Trade cycles[edit] Many writers see the destabilizing effects that interest has on trade cycles. The basic idea is that different interest rates and their variations allow for speculative institutions. Speculators hoard capital for the purpose of chasing higher rates, which in turn deprives the deployment of capital for productive purposes. It is argued that these vast movements of funds contribute to the fluctuations in the trade cycles and make economic planning and organization problematic. With the absence of interest, writers argued there will be less speculation due to the absence of the interest rate and the reduced levels of debt that will result. That is not to say there will be no debt: non- interest modes of finance allows debt but less. Decreased levels of speculation would thus result in a more stable environment. Etymology[edit] The word was linguistically used by the Arabs prior to Islam to refer to an increase. In commercial practice, it referred to the increase on loans, namely, interest. The definition of riba in classical Islamic jurisprudence was surplus value without counterpart. When currencies of base metal were first introduced in the Islamic world, paying a debt in a higher number of units of this fiat money was not considered riba; jurists were concerned with the real value of money (determined by weight only) rather than its numericalvalue. For example, it was acceptable for a loan of 1000 gold dinars to be paid back as 1050 dinars of equal aggregate weight of gold (the value in terms of weight had to be same because all makes of coins did not carry exactly similar weight), therefore having the same real value. No-one has answered this, and it needs answering. Is Riba usury in the old sense (any form of interest) or in the new sense (unreasonable rates of interest) or in smoe other sense (in which case it isnt usury) William M. Connolley (talk) 12:35, 27 June 2011 (UTC) This is a great question and brings up my concern about the absurd one-sidedness of this article. The Islamic legality of interest, and if it is interest or usury is hotly contested. As currently written the article gives you no indication of this. — Preceding unsigned comment added by 69.199.139.26 (talk) 20:45, 1 August 2011 (UTC) We need to go a little deeper into what the Quran really says about riba. The Quran was revealed to an ummi i.e. ignorant, illiterate person though of great intelligence, intellect and common sense, and the first recipients of the message were little more than barbarians! The message perforce had to be plain and simple, not obscure and creating controversy. No economic activity can be done without profit whether as goods or services or finance,whether one labels it profit or commission or interest. In business and commerce the same rules applied all over the world to keep equitable conditions, and giving and taking credit was a normal occurrence (as in Shakespeares Merchant of Venice). These dealings were between equals and in the market when a lender today may be a borrower tomorrow, and terms would be equitable and affordable. The Quran describes riba as extortionate, excessive, rapacious,exploitative, doubling and quadrupling, and expropriating the borrowers property. And the Quran vigorously contrasts it with charity in which is great merit to the extent that it is best for you to not only forgo the profit but also the principal. Why? In effect it means that here was a person deserving charity from you but you have extorted riba. Riba rates were 50 to 100% per year then. $1000 at 50% would become $3600 at simple interest and $8600 at compound in 5 years while at bank interest of 10% it would be $1500 and $1650. The difference is obvious. The two are indeed related, but it is if you were on a 100-rung ladder, the lowest 5 are interest and the top 80 to 100 are riba. Nobody seems to have noted verse Al-Baqarah 282 in which it is stated that you must write down the terms, with proper witnesses, whenever you give or take credit. When you do not get any profit and may even forgo the principal, would any sane person lend money? ( Of course he can give as charity ) Surely if the Quran then allows credit it must mean that there are two types of credit: riba from the weak and in-need and the other applying to business between equals. Is there any evidence that terms and rules of business were changed after these verses? Because they should have caused a severe upheaval in business affecting even international commerce. Indeed if ordinary business lending and riba were synonymous, the Quran could simply have said that all credit is riba, and thus forbidden (of course more elegantly ) instead of explaining at some length what riba implies. It must also be stressed that the bank has no interest in exploiting you, it wants you to flourish and to be able to pay the bank dues --it has no use in taking over a failed business or a house that it cannot sell. --Thinker25 (talk) 02:32, 20 September 2011 (UTC) Translation[edit] The actual translation reference linked to the USC website is: YUSUFALI: O ye who believe! Devour not usury, doubled and multiplied; but fear Allah; that ye may (really) prosper. PICKTHAL: O ye who believe! Devour not usury, doubling and quadrupling (the sum lent). Observe your duty to Allah, that ye may be successful. SHAKIR: O you who believe! do not devour usury, making it double and redouble, and be careful of (your duty to) Allah, that you may be successful. it does not say compounded over and over.58.65.196.77 (talk) 12:08, 16 July 2008 (UTC) The definition of RIBA,according to Shariah, given above means that no credit transaction could be possible - who would be fool enough to give a loan when there is no prospect of profit to offset the risk of loss. Thus money would be locked up in personal accounts and circulation of money would be severely restricted, leading to shortage of floating capital. This would put Muslim markets at a disadvantage to compete internationally. I cannot accept that the Quran could be ambiguous in its communication -- on the one hand ban lending ( RIBA) and on the other mention almost offhandedly giving and taking of credit ( 282 Al-Baqarah) unless it was a commonplace practice which required no further elucidation. Shariah is the interpretition of Quranic injunctions given by admittedly very learned men but who are limited by their extent of knowledge, or lack thereof, the economics, politics, the times, the education of the ordinary people, etc. There are so many different schools of Shariah illustrating thet mens opinions cannot be final. The Shia believe in continuing thought and necessary modification as new ideas and knowledge emerge ( Ijtehad). The Sunnis should do likewise and not be frozen in time ( Taqleed). Only the Quran is immutable and the final word. The Muslim jurists of old had a few hurdles to face. 1) Economics was not a known field of study at all - its basis was laid by Adam Smith in the 18th century. 2) They did not do the maths to show the difference between 50% RIBA and 10% market rate or probably they did not know how to do so. 3) Money seems to have been a mystery to them. --they do not seem to grasp that money has no intrinsic value and is only a yardstick against which other commodities can be valued. It replaced barter. Many modern Muslim scholars have declared paper money haram and that zakaat can not be paid by currency notes! For instance you can give a man 100 goats as a loan and he will after due time give you back the 100 goats and a proportion of their offspring or extra goats as profit -- but you may not give him the money to buy the goods himself and return you the money with due profit. 4) they were so overcome by the severe strictures against RIBA, to the extent that Allah would be at war with the RIBA takers, that they could not envisage that anything which could. however remotely, be related to Riba is allowable. 5) At the same time commerce and business was being carried on in the normal international practices with credit being given and taken on equitable market rates. So instead of accepting that market rules of credit are different to RIBA they had to contrive roundabout methods to legitimize credit and profit hence the various categories of RIBA which are mentioned, to allow credit and profit. Whereas if we read the Quran as if we were the very first people to do so we would see that RIBA is a terrible thing and is justifiably condemned: but in spite of its prohibition verse 282 Al- Baraqah tells you how to give and take credit. Does not this indicate that the Quran tells you here that normal give and take in trade and commerce is allowed to go on as before with due gains.This verse seems to have escaped comment from everyone. There is a Hadith that the Holy Prophet borrowed some money and returned it with some extra money. This is interpreted to mean that if someone voluntarily pays a profit that would be acceptable. But the correct reading is that the lender, out of respect reverence and friendship, could not be so presumptuous as to ask for a profit but the Holy Prophet, with his sense of justice and propriety insisted on paying him what he wold have earned from the market and because he would not want to be further obligated. I am aware of these sentiments because my father borrowed from a Hindu friend to complete his house and insisted on giving Dr. Khera the market profit while Dr. Khera declined. This illustrates that market credit was different from RIBA. While RIBA may be defined as excess over the principal the Quran does not define it as any excess. In English there is a difference between interest, say 10%, and usury at 50% but in Arabic there is no such term but the description of RIBA vividly illustrates its contrast to the market practice, and that the two are distinct entities. — Preceding unsigned comment added by 115.186.48.218 (talk) 13:58, 28 September 2011 (UTC) Definition of Riba[edit] Shara’i meaning & terms[edit] In Shariah meaning “Riba” is a term that is used when two parties exchange item of same kind, and in return one party received extra (or in excess) of what he gave. A simple example is when gives 100 units of Gold and received 120 units of Gold in return. The extra or excess 20 units are considered “Riba”. The most common application of Riba is on monetary transaction relating to “loans” and “credits”. A simple example of loan is when Lender gives $1000 to a Debtor with an agreement that Debtor will return $1200 on specified date. Hence, the Lender will receive extra $200 (either as his service fee, rent, income, or reward for lending money for stated time period). This extra $200 is absolute form of Riba in Islamic Shariah. Similarly, other financial transactions involving Riba, such as advancing money on interest, keeping deposits in a bank for the sake of earning interest, or getting concessions in rates of goods or commodities against advance payments of price, mortgaging and utilizing an income-yielding property against a certain sum, to be returned in full when the property is redeemed and investing money in a trade against a predetermined and fixed rate of profit-are all forbidden transactions because they involve Riba in some form or the other. And the person doing any of these transactions invariably pay X amount of money, but in return gets X+more back (without profit and loss sharing). Islamic Shariah doesn‟t limit “Riba” application to Loan or financial transaction. In fact the canvas of Riba is spread across larger transactions involving any exchange of items between two parties, as far as the items are of same kind, and one item is exchange for other for either more or less.
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