Interest is Haraam in Islam

'Riba' (Arabic: ربا ,الربا، الربٰوة‎ ribā or al-ribā, IPA: [ˈrɪbæː]) can be roughly translated as "usury", or unjust, exploitative gains made in trade or business under Islamic law. Riba is mentioned and condemned in several different verses in the Qur'an (3:130, 4:161, 30:39 and perhaps most commonly in 2:275-2:280). It is also mentioned in many hadith (reports describing the words, actions, or habits of the Islamic prophet Muhammad).

While Muslims agree that riba is prohibited, not all agree on what precisely it is. It is often used as an Islamic term for interest charged on loans, and the belief this is based on — that there is a consensus among Muslims that all loan/bank interest is riba — forms the basis of a $2 trillion Islamic banking industry. However, not all scholars have equated riba with all forms of interest, or agree whether its use is a major sin or simply discouraged (makruh), or whether it is in violation of sharia (Islamic law) to be punished by humans rather than by Allah.

There are two principal forms of riba. Most prevalent is the interest or other increase on a loan of cash, which is known as riba an-nasiya. Most Islamic jurists hold there is another type of riba, which is the simultaneous exchange of unequal quantities or qualities of a given commodity. This is known riba al-fadl. 

Quran and prohibition[edit]

Twelve verses in the Quran deal with riba^[89] (although not all of them mention the word). The word (usually translated as usury) appearing eight times in total — three times in 2:275, and once each in verses 2:276, 2:278, 3:130, 4:161 and 30:39.^[90]

The Mekkan verse in Surah Ar-Rum was the first to be revealed on the topic:

And what you give in usury (riba), that it may increase upon the people's wealth, increases not with God; (Quran 30:39)^[91]

Other Medinan verses are:

... for their taking usury (riba), that they were prohibited, ... (Surah An-Nisaa Quran 4:161)^[92]

O believers, devour not usury (riba), doubled and redoubled, and fear you God; haply so you will prosper. (Surah Al-i-'Imran Quran 3:129-130)^{[93][Note 11]}

Culminating with the verses in Surah Baqarah:

Those who devour usury (riba) shall not rise again except as he rises, whom Satan of the touch prostrates; that is because they say, 'Trade is like usury (riba).' God has permitted trade, and forbidden usury (riba). Whosoever receives an admonition from his Lord and gives over, he shall have his past gains, and his affair is committed to God; but whosoever reverts — those are the inhabitants of the Fire, therein dwelling forever.

God blots out usury, but freewill offerings He augments with interest. God loves not any guilty ingrate.

Those who believe and do deeds of righteousness, and perform the prayer, and pay the alms - their wage awaits them with their Lord, and no fear shall be on them, neither shall they sorrow.

O believers, fear you God; and give up the usury (riba) that is outstanding, if you are believers.

But if you do not, then take notice that God shall war with you, and His Messenger; yet if you repent, you shall have your principal, unwronging and unwronged.

And if any man should be in difficulties, let him have respite till things are easier; but that you should give freewill offerings is better for you, did you but know. (Quran 2:275-280)^{[94][Note 12]}

Interpretations

According to Youssouf Fofana and Taqi Usmani, jurists do not consider the verses 30:39 and 4:161 to clearly prohibit Muslims from riba, whereas the latter two (3:129-130 and 2:275-280) do.^[95][59] Another orthodox scholar, M. N. Siddiqi, also believes 2:275-80 "establishes" that riba is "what is over and above the principal" and that "it is unjust".^[86] According to Fofana, historically (most) jurists agreed on the prohibition of riba from these verses and termed it riba al-nasia, distinguishing it from riba al-fadl (the exchange of like goods in different quantities at the same time, mentioned in a number of narrations).^[59]

• verse 30:39 provides "insufficient indication" to prohibit riba, according to Fofana, because sources disagree on what it refers to. Muhammad ibn Jarir al-Tabari quotes a number of Tabi'een (Muslims who were born after Muhammad died but who were old enough to be contemporaries of the Sahaba "Companions"), who state that (Quran 30:39) refers to a gift, whereas al-Jawzi quotes Hasan al-Basri as stating it refers to riba.^[96]
• Verse 4:161 refers to the Jews and their taking of riba, but it is unclear if the prohibition applies to the Muslims (according to Usmani and Fofana).^[59][97]
• However 3:129-130 is seen by many — including Taqi Usmani^[98] and Ibn Hajar al-Asqalani (a medieval Shafiite Sunni scholar of Islam)^[59] — as prohibiting riba. Fofana however, thinks "the verse itself could be interpreted as expressing a preference against interest", so interpreting the verse as prohibiting riba may require support from some ahadith "relating to Amr ibn Aqyash".^[59]
• Mohammad Nejatullah Siddiqi, interprets Quranic verses (2:275-2:280, known as ayat al-riba)^[99] to mean that riba is not only "categorically prohibited" and "unjust" (zulm), but is defined as any payment "over and above the principal" of a loan.^[86] Youssouf Fofana and Taqi Usmani and other orthodox sources agree.^{[100][Note 13]}

Questions and replies

On the other hand, some believe the "riba verses" (2:275-280) to be ayat al-mujmalat ("ambiguous" verses). These include the second caliph `Umar, (according to Al-Shafi‘i jurist Fakhr al-Din al-Razi),<sup>[99][102]</sup> and a number of classical jurists, including Ibn Rushd (see below).<sup>[99]</sup> Other Classical Islamic jurists considered the term riba "speculative general"<sup>[103]</sup> rather than a "specific" (khass), or absolute or unqualified (mutlaq).<sup>[104]</sup> They restricted the application of riba to "the clarification by the Tradition [ahadith] ...".<sup>[99][105]</sup> According to Farhad Nomani, in studying scholarly "commentaries, one notes that the technical, and even to some extent the customary meaning of riba as a practice in pre-Islamic era, is a matter of controversy among classical jurists and the interpreters of the Qur'an."<sup>[106]</sup> Other classical jurists ("like al-Baji and al-Tawwafi, to name only two"), believed riba was `amma, a "general term" meaning it "is definitive or free of speculative content", according to Farhad Nomani.^[99]

Umar, also declared that Muhammad died before he could explain the verse of riba (among 2:275-280) fully — it being the last revealed verse of the Qur'an according to a hadith reported by Ibn Majah. (However, according to Taqi Usmani, this hadith is not as authentic as that of another where one of the narrators in the change of transmission was more reliable.^[107] This hadith indicates that the last verse was actually 2:281 — one not mentioning riba.)^[108]

Raqiub Zaman argues against the orthodox translation of riba as any

"excess or addition — i.e. an addition over and above the principal sum that is lent." If Muslim jurists are referring to interest as usury on the basis of this literal meaning of riba, than naturally one wonders why God Almighty used the terms `doubling` and `quadrupling` (the sum lent) as usury in 3:130 ... and why there was no further clarification of this verse in the Quran or by the Prophet.^[45]

Taqi Usmani argues that the words "doubled" and "tripled" in the verse are not "restrictive" of the prohibition of riba, and like some other words in the Quran are not to be taken literally but are used "for emphasis or for explaining".^[109]

The background of these verses was the dispute between two clans, Banu Thaqif and Banu Amr ibn al-Mughirah. The verse is addressed to the Banu Thaqifa who insisted that they be able to collect riba from the Banu Amr ibn al-Mughirah for a loan made to them, despite having signed a peace treaty forgoing claims of riba.

According to Fofana, historically (most) jurists agreed on the prohibition of riba from these verses.^[59] Disagreeing with the orthodoxy is author/economist Muhammad Akram Khan who writes that since the verse ("O believers, fear you God; and give up the usury (riba) that is outstanding, if you are believers") is addressed to the Banu Thaqifa it is (according to Khan) a "specific reference" addressing a "historical situation" and does "not institute a law that could make dealings in riba a state crime."^[110]

source: wikipedia.org