The document discusses arguments that have been made regarding the prohibition of interest (riba) in Islam and provides Quranic verses in response. It discusses five main arguments: 1) That the verses prohibiting riba were revealed late and the Prophet did not have time to interpret them; 2) That riba only refers to excessive interest on loans to the poor; 3) That riba does not apply to commercial loans; 4) That riba only prohibits increasing a debt over time, not pre-agreed interest; 5) That interest is necessary for modern economies. The document then provides answers to each argument based on Quranic verses and scholars, clarifying that riba is prohibited for all loans and interest-based

1. Historic
Judgment On
Interest
Arguments and Verses
In 1991 Federal Shariat Court fought 67 appeals with the
Supreme court of Pakistan for the elimination of interest as it is
strictly prohibited in Islam. In this report five arguments along
with their answers in the form of Quranic verses have been
given. It gives a clear picture regarding the prohibition of
Interest and adaptation of Islamic Banking as a logical solution
to avoid this economic ill.
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Submitted to Sir Shujaat Mubarik
Financial Institutions Section A
4/18/2012

2. HISTORIC JUDGMENT ON
INTEREST
GROUP MEMBER LIST
 Sahrish Darjat SP10-BB-0066
 Samreen Rasheed SP10-BB-0067
 Umaima Siddiqui SP10-BB-0075
 Urooj Sheikh SP10-BB-0076
 Kulsoom Usmaan SP10-BB-0026

3. ARGUMENTS
1. THE VERSES OF THE HOLY QUR'AN WHICH PROHIBIT RIBA WERE
REVEALED IN THE LAST DAYS OF THE LIFE OF THE HOLY
PROPHET, (S.A.W), AND HE DID NOT HAVE AN OPPORTUNITY
TO INTERPRET THEM PROPERLY.
2. THE SECOND ARGUMENT RUNS ON THE BASIS THAT THE WORD
'RIBA' REFERS ONLY TO THE USURIOUS LOANS ON WHICH AN
EXCESSIVE RATE OF INTEREST USED TO BE CHARGED BY THE
CREDITORS. AS FAR THE MODERN BANKING INTEREST, IT
CANNOT BE TERMED AS 'RIBA' IF THE RATE OF INTEREST IS NOT
TOO MUCH OR UNFAIR
3. THE THIRD ARGUMENT DIFFERENTIATES BETWEEN
CONSUMPTION OF LOANS AND COMMERCIAL LOANS.
 THE WORD "AL-RIBA" USED IN THE HOLY
QUR'AN IS RESTRICTED TO THE
INCREASED AMOUNT CHARGED ON THE
CONSUMPTION LOANS USED TO BE TAKEN
BY THE POOR PEOPLE FOR THEIR DAY TO
DAY NEEDS AND THE RICH PEOPLE USED
TO CHARGE HEAVY AMOUNTS FROM THEM.
 BUT THE MODERN COMMERCIAL LOANS
ARE CONCERNED, THEY WERE NOT IN THE
DAYS OF THE HOLY PROPHET, (S.A.W),
NOR HAS THE HOLY QUR'AN ADDRESSED
THEM WHILE PROHIBITING 'RIBA' AND
THE BASIC PHILOSOPHY OF 'RIBA' CANNOT
BE APPLIED TO THESE COMMERCIAL AND
PRODUCTIVE LOANS WHERE THE DEBTORS
ARE NOT POOR PEOPLE. IN MOST CASES
THEY ARE WEALTHY OR AT LEAST

4. ECONOMICALLY WELL-OFF AND THE
LOANS TAKEN BY THEM ARE GENERALLY
USED FOR GENERATING PROFITS.
THEREFORE, ANY INCREASE CHARGED
FROM THEM BY THE CREDITORS CANNOT
BE TERM AS ZULM (INJUSTICE) WHICH
WAS THE BASIC CAUSE OF THE
PROHIBITION OF 'RIBA'.
4. THE FOURTH SAYS THAT THE HOLY QUR'AN HAS PROHIBITED
RIBA-AL-JAHILIYYA. IN WHICH IF THE DEBTOR COULD NOT PAY
OFF THE LOAN AT ITS DUE DATE, THE CREDITOR WOULD GIVE
HIM MORE TIME AGAINST CHARGING AN ADDITIONAL AMOUNT.
ACCORDING TO THIS THEORY, IF AN INCREASED AMOUNT IS
FIXED IN THE INITIAL AGREEMENT OF LOAN, IT DOES NOT
CONSTITUTE RIBA AL-QUR’AN. HOWEVER, IT DOES FALL IN THE
DEFINITION OF RIBA-AL-FADL, PROHIBITED BY THE SUNNAH.
ITS PROHIBITION IS OF A LESSER DEGREE WHICH CAN BE
TERMED AS MAKROOH AND NOT HARAM.
5. THE FIFTH WAS THAT ALTHOUGH THE MODERN INTEREST-
BASED TRANSACTIONS ARE COVERED BY THE PROHIBITION OF
'RIBA', YET THE COMMERCIAL INTEREST IS THE BACK-BONE OF
THE MODERN ECONOMIC ACTIVITIES, NO COUNTRY CAN LIVE
WITHOUT BEING INVOLVED IN INTEREST-BASED TRANSACTIONS.
ISLAM, BEING A PRACTICAL RELIGION, RECOGNIZES THE
PRINCIPLE OF NECESSITY AND IT HAS ALLOWED EVEN TO EAT
PORK IN EXTREME SITUATION WHERE ONE CANNOT LIVE
WITHOUT EATING IT. THE SAME PRINCIPLE SHOULD BE
FOLLOWED, AND ON THESE BASIS OF THIS NECESSITY THE LAWS
PERMITTING THE CHARGE OF INTEREST SHOULD ALLOWED.

5. ANSWERS
1. The Holy Prophet (SAW) announced the prohibition of riba in his
last sermon during his last Hajj (10th year after Hijra).He also
declared that the first riba decreed to be void is the riba payable
to his uncle Abdul Muttalib (Radi-Allahu anhu). A deeper study
reveals that this argument is misconceived. In fact the prohibition
of riba was effective at least from the 2nd year of Hijra but the
Holy Prophet, Sall-Allahu alayhi wa sallam, deemed it necessary to
be announced at the time of his last sermon which was the most
attended gathering of his followers.
2. Imam Abubakr Al-Jassas (D.380 AH) in his famous work Ahkamul
Qur'an has explained riba in the following words:
"AND THE RIBA WHICH WAS KNOWN TO AND PRACTICED BY THE ARABS WAS THAT THEY USED TO
ADVANCE LOAN IN THE FORM OF DIRHAM (SILVER COIN) OR DINAR (GOLD COIN) FOR A CERTAIN
TERM WITH AN AGREED INCREASE ON THE AMOUNT OF THE PRINCIPAL ADVANCED."
IMAM ABUBAKR AL-JASSAS (D.380 AH)
3. They argued it is injustice to claim any additional amount on the
principal from a poor person, but it is not so in the case of a rich
man who borrows money to develop his own commercial
enterprise and earn huge profits through it. Therefore, it is only
the consumption loans on which any excess is termed as Riba and
not an increased amount charged on the commercial loans.

6.  Validity of a Transaction is not Based on the Financial Status of a
Party
 The Nature of Qur'anic Prohibitions
 Banking and Productive Loans in the Age of Antiquity
4. Two things discussed:
 Account of Riba al-Jahiliyya (Riba al-Qur’an)
"The Riba of Jahiliyya was a transaction whereby a person used to
sell a commodity for a price payable at a future specific date,
thereafter when the date of payment came and the buyer was not
able to pay, the seller used to increase the amount due and give
him more time."
 The seller used to keep on increasing the amount in
exchange of additional time given to the buyer.
 Also Known As Riba Al Quran and Riba Al Nasiah.
 'Riba al-fadl' or 'Riba-al-sunnah
It means that the quantity on both sides must be equal to
each other and if the quantity of any one side is more or less
than this transaction is also a Riba transaction, because in
the tribal system of Arab these commodities were used as
money. However, this transaction was termed as riba by the
Holy Prophet, Sall-Allahu alayhi wa sallam, and this meaning
was not covered by the term 'riba al-Jahiliyya'. Therefore, it
was called as 'riba al-fadl' or 'riba-al-sunnah'.
GOLD FOR GOLD, SILVER FOR SILVER, WHEAT FOR WHEAT, BARLEY FOR BARLEY,
DATE FOR DATE, SALT FOR SALT, MUST BE EQUAL ON BOTH SIDES AND HAND TO
HAND. WHOEVER PAYS MORE OR DEMANDS MORE (ON EITHER SIDE) INDULGES IN
RIBA."
“SIX COMMODITIES”

7. 5. We can compromise on extreme basis but not if we have a
solution for it. Islamic Banking should be implemented. Quran has
stated laws for economic transactions and Muslims should follow
these laws to keep their earnings RIBA free.

8. ACKNOWLEDGEMENT
We would firstly thank Almighty for granting us the resources, time and physical
ability to understand and spread the knowledge given to us.
Secondly, to our parents and teachers for trusting and believing in us.
Last but not the least our prestigious Mohammad Ali Jinnah University. Without
its repute and industrial exposure we wouldn’t have had such a broad platform
to enhance our careers.