What is ribā, and why is interest forbidden?
Ribā is a guaranteed increase on a loan of money — charging or paying interest for the use of money over time. It is prohibited in unusually severe terms, and both paying and receiving fall under it. The objection is not to profit; trade is explicitly permitted in the same verse. It is to money earning money with no risk taken and nothing produced.
The four schools concur on this.
The prohibition is stated alongside its own counter-example, which is what makes the reasoning visible:
“Those who consume interest cannot stand on the Day of Resurrection except as one stands who is being beaten by Satan into insanity. That is because they say, "Trade is just like interest." But Allah has permitted trade and has forbidden interest. So whoever has received an admonition from his Lord and desists may have what is past, and his affair rests with Allah. But whoever returns to dealing in interest or usury - those are the companions of the Fire; they will abide eternally therein.” (Qur’an 2:275)
The verse does not condemn making money. It contrasts two ways of doing it. In trade, you take a risk: you buy stock that might not sell, you do work that might fail, and your profit is payment for bearing that. In ribā, the lender takes no risk at all — the increase is fixed in advance and owed whether the borrower's venture succeeds or ruins them.
The warning that follows is among the strongest in the Qur’an: “O you who have believed, fear Allah and give up what remains due to you of interest, if you should be believers.” (Qur’an 2:278)
A few clarifications a beginner usually needs:
- It applies to both sides. Receiving interest on savings and paying it on borrowing are both included.
- It is about money lent for money returned. Profit from buying and selling, rent on property, wages for work and returns from a genuine partnership are different things and are permitted.
- Islamic finance exists to reconstruct ordinary transactions — a home purchase, a business loan — as sale, lease or partnership rather than lending at interest. Whether particular products succeed at that is debated by scholars, sometimes sharply.
What to do about interest you have already received is a common question. The usual guidance is not to keep it and not to consume it, but to dispose of it to someone in need without counting it as charity you are rewarded for.
What to do about a loan you are already in — a mortgage, a student loan — is a genuinely different question, and it is asked and answered separately.
- Qur’anQur’an 2:275
- Qur’anQur’an 2:278