Twards InterestMuslim scholars equate interest with riba, the term used in the holy Quran. In the Shari’ah, riba technically refers to premium that must be paid by the borrower to the lender along with the principal amount as a condition for the loan or for an extension in its maturity. In other words, riba is the predetermined return on the use of money. In the past there was dispute about wether riba refers to interest or usury, but there is now consensus among Muslim scholars that the term covers all forms of interest and not only “excessive” interest.
The Islamic restriction on interest is quite explicit and unequivocal. All transactions based on riba are strictly prohibited in the Quran. The first of these revealed in Makkah, emphasized that while interest deprived wealth of God’s blessing, charity raised it manifold. The second revelation concerning the subject took place in the early Madinah period. It severely condemned interest in line with prohibitions in the previous scriptures. The third revelation enjoined Muslims to keep away from riba. The fourth revelation near the completion of the Prophet’s mission finally prohibited riba.
The last revelation gives a strong verdict against riba, as the following:
Those who devour riba will not stand except as stands one whom the devil hath driven to madness by [his] touch.
Condemnation of the system of interest, which is so strong and without any doubt, can be reflected in following verse which imposes penalties on those who hesitate in observing the verdict:
O yea who believe! Observe your duty to Allah and give up what remains [due to you] from riba, if you are [in truth] believers. And if you do not, then be warned of war [against you] from Allah and His Messenger. And if you repent then you have your principal [without riba]. Wrong not, and you shall not be wronged.
The strong disapproval of interest by Islam and the crucial role it plays in the modern commercial banking has led Muslim thinkers to explore ways and means by which commercial banking could be organized on an interest-free basis. However, for a long time, the idea of Islamic banking remained a mere wish. Some papers were written and some professional economists even worked out theoretical models of Islamic banking. However, they were quickly dismissed by highbrow economists who described them as wishful thinking and attempts to put history into reverse gear.