has strictly prohibited interest and interest based transactions. The above mentioned reasons show the rationale of Islam behind the prohibition of this inhuman and illogical practice.

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