Prohibition of Riba

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BOF Y2S2 2 PFS 2253 ISLAMIC FINANCE

Prohibition of Riba
Prepared by: Nuradli Ridzuan Shah & Abdullaah Jalil

Stages of Revelation
• First stage: al-Rum, 39 • Second stage: al-Nisa’, 161 • Third stage: Ali cImran, 130 • Fourth stage: al-Baqarah, 275-281

Al-Riba: Its Definition • Riba:
– Deferment in the time of exchange (riba al-nasiah) – Quantity of one of the counter values (riba al-fadhl) al-Riba

Time Factor Ribawi items

Quantity Factor

Al-Riba: Its Definition
• Nabil Salih’s:

“An unlawful gain derived from the quantitative inequality of the counter values in any transaction purporting to affect the exchange of two or more species which belong to the same genus and are governed by the same legal cause. Deferred completion of the exchange of such species, or even of species which belong to different genera but are governed by the same cillah (legal cause), is also riba, whether or not the deferment is accompanied by an increase in any one of the exchanged counter values.”

Types and Classifications of al-Riba
• Riba al-duyun / al-jaliyy / al-Quran / al-Jahiliyyah / al-Nasiah: – An increase for the repayment deferment/poseponement in contract of loan

• Riba al-buyuc / al-khafiyy / al-Sunnah:
– Riba al-Fadl: Inequality of quantity between the (ribawi) counter values – Riba al-Nasiah: Deferment of one of the (ribawi) counter values which share the common cillah

al-Riba Al-Duyun / Al-Jaliyy Al-Quran / Al-Jahiliyyah / Al-Nasiah*(excess is charged for deferment)

Al-Buyuc / Al-Khafiyy / Al-Sunnah

al-Fadl

al-Nasiah* (deferment of one of the counter values)

Riba al-Buyuc
cUbadah

Ibn al-Samit reported a hadith from the Propehet

s.a.w: “Gold for gold, silver for silver, wheat for wheat, barley for barley, dates for dates, salt for salt, like for like, equal for equal, and hand-to-hand. If the commodities differ, then you (may) sell as you wish provided that (the exchange) is hand-to-hand.”

al-Riba in Trade - Barter & al_Sarf : Al-Shafiiyyah

Differences on the Extension of Riba al-Buyuc
• Al-Zahiri: The six kinds only. • Al-Hanafiyyah: Weighed (al-mawzun) and measured (al-makil) items. • Al-Malikiyyah: Price and storable and/or staple food provisions. • Al-Shaficiyyah: Commodity money and foods • Al-Hanabilah: (1) Same as al-Hanafiyyah (2) Same as al-Shaficiyyah (3) Weighed and measured foods 2 (1) Prompt delivery (time) & (2) with the equivalent quantity 1 (1) Prompt delivery (time) only

ISLAMIC BANKING
• CLASSIFICATION OF RIBA
– Riba-un-Nasiyah or Riba-al-Jahiliya

– Riba-al-Fadl or Riba-al-Bai

ISLAMIC BANKING
• CLASSIFICATION OF RIBA
– 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)

ISLAMIC BANKING
• CLASSIFICATION OF RIBA
– Riba-un-Nasiyah or Riba-al-Jahiliya
• “all loans that draw interest is riba”(Hadith quoted by Ali ibn Talib) • “the loan that draws profit is one of the forms of riba”(definition from Sahabi Fazala Bin Obaid)

ISLAMIC BANKING
• CLASSIFICATION OF RIBA
– Riba-un-Nasiyah or Riba-al-Jahiliya
• real and primary form of riba • premium paid to the lender in 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

ISLAMIC BANKING
• CLASSIFICATION OF RIBA
– Riba-al-Fadl
• Definition: Any excess that is without due consideration For example: excess taken in exchange of specific commodities (Al amwal Ur Ribawiyyah) which are homogeneous

ISLAMIC BANKING
• CLASSIFICATION OF RIBA
– 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

ISLAMIC BANKING
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