In Article 1, we saw that ribā (usury/interest) is spiritually forbidden because it disconnects wealth creation from the real economy and transfers all risk to the borrower.
But technically, how do scholars (fuqahāʾ) identify ribā in a transaction? For that, one must delve into a foundational ḥadīth of Islamic jurisprudence that divides ribā into two major categories.
The Six-Category Ḥadīth (Ribawī Goods)
The technical foundation of the prohibition of ribā in commercial exchanges rests on this famous ḥadīth:
💡 Reference text
(Reported by ʿUbāda ibn al-Ṣāmit — Ṣaḥīḥ Muslim).
This ḥadīth lists six specific goods. Classical scholars (such as Ibn Taymiyya and Ibn al-Qayyim) extracted the legal cause (ʿilla) behind this list to apply it to other goods:
- Gold and silver represent money and means of exchange. Today, all fiat currencies (euro, dollar, dinar) fall into this category by analogy (qiyās).
- Wheat, barley, dates, and salt represent basic foodstuffs (that can be stored).
From this text, scholars distinguish two types of ribā.
1. Ribā al-Faḍl: Surplus (Exchange) Ribā
Ribā al-Faḍl occurs when one exchanges the same type of ribawī good (e.g. gold for gold, or wheat for wheat) with a difference in quantity.
The ḥadīth is explicit: exchanging gold for gold must be « equal for equal ». If you exchange 10 grams of 18-carat gold for 8 grams of 24-carat gold, you fall into ribā al-faḍl, even if market value is identical. Quality is not taken into account in a direct exchange of the same kind.
Why this rule? Scholars explain that ribā al-faḍl blocks the door (sadd al-dharāʾiʿ) to true usurious ribā. Preventing exchange of a currency against itself with a surplus prevents profit without a real economic cause. If you want better-quality wheat, Islamic law requires selling your wheat for money first, then buying the other wheat with that money.
2. Ribā al-Nasīʾa: Deferred Ribā
Ribā al-Nasīʾa (from the verb nasāʾa, to defer) is the most common and gravest form of usury. It is interest charged in exchange for granting a delay.
It appears in two cases:
A. Currency exchange with deferral
The ḥadīth states: « If the types differ, sell as you wish, provided it is hand to hand (yadan bi yadin). »
If you exchange gold for silver (or today euros for dollars), quantities may differ (according to the exchange rate). But the exchange must be immediate. Buying currencies and deferring payment falls under ribā al-nasīʾa.
B. Interest-bearing loans (pre-Islamic ribā)
This was the practice of the Jāhiliyya (pre-Islamic Arabia). A man would lend 100 dirhams for a year. At maturity, if the debtor could not pay, the creditor would say: « Pay now, or I increase the debt in exchange for a new delay. »
This principle encompasses every loan conditioned on a surplus. The golden rule in fiqh al-muʿāmalāt is: « Every loan that attracts a benefit (financial or in kind) is ribā. » (Kullu qarḍ jarra manfaʿa fahuwa ribā).
⚠️ Modern application
Installment sale vs. interest-bearing loan
This is the most frequent confusion.
« If I buy a phone cash, it costs €1000. If I buy it in installments from the merchant, he sells it for €1100. Is that not ribā? »
No. Sunni scholars (all four schools) largely agree that a seller may set a higher price for deferred payment (bayʿ bi al-taqsiṭ), provided that:
- The transaction is a genuine sale of a real asset (not a mere exchange of money).
- The price is definitively fixed at agreement (if it is €1100, it can never rise to €1200 even if payment is late).
In a conventional bank loan, the bank does not sell you a house or car. It lends you money to buy it, and you return more money. That is money producing money, without ownership of the asset (ribā).
Summary
- The six-category ḥadīth structures the prohibition of ribā around means of exchange (currency) and staple goods.
- Ribā al-faḍl: Forbidding exchange of the same currency (or staple) with a quantity difference, even immediately.
- Ribā al-nasīʾa: Forbidding currency exchange with deferral, and the absolute prohibition of any interest-bearing loan.
- Selling an item at a higher price with deferred payment is lawful (trade). Lending money with interest is unlawful (ribā).
If Islam forbids making money sterile through usury, how does the economy help the most destitute? That is where the third pillar of Islam intervenes: zakāt, the subject of our next article.