Ribā — the Prohibition of Interest

Ribā — interest or usury — is strictly prohibited in Islam; its avoidance is the single most defining feature of Islamic finance.

At a glance

The Qurʾān draws a hard line between legitimate commerce and interest: “God has permitted trade and has forbidden ribā” (2:275), and it warns in the strongest terms — that those who persist in it should “take notice of a war from God and His Messenger” (2:279). Ribā is, in essence, a guaranteed, predetermined increase charged on a loan of money purely for the passage of time.

The reasoning turns on how Islam views money and risk. Money is treated as a medium of exchange, not a commodity that can be rented out for a certain profit. Charging interest guarantees the lender a return while placing all the risk on the borrower; Islam requires instead that reward be tied to risk and effort — if one wishes to profit from capital, one must invest it in a real venture and share in both its gains and its possible losses. This principle of risk-sharing is what distinguishes an Islamic partnership from an interest-bearing loan.

The prohibition of ribā does not forbid profit or even the time value of a genuine sale; it forbids the guaranteed rent of money itself. Modern Islamic finance is built precisely around this distinction, replacing the lender–borrower relationship with sale, lease and partnership contracts in which the financier shares real risk.

Related in Chronicle

Curated reference on Islamic belief and thought. On matters where traditions differ, positions are attributed rather than adjudicated; verify points of doctrine with qualified scholars.