Riba & Its Types

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Riba'
The word "Riba" means excess, increase or addition, which correctly interpreted according to Shariah terminology, implies any excess compensation without due consideration (consideration does not include time value of money).

Types of Riba:

1.  Riba' AnNisi'ah: This is the stipulated interest which the lender takes from the borrower in consideration of the time given to the borrower to pay back the capital.  It is HARAM based on the Quran and the Sunnah and the consensus of Muslim scholars.

2. Riba' Al Fadl:  This applies to barter (exchanging one commodity for another), where  commodities of the same type are exchanged in unequal amounts, especially the exchange of precious metals and foodstuffs, it is HARAM, by the Sunnah and the concensus of scholars; as it paves the way for Riba' nNasi'ah.

Numerous ahadith have demonstrated the prohibition with regard to gold, silver, wheat, barley, dates, and salt.

The Prophet sallaAllahu 'alayhi wa sellem said, "Gold for gold, and silver for silver, and wheat for wheat, and barley for barley, and dates for dates, and salt for salt, like for like, equal for equal, from hand to hand (the transaction must be completed before the two sides leave each other).  But if the types are different then sell as you wish, as long as it is hand to hand."  (Muslim)

The Prophet sallaAllahu 'alayhi wa sellem also said, "Whoever gives more or asks for more (than what he gave) commits an act of Riba', the given and the taken are equivalent (in the sin)." (Muslim)

The Prophet sallaAllahu 'alayhi wa sellem said, "Prohibited selling food (of the same variety) except equivalent in weight and hand to hand." (Muslim)

"Do not sell gold for gold unless equivalent in weight (and from hand to hand), and do not sell less amount for greater amount or vice versa, and do not sell silver for silver unless equivalent in weight (and from hand to hand), and do not sell less amount for greater amount or vice versa and do not sell...
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