RIBA – an addition to, an increase over and

above the original amount/size (unlawful

addition – usury and interest)
30:39
4:161
3:130
2:275, 276, 278
Allah and His Rasul will wage a war against
you:
2:279

2:280
Sahih Bukhari 48-51:64-67

Hazrat Umar (RA) said that he had wished that

Prophet (PBUH) had thrown more light on
three things; Riba, Khilafa and Kalala (how
property of disease person who has no
relatives how should it be divided – Quran
4:12) (Tafsir Ibn Kathir)
Sahih Muslim 623:3845-3849

Intoxicants
2:219
4:43
Prohibition of Intoxicants
5:90

Interest – Amount/money paid for the use of

amount/money lent
Usury – the act or practice of lending money at
interest especially at very high rate (simply
means exorbitant interest)
OBJECTIVES OF ISLAMIC ECONOMIC ORDER
(INTEREST FREE)
1. Economic Wellbeing within framework of
moral norms of Islam
2:68, 160
62:10
Al Bayhaqi: The person who seek the
world lawfully to cater to the need of his
family to avoid begging and to be kind to
his neighbour will meet Allah with
shining face like the full moon

Sahih Bukhari v2 p133

Sunan Ibn Maja v2 p723
2. Universal brotherhood and justice
49:13
Farewell Sermon during Hajjatul Wida
4:135
3. Equitable distribution of wealth
9:60
 59:7
4:11, 12, 176
4. Individual freedom within the context of
social welfare

EVILS OF INTEREST BASED ECONOMY:

1. If selling price goes up due to interest,
demand comes down. When demand
comes down, supply goes down. When
supply goes down, production comes
down. When production comes down,
there is a retrenchment and
labour/employment problem
2. Social Injustice – If a person takes loan
from the bank irrespective whether he
makes a profit or he goes in loss, he has
to pay fixed amount of interest in the
time stipulated. Even if some calamity
befalls on his family, like flood,
 earthquake etc. Still the person who has
taken the loan has to pay the amount
along with his interest.
3. No social consideration – If two
businessman they come to ask for loan
from the bank (modern bank), one
businessman wants to open an alcohol
factory and the other businessman wants
to start school, but natural person
starting alcohol factory will have better
returns and loan given to him will be
more secured and he will give a higher
rate of interest as compared to business
who wants to start school or an hospital.
Modern banks are only interested in
getting bigger returns, its not bothered
whether you start alcohol factory,
gambling dent or a school. In the 1980s,
all the modern banks financed gambling
dents and several gambling dents were
 opened. Majority of loans from modern
banks are not based on social
considerations, but on better interest. It
encourages a person to store money and
keep it idol that he keeps money in the
bank and will get fixed return of 10% or
12% every year.
4. Power concentrated in the hands of few
people – Jews controlling major modern
banks are controlling the whole world.

BENEFITS OF ISLAMIC BANKING

1. No interest, but based on profit and loss
– (opposite of previous point 1)
encourages people to earn living
2. Social justice – If a business takes a loan
if he goes in loss, loss is shared by bank
or vice versa. If he takes a loan and
further calamity befalls on him, Islamic
 Bank will give him more to repay. If
Islamic bank find situation very bad, it let
go out of loan.
3. Social Consideration – You cannot give
loan to businessman who is doing
activity against Sharia, activity causing
harm to society. Thus it encourages
projects which are beneficial for the
society.
4. Not encouraged to keep money idle,
rather to invest money and be partner in
business
5. Profit and loss is shared by the
businessman, by the banker and the
depositor. Power is shared equally
among the people
INTEREST
Earning based on the use of money, not on
labour. (Aristotle)

FACTORS INVOLVED IN PRODUCTION

1. Land – On land, you pay rent
2. Labour – on capital, you pay wages
3. Capital – you pay interest (modern
theory), there is profit and loss sharing
(Islamic theory)
4. Organisation – profit and loss sharing

No difference between capital and

organisation in Islam, the money lent by bank
does not belong to the bank, it is belonged to
depositors. Depositors are part of
organisation. Money which is deposited from
bank, capital is included in the bank.
PRINCIPLES OF ISLAMIC BANKING
1. Tauhid
2. Divine origin of naridgement and
direction towards perfection
3. Khilafa – man as vicegerent of Allah
4. Tasqiya (Purification and growth)
5. Accountability

UNITS OF BUSINESS
1. Surplus unit – excess of money, but
doesn’t know how to utilise it
2. Deficit unit – those who have no money,
but have great ideas
Based on two units, Hazrat Khadija (RA) gave
to Holy Prophet (PBUH) to do business, and
whatever profit they obtained it was shared
the ratio that was split into them.