Classification of Riba Interest.
given in verses 2: 278 and 279 is that in both loans and debts, the creditor has the right to the Rasul - mal principal amount only; in the
former case, exactly the amount given as the loan and in the latter case, the liability or the amount of debt generated from the credit transaction.
Any amount, big or small, over and above the principal of loan or debt would be Riba. As conventional banks’ financing falls into the category
of loans on which they charge a premium, it falls under the purview of Riba as prohibited by the Holy Qur’an. As such, there should be no
doubt that commercial interest as in vogue is Riba in the light of the principle given by the Holy Qur’an. The word “Riba”, meaning
prohibited gain, has been explained in the Holy Qur’an by juxtaposing it against profit from sale.
It explains that all income and earnings, salaries and wages, remuneration and profits, usury and interest, rent and hire, etc. can be
categorized either as: • Profit from trade and business along with its liability – which
is permitted; or • Return on cash or a converted form of cash without bearing
liability in terms of the result of deployed cash or capital which is prohibited.
Riba, according to the criterion, would include all gains from loans and debts and anything
over and above the principal of loans and debts
and covers a ll forms of “interest” on
commercial or personal loans. As such, conventional interest is Riba.