Legal Definition of Interest (Riba)
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Riba Usury, as defined in “A Dictionary of Islam” by Thomas Patrick Hughes, Lahore, 1964, page 544 means “A term in Muslim law defined as “an excess according to a legal standard of measurement or weight, in one or two homogeneous articles opposed to each other in a contract of exchange, and in which such excess is stipulated as an obligatory condition.
The word riba appears to have the same meaning as the Hebrew neshec, which included gain, whether from the loan of money, or goods, or property of any kind. In the Mosaic law, conditions of gain for the loan of money or goods were rigorously prohibited. See Exold. xxii. 25; Lev. xxv. 36
Therefore, Riba includes both `usury’ and `interest’ as known in English terminology. In legal sense, it is that excess amount which a “Creditor” settles to receive/or recover from his “Debtor” in consideration of giving time to the said debtor for re-payment of his loan. Imam Tabri (d.310 A.H.) in Tafseer Tabri(Vol. III, p.64) commenting on the Qur’anic verse writes that:-
Riba is that increase (financial) which an owner of valuable property (Mal) receives from his debtor for giving him time to repay his debt.
Ibn al-Athir, in his famous work Kitab al-Nihavah fi-Gharib al-Hadith wa’1-Athar Cairo, 1322 A.H. Vol. 11, p. 66 says, The original meaning of riba is excess and in the terminology of the Shari’ah.
Ibn ‘Arabi in his noted work, Ahkam al Qur’an, Cairo, 1957, Vol. 1, p. 242 has defined riba to be the name of every increase in lieu of which there is no consideration viz. property.
This is the definition which Allama Burhanuddin al-Marghinani (d. 593 A.H.) has also stated in his famous book, Al-Hidayah (See Al-Hidayah, Qur’an Mahal, Karachi, Kitab-al-Buu’ Sing. Bai (Sale) Chapter on Riba (Vol. III, p.78), which reads as under:-
Riba, in law, signifies an excess (increase) in a (loan) contract in which such’ excess is stipulated as an obligatory condition on one of the parties, without any return, i.e. without any property (Mal), in exchange. (See Book XIV on Sale Chapter VIII on Riba or usury. Hidayah, English Translation by Hamilton, Lahore, page 289), Imam Fakhrud-Din Al-Razi (d. 606 A.H.) in his well-known Tafsir al Kabir writes that the meaning of the word Riba is increase but it does not mean that to recover every kind of increase is Riba and is unlawful . The forbiddance of Riba relates to a special kind of contract which was known amongst the Arabs as Riba al Nasiyah i.e. increase on debt. (The other kind of riba called “Riba al-Fadl” is outside the scope of the present discussion).
Al-Jassas in Ahkam al-Qur’an (Istambol, 1335 A.H. Vol. 1, p.469) defines the term `riba’ as follows:
Riba is the loan given for a specified period on condition that on the expiry of the period, the borrower will repay it with some excess.
Even in common law parlance “interest” has been held as “The excess over the original advance is certainly the compensation which the creditor gets for lending his money for the particular period. The fact that it is not described in so many words as interest will not alter its character”. (A I R 1944 Mad. 243).
Halsbury’s Laws of England, Vol. 23, S. 253 defines interest as follows:–
“Interest when considered in relation to money denotes the return of consideration or compensation for the use of retention by one party of a sum of money or other property belonging to another.”
It can thus be concluded that interest is not an increase simpliciter but in the Shari’ah it is a special kind of increase, otherwise in Bai’ (sale), there is an increase which is termed as profit, whereas Riba is the consideration or compensation for the period of re-payment of loan. Since this `period’ is not a valuable property (Mal), its return has been declared as unlawful, whether it be money or any other thing. In other words, wherever there is money from the One Part and there is only grace period or deferment of the repayment of loan on the other, and for that a `return’ is stipulated it is Riba. On a careful study of several forms of commercial activities and credit transactions, prevalent among Arabs during the period of Holy Prophet a transaction which contains excess or addition over and above the principal amount of loan, which is predetermined in relation to time or period to be conditional on the payment of that pre-determined excess or addition, payable to the creditor (such a transaction containing the said elements) constitutes Riba and any sale, transaction or credit facility, in money or in kind, has been considered to be a transaction of Riba, which is unlawful.