In Islam, interest (Riba) is forbidden because it is seen as unjust enrichment, exploiting others’ needs, and undermining fairness and social justice.

The Qur’an explicitly prohibits Riba, and Islamic scholars emphasize that it distorts economic balance by rewarding money without risk or productive effort.

Why Interest (Riba) is Forbidden in Islam

Religious Foundations

• Qur’anic prohibition: The Qur’an condemns Riba in several verses (e.g., Surah Al-Baqarah 2:275–279), equating it with injustice and warning of severe consequences for those who persist in it.
• Hadith reinforcement: Prophet Muhammad (peace be upon him) strongly warned against Riba, describing it as one of the gravest sins.

Ethical and Moral Reasons

• Exploitation of need:
  • Interest takes advantage of borrowers, especially the poor, by charging them extra simply for access to money.
• Unjust gain:
  • It allows lenders to profit without effort, risk, or contribution to society, which Islam considers unethical.
• Wealth concentration:
  • Interest systems enrich the wealthy
  • while burdening the needy,
  • widening inequality.

Economic and Social Dimensions

• Discourages real investment:
  • Islam encourages trade,
  • entrepreneurship, and
  • risk-sharing.
• Interest-based lending shifts wealth without creating value.
• Creates instability:
  • Economies built on interest can lead to cycles of debt, poverty, and financial crises.
• Promotes fairness:
  • By forbidding Riba, Islam promotes profit-and-loss sharing, ensuring both parties bear risk and reward.

Broader Wisdom

• Islam views money as a medium of exchange, not a commodity to be rented out for profit.
• The prohibition of Riba aligns with Islam’s larger vision of justice, compassion, and community welfare.

CONCLUSION

Interest is forbidden in Islam because it violates justice, exploits human vulnerability, and undermines social harmony.

Instead, Islam promotes ethical finance based on risk-sharing, fairness, and real economic activity.

Islamic banking is accepted by many scholars, but some Muslims question whether certain modern practices truly avoid interest in spirit, making this an internal ethical discussion rather than a rejection of Islam or modern finance.

Islam strictly prohibits interest because it is seen as exploitative and unjust. Modern Islamic banking was created to avoid this, and many Muslim scholars accept it as legally permissible under Islamic law.

However, some Muslims—including myself and a number of respected scholars—remain uncomfortable with certain practices, especially when transactions only differ from conventional interest in form but not in economic reality. When buying and selling are only technical or symbolic, the ethical spirit of the prohibition can feel lost.

This is not a rejection of Islamic banking, but an internal moral debate within Islam—similar to ethical debates in other faiths about capitalism, usury, or social justice. It reflects Islam’s emphasis not only on legal rules, but also on fairness, transparency, and genuine risk-sharing.

NOTES FOR THOSE INTERESTED TO KNOW INDEPT ANALYSIS ABOUT ISLAMIC BANKING

1. The mainstream / majority scholarly position

Most contemporary scholars who serve on Shariah boards of Islamic banks (including scholars from Al-Azhar, OIC Fiqh Academy, AAOIFI) hold that:

• Instruments such as Murābaḥah, Ijārah, Mushārakah, and Muḍārabah are technically valid contracts in classical fiqh.
• Even if the economic outcome resembles interest, the legal form matters in Islamic law.
• As long as:
  • ownership formally transfers,
  • risk exists at least momentarily,
  • and contracts meet fiqh conditions,
  then the transaction is halāl, though sometimes makrūh (disliked).

Their argument:

“Ribā is prohibited because of its legal structure, not merely its economic similarity.”

They often justify current practice as:

• ḍarūrah (necessity) in a ribā-based global system
• or ḥājah ‘āmmah (widespread need)

2. Critical scholars — including respected traditional authorities

A significant number of scholars strongly agree with your discomfort.

They argue that much of modern Islamic banking is:

• ḥīlah (legal trickery) to bypass ribā
• “Ribā with Islamic labels”
• A betrayal of the moral objective (maqāṣid) of Sharīʿah

Scholars often cited in this camp include:

• Shaykh Taqi Usmani (despite serving on boards, he openly criticised Islamic banks)
• Shaykh Wahbah al-Zuhayli (late)
• Dr. Monzer Kahf
• Dr. Mahmoud El-Gamal
• Shaykh Abdal Hakim Murad (Timothy Winter) — cautious and critical
• Many independent Salafi and traditional fiqh scholars

Their key objections match exactly what you said:

• “Buying and selling imaginary bricks”
• No real commercial risk
• Pre-fixed profit identical to interest
• Benchmarking against LIBOR / KIBOR / conventional rates
• Banks behaving like creditors, not partners

Shaykh Taqi Usmani famously said:

“Most of the products offered by Islamic banks today do not genuinely fulfill the spirit of Islamic finance.”

3. The key juristic divide

This is the core disagreement:

A. Form-based jurists

• Law judges external compliance
• If contract structure is sound → valid
• Accepts imperfect implementation

B. Maqāṣid-based jurists

• Law judges economic reality
• If outcome replicates ribā → impermissible
• Rejects legal stratagems (ḥiyal)

You clearly align with the second approach.

4. Classical precedent supports your concern

Classical scholars warned strongly against this exact behaviour:

• Imām Mālik rejected sales that merely disguise loans
• Imām Ibn Taymiyyah condemned sales that functioned as ribā
• Imām Ibn al-Qayyim wrote extensively against legal tricks

They argued:

“Changing names does not change realities.”

5. What many sincere Muslims do in practice

Among conscientious Muslims (including scholars):

• Avoid debt entirely unless unavoidable
• Prefer:
  • cash purchases
  • co-operative models
  • real equity participation
• Use Islamic banks only as a lesser evil, not as ideal

Some scholars explicitly say:

“If you feel moral certainty that a product is ribā in disguise, avoid it.”

6. A balanced conclusion

You are not rejecting Islam, not being extreme, and not alone.

• Your position is within orthodox Islamic discourse
• Many scholars share your discomfort
• Islamic banking today is often legally Sharīʿah-compliant but ethically weak

A well-known summary statement is:

“Islamic banking exists, but Islamic finance does not yet.”