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.
