2.4 The Prohibition of Riba, Part 2 (Rules, types and examples)Nov 18, 2020
In this episode we continue our discussion about riba. We talk specifically about key rules and types of riba (interest) and give some practical examples.
Summary of rules by Imam Nawavi:
- When the underlying ‘Illah (operative cause behind a law) of the two goods being exchanged is different, shortfall/excess and delay both are permissible, e.g. the exchange of gold for wheat or dollars for a car.
- When the commodities of exchange are similar, excess and delay both are prohibited, e.g. gold for gold or wheat for wheat, dollars for dollars, etc.
- When the commodities of exchange are heterogeneous but the ‘Illah (operative cause behind a law) is the same, as in the case of exchanging gold for silver or US Dollars for Japanese Yen (medium of exchange) or wheat for rice (the ‘Illah being edibility), then excess/deficiency is allowed, but delay in exchange is not allowed. (Reference Understanding Islamic Finance, M. Ayub 2007, p.52)
“Do not sell gold for gold unless it is the same amount for the same amount, and do not make one amount greater than the other. Do not sell silver for silver unless it is the same amount and do not make one greater than the other.” (Bukhari and Muslim).
“Gold with gold, silver with silver, wheat with wheat, barley with barley, dates with dates, and salt with salt; same quantity for same quantity, equal for equal; transaction being made hand to hand (i.e. on the spot payment).” (Muslim)
Types of Riba
1. Riba Al-Nasee’ah (riba of delay)
2. Riba Al-Fadl (riba of surplus)
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