Riba (Usury/Interest)
Unjustified, exploitative gains or predetermined interest charged on loans, prohibited in Shariah.
Detailed Definition
Riba encompasses both interest-bearing debt (Riba al-Duyun) and unequal exchange of identical fungible commodities (Riba al-Fadl). In Islamic finance, money is merely a medium of exchange and has no intrinsic value; therefore, earning guaranteed interest without sharing commercial risk is strictly prohibited.
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Related in Islamic Finance
Murabaha (Cost-Plus Financing)
An Islamic financing structure where the bank buys an asset and sells it to the client at cost plus a disclosed profit margin.
Mudarabah (Trustee Financing)
A partnership where one party provides 100% of the capital while the other provides managerial expertise.
Ijarah (Islamic Leasing)
A Shariah-compliant leasing agreement where the bank purchases an asset and leases its usufruct to the client.