Ribā or interest is sometimes defined as ‘the money paid
for the use of money borrowed’. This definition confuses some people and they
mix up ribā with rent, whereas the two are quite different from each other.
Rent is a payment made periodically for the use (not
consumption) of an asset, eg, for the use of some land, building, machinery,
On the other hand, any financial arrangement must qualify
two simultaneously present conditions to be classified as one containing ribā:
i) There is a predetermined fixed increment for the lender
over and above the commodity lent, and the increment must be paid back to the
lender within a specified period of time.
ii) The commodity lent is used up (consumed) by the
borrower, and then it is ‘re-created’ for the purpose of returning it to the
lender along with the fixed increment or interest.
Mr B rents his house to Mr A for one year at Rs. 500 per
month. If in one of these months Mr A does not have Rs. 500 to pay the rent, he
would have to only vacate the house, thereby returning the asset he was using.
He would not have to ‘re-create’ the building to return it back to the lender.
This arrangement involves rent not ribā.
But supposing Mr A had borrowed some wheat from Mr B for a
specified period of time and had to pay Rs. 100 every month as interest, this
arrangement would involve ribā. The reason is that Mr A would first use up
(consume) the wheat and then would have to ‘re-create’ it (or its value) to
return it to Mr B. If in a certain month Mr A did not have Rs. 100 to pay the
interest, Mr B, under this arrangement, would be demanding not only the
increment but also the ‘re-creation’ of the commodity lent.
In the first case, Mr A is never overburdened. If he is
unable to pay the rent, he would have to return the borrowed asset only.
However, in the second case, the lender has the legal right to demand not only
the remaining unpaid interest but also the ‘re-creation’ of the commodity lent
from a man who does not have even Rs. 100 to pay the monthly interest. The
second agreement involving ribā, therefore, is a clear case of gross
exploitation of the borrower. The only probable alternative left with Mr A in
such a case would be to sell his personal property to pay the interest and to
return the commodity borrowed.