Some of the ideas mentioned in this paper were presented in their preliminary form in my Ph.D. thesis ‘An Enquiry into the Basic Concept of Banking as Perceived by the Spirit of Islamic Economic Justice’. This article is a considerably modified version of those initial ideas. See Zaheer 1994, pp. 50-54

Abstract

An important instruction found in narratatives of the Prophet of Islam (sws) regarding Ribā (interest) is reported in the following way: ‘If you give gold, then receive back the same gold: the same weight and the same quality; and if you give silver, then receive back the same silver: the same weight and the same quality, because the one who gives more or expects more, then [he should know that] that is exactly Ribā.’ (Muslim 1981, p. 211) In another narration he is reported to have said: ‘If you will sell gold for silver then there is a danger of interest in it. [Likewise, if you will sell] wheat for wheat, barley for barley and dates for dates, the result would be no different; [there is no way of avoiding the danger of Ribā in a barter transaction] except that the exchange be spot’. (ibid., p. 208)

The two narrations mentioned above along with many other similar ones have led many Muslim writers to conclude that apart from interest on credit transactions (called Ribā al-Nasī’ah), the Prophet (sws) in these narrations, has prohibited another kind of Ribā: Ribā al-Fadl (interest in excess). In their opinion this kind of Ribā is associated with spot exchange of dissimilar commodities. According to them, the Prophet (sws) had strongly emphasized that while exchanging the same commodities like gold for gold, silver for silver, wheat for wheat, barley for barley etc. on the spot it is extremely important that equal quantity and the very same quality of these goods should exchange hands. Many Muslim writers find themselves at a loss to appreciate the very suggestion that two individuals can ever contemplate the possibility of entering into an exercise of exchanging two identical commodities on spot. However, most of them still accept that Ribā al-Fadl is another form of Ribā prohibited in Islam by presenting one unconvincing rationale for their understanding of the concept or another.

Javed Ahmad Ghāmidī has pointed out that the narrations claimed to be condemning Ribā al-Fadl have been incorrectly understood and that if their correct context is properly explained, they would appear to be clearly explaining the idea of the same concept of Ribā that is mentioned in the Qur’ān (Ribā al-Nasī’ah). This clarification about Ribā is extremely important for the academic world to acknowledge, because as it stands today, the literature on Islamic Finance and Economics is presenting very strange applications of the concept of Ribā al-Fadl, which are not only unnecessarily confusing but are also being applied in areas of business and finance where their application was never intended. This article is an explication of Ghāmidī’s views and an academic case for the unacceptability of Ribā al-Fadl as an Islamic term.

1. Introduction

The Qur’ān, the primary book of guidance for Muslims, prohibits believers from entering into Ribā-based financial arrangements.1 The understanding of a vast majority of Muslim scholars on this injunction is that it outlaws all forms of interest-based borrowing and lending (Siddiqi 1983, 9).2 However, most Muslim scholars include within the scope of the prohibition of Ribā3 another type of it, which they call Ribā al-Fadl. Since the entire understanding of the notion of Ribā al-Fadl is based on the incidents from the life of the Prophet (sws), God’s mercy be on him,4 reported in Ahādīth,5 and the Qur’ān is completely silent on the subject, the alleged understanding of Ribā is also called Ribā al-Sunnah (Ribā, whose understanding has been derived from the example of the Prophet (sws)).6 This article attempts to show that the Prophet (sws) clarified only the meanings of the Qur’ānic concept of Ribā. Furthermore, it also explains that some of the statements of the Prophet (sws) and incidents reported from his life relevant to this area have been erroneously construed as conveying the understanding of another category of Ribā, the traditional Muslim understanding of which has caused unnecessary confusions.

2. What is Ribā Al-Fadl

Ribā al-Fadl is described as an unlawful excess in the exchange of two counter-values where the excess is measurable through weight or measure. The concept is based on some Ahādīth according to which if gold, silver, wheat, barley, dates, and salt are exchanged against themselves, they should be spot and equal and specified. If these conditions are not found, this transaction will become Ribā al-Fadl. (Usmani, I. 2002, p. 253)

3. Ahādīth mentioning Ribā al-Fadl

Although there are myriad Ahādīth on the subject of Ribā al-Fadl mentioned in the books of Hadīth literature, the following represent almost all of them, since those missed almost repeat what has been mentioned in these Ahādith7.

--Ribā Al-Fadl in Gold, Silver, Wheat etc:

i.a.8 Narrated ‘Umar: The Prophet said, ‘The selling of wheat for wheat is Ribā except if it is handed from hand to hand and equal in amount. Similarly the selling of barley for barley is Ribā except if it is from hand to hand and equal in amount, and dates for dates is Ribā except if it is from hand to hand and equal in amount.’ (Bukhārī 1985, h. 2026)

ii.a. Narrated Ibn Shihāb that Malik Ibn Aws said: ‘I was in need of change for one-hundred Dinars. Talhah Ibn ‘Ubaydullah called me and we discussed the matter, and he agreed to change (my Dinars). He took the gold pieces in his hands and fidgeted with them, and then said: ‘Wait till my storekeeper comes from the forest.’ ‘Umar was listening to that and said: ‘By Allah! You should not separate from Talhah till you get the money from him, for Allah’s Apostle said: ‘The selling of gold for gold is Ribā except if the exchange is from hand to hand and equal in amount, and similarly, the selling of wheat for wheat is Ribā unless it is from hand to hand and equal in amount, and the selling of barley for barley is Ribā unless it is from hand to hand and equal in amount, and dates for dates, is Ribā unless it is from hand to hand and equal in amount’. (ibid. h. 2029)

iii.a. Narrated Abū Hurayrah: The Prophet said: ‘If you give gold, then receive back the same gold: the same weight and the same quality; and if you give silver then receive back the same silver: the same weight and the same quality, because the one who gives more or expects more, then that is exactly Ribā’. (Muslim 1981, p. 211)

iv.a. Narrated by Talhah Ibn ‘Ubaydullāh: ‘Umar Ibn Khattāb said that the Prophet said: ‘If you will sell gold for silver then there is a danger of interest in it. [Likewise, if you will sell] wheat for wheat, barley for barley and dates for dates, the result would be no different; except that the exchange be spot.’ (ibid., p. 208)

-- Ribā Al-Fadl in the Trading of Dates:

i.b. Narrated Ibn ‘Abbās: The Prophet came to Madīnah and the people used to pay in advance the price of dates to be delivered within two or three years. He said [to them]: ‘Whoever pays in advance the price of a thing to be delivered later should pay it for a specified measure at specified weight for a specified period.’ (Bukhārī op. cit., h. 2086)

ii.b. Narrated Abū Sa‘īd Al-Khudrī and Abū Hurayrah: Allah’s Apostle employed someone as a governor at Khaybar. When the man came to Madīnah, he brought with him dates called Janib. The Prophet asked him: ‘Are all the dates of Khaybar of this kind?’ The man replied: ‘(No), we exchange two Sā‘ of bad dates for one Sā‘ of this kind of dates (i.e. Janib), or exchange three Sā‘ for two’. On that, the Prophet said: ‘Don’t do so, but sell the dates of inferior quality for money, and then buy Janib with the money’. The Prophet said the same thing about dates sold by weight. (Muslim op. cit., p. 215)

iii.b. Narrated Abū Sa‘īd Al-Khudrī: Once Bilāl brought Barni (i.e. a kind of dates) to the Prophet and the Prophet asked him: ‘From where have you brought these?’ Bilāl replied: ‘I had some inferior type of dates and exchanged two Sā‘ of it for one Sā‘ of Barni dates in order to give it to the Prophet to eat.’ Thereupon the Prophet said: ‘Beware! Beware! This is definitely Ribā! This is definitely Ribā! Don’t do so, but if you want to buy [ superior kind of dates] sell the inferior dates for money and then buy the superior kind of dates with that money.’ (ibid.)

iv.b. Narrated Zaid bin Thābit: The Prophet permitted selling the dates of the ‘Araya for ready dates by estimating the amount of the former (as they are still on the trees). (Bukhārī op. cit., h. 2044)

4. Consequences of accepting Ribā al-Fadl?

The following are some of the implications of Ribā al-Fadl in the contemporary commercial dealings that have been imagined by some Muslim writers:

i) There should be a ban on money-changers trading the same currency (dollar for dollar for instance) on unequal terms.9

ii) Goldsmiths should be required to exchange old jewelry for the new on the basis of weight (after separating the precious stones) without applying a cut for any impurity in gold or making a claim for their manufacturing costs.

iii) Indirect means should be adopted to exchange goods belonging to the same category but having different qualities. (IIIE’s Blueprint 1999, p. 41)

5. Rational Justifications and Reasons for their Unacceptability

There are numerous explanations attempted by scholars to offer rational justifications for the proscription of Ribā al-Fadl. This section mentions only a few of them, with each mention followed by my comments.

Hardie and Rabooy have suggested that the injunction on Ribā al-Fadl had the effect of discouraging barter, unless it could fulfill very specific requirements, and encourage people to use cash transactions in business deals’ (Hardie and Rabooy, op. cit., p.58). Indeed if the Ahādīth on Ribā al-Fadl are accepted the way many of them appear in the books of the Hadīth literature, then no barter trade can ever be undertaken by Muslims since the only barter that seems to have been allowed in these Ahādīth is the exchange of similar goods on spot.10 Muslims have, however, never considered barter trade illegitimate. Moreover, the ‘very specific requirements’ suggested in the explanation have not been clarified by the authors any further. The only type of barter that seems to be legitimate on the basis of these Ahādīth would require the commodities to be identical in all respects, which is a condition that can fulfill no business requirements at all.

Another explanation presented is this: ‘Debasing of currency was widely practiced; to protect ignorant people from deception and fraud [therefore,] it was necessary to establish certain measures to introduce well defined criteria’ (Kabbara 1988, 81). Without any supportive evidence, this argument cannot be accepted as valid. The onus of proving that at the time of the Prophet (sws), debasing of currency was actually widely practiced and that he condemned exchange of debased coins with the genuine ones is on those who have made that claim. Moreover, it is not just gold and silver which are mentioned in the Ahādīth of Ribā al-Fadl; wheat, barley, dates, and salt have also been included in the list of items prohibited in the exchange allegedly causing Ribā al-Fadl. How do these commodities help remove the problem of debased currency?

Mawdūdī has attempted to rationalize Ribā al-Fadl differently. He has argued that the commodities proposed to be exchanged in the Ahādith, although falling under the same category, are those with slight variations in quality. In other words, according to him, if one quality of gold is to be exchanged with another of a different quality, then the Ahādīth require that the differences of quality be ignored and the very same quantity or weight of both should be exchanged on spot (Mawdūdī 1992, p. 174). The difficulty one finds in accepting this explanation is that the Hadīth of the Prophet (sws) quoted above does mention the same quality to be exchanged along with the same quantity.11 Secondly, it looks even more unacceptable to imagine that a person would knowingly commit himself to a bargain whereby he is required to give a superior quality of his gold to another person for inferior quality gold of exactly the same weight. It would indeed be unfair to expect the former to agree to any such deal. Surprisingly, the same author allows the exchange of the same category of animals in dissimilar numbers because he believes that there can be huge variations in the quality of the same category of animals (ibid., 181-2).

According to another explanation presented to rationalize Ribā al-Fadl, it was a significant step to elevate trade from narrow regional and national limits to international horizons. This injunction was meant to discourage exchange of metallic coins with face values different from their real intrinsic values in international trade (Sioharvi 1984, p. 275). The same author, a few pages later, reveals another reason behind the apparent injunction: to discourage people from accumulating the commodities mentioned in the Hadīth because ‘by prohibiting Ribā al-Fadl, situation has been created whereby people do not sell gold, silver, and identical commodities, because exchanging a like commodity for another identical one is a futile exercise’ (ibid., p. 280). It seems as difficult to understand what these Ahādīth have to do with the exchange of face value of coins with their intrinsic values as it is to appreciate how by banning unequal spot exchange of gold and silver their accumulation could be discouraged.

Ghazālī understood from the apparent restriction of Ribā al-Fadl yet another purpose. According to him, since gold and silver were meant to be used as currency in the divine scheme, their sale for each other in dissimilar quantities was considered contrary to that purpose (Ghazālī n.d., pp. 68-9). Use of gold and silver as currency is, however, now a thing of the past. Its use as a currency has become extinct because the two metals are available in far less volume than would be necessary to meet the growing needs of the world. It could not have been an unalterable part of the Divine Scheme. Moreover, if that is the explanation for prohibition of sale of gold for gold, silver for silver, and gold for silver then what about the other non-metallic commodities mentioned in the Ahādīth in whose case similar exchange has likewise been prohibited?

Ibn Qayyim, on the contrary, believes that Ribā al-Fadl has been prohibited not for its own sake but because, if allowed, it could lead to the real Ribā al-Nasī’ah12 (Ibn Qayyim 1374 H., Vol. 2 pp. 99-100). Although this explanation seems to be the least unacceptable of all, the trouble with accepting it is that, as mentioned in a Hadīth quoted later, Ribā is to be found in credit transactions alone and has nothing to do with spot exchange of commodities.13 Far from helping in consolidating the prohibition of Ribā, the so-called Ribā al-Fadl has helped in confusing the entire concept of it.14

It is interesting to observe that some modern Muslim economists mention Ribā al-Fadl but carefully omit to make any comments on it.15 I heard the late Shaikh Mahmud Ahmad, an enlightened Muslim economist, expressing his inability to appreciate the reasons behind the concept of Ribā al-Fadl and its alleged prohibition.16 Ibn Qayyim writes that many people in his days were oblivious of the real rationale behind the prohibition of Ribā al-Fadl. So much so that some of the scholars did openly admit that they failed to appreciate the logic behind it. (Ibn Qayyim 1374 H., vol. 3., p. 204) Likewise, in the contemporary Muslim writings on the subject there is a strong need expressed to do something about this concept. The Report of the International Institute of Islamic Economics Workshop on Islamization of the Financial System says: ‘Ribā is Ribā. The traditional dichotomy between Ribā al-Nasī’ah and Ribā al-Fadl (sic.), in the Fiqh literature needs reconsideration. It does not serve any new purpose, to say the least.’ (IIIE’s Report 1999, p. 41)

6. The Correct Understanding

It is my firm opinion that  Ahādīth have not attempted to define Ribā. The Qur’ān has done that quite adequately.18 Any further attempt in a relatively less reliable source of knowledge would have been, at least, unnecessarily repetitive or, worse still, confusing because of the danger of misreporting. Hadīth has, well within the jurisdiction given to it by the Qur’ān19, clarified Qur’ānic teachings about Ribā by removing misunderstandings about it and explaining its application in certain areas of business.

If the Ahādīth of Ribā al-Fadl are properly interpreted, they serve to clarify two important aspects relevant to the prohibition of Ribā: one that Ribā is only applicable to credit dealings and, two, that while dealing with loan transactions, it is absolutely essential that what is returned by the borrower should be identical to the item he borrowed, otherwise it is very likely to cause the transaction to be Ribā-ridden.

The following presentation of Ahādīth would clarify the correct understanding on the subject. In order to properly understand the meanings of the Ahādīth, the translations given below arrange to insert within brackets the words that either seem to have been implied when the Prophet (sws) made the statements or else were missed out in the process of communication between the individuals forming the chain of narrators during the two centuries when only the memories of the narrators were accommodating them.20 Thus the correct understanding is that the following is a more correct presentation of Hadīth iii.a:21. ‘If you give [on credit] gold, then receive back the same gold: the same weight and the same quality; and if you give silver [on credit], then receive back the same silver: the same weight and the same quality, because the one who gives more or expects more, then [he should know that,] that is exactly Ribā.’ Likewise, a more correct translation of iv.a. is this: ‘If you will sell gold for silver [on credit] then there is a danger of interest in it. [Likewise, if you will sell] wheat for [another kind of] wheat, barley for [another kind of] barley and dates for [another kind of] dates, the result would be no different; [there is no way of avoiding the danger of Ribā in a barter transaction involving the same commodity] except that the exchange be spot.’22

Likewise the Prophet (sws) has also been reported to have prohibited people from selling silver on credit to receive gold (Hadīth iva). The Prophet (sws) categorically stated that the question of Ribā relates to exchanges involving credit and has nothing to do with spot exchanges. He is reported to have said: ‘What is [exchanged] on spot, there is no problem [of Ribā] in that but that which is [exchanged] on credit [and there is a variation in the value of commodities exchanged] then that is Ribā’ (Muslim, op. cit., vol. 4, p. 211).23

Likewise, the following two Ahādīth can’t be accepted unless we accept that the question of time lag was implied in the statement. If that is not accepted then these Ahādīth are in direct conflict with the Ahādīth i.b and iv.b.

ii.b. Narrated Abū Sa‘īd Al-Khudrī and Abū Hurayrah: Allah’s Apostle employed someone as a governor at Khaybar. When the man came to Madīnah, he brought with him dates called Janib. The Prophet asked him: ‘Are all the dates of Khaybar of this kind?’ The man replied: ‘(No), we exchange two Sā‘ of bad dates for one Sā‘ of this kind of dates [on credit], or exchange three Sā‘ for two [on credit]’. On that, the Prophet said: ‘Don’t do so, but sell the dates of inferior quality for money, and then buy Janib with the money’. The Prophet said the same thing about dates sold by weight.

iii.b. Narrated Abū Sa‘īd Al-Khudrī: Once Bilāl brought Barni (i.e. a kind of dates) to the Prophet and the Prophet asked him, ‘From where have you brought these?’ Bilāl replied, ‘I had some inferior type of dates and exchanged two Sā‘ of it for one Sā‘ of Barni dates in order to give it to the Prophet to eat.’ Thereupon the Prophet said, ‘Beware! Beware! This is definitely Ribā! This is definitely Ribā! Don’t do so, but if you want to buy (a superior kind of dates) sell the inferior dates for money and then buy the superior kind of dates with that money.’

In the Hadīth i.a,24 the word selling should be read as ‘selling on credit’, which is clarified in the subsequent part of Hadīth that allows selling them ‘hand to hand and equal in amount.’ This expression is clarifying only the unacceptability of a commodity on credit for an inflated return.25  In other words, ‘except hand in hand’ is disallowing what is not ‘hand in hand’ i.e. credit. Likewise ‘except … equal in amount’ is disallowing what doesn’t fall into this category i.e. unequal amount.

What proceeds from this explanation is the fact that it is allowed to go for a financial deal or a business transaction which involves any of the two conditions mentioned, but not both. Thus it is allowed to exchange identical commodities and therefore values on credit (the possibility of indexation in a loan agreement)26 and it is allowed to exchange unequal weights and qualities of commodities on spot.27

7. Consequences of this Understanding

i. Conceptual Clarity

The correct understanding of Ahādīth on the subject would enable the debate on Ribā to be focused on the real issue of the prohibition of interest. Unnecessary references to an imagined notion would give rise to distractions which only serve to confuse. For instance, Vogel and Hayes have concluded after mentioning the complexities of issues emerging from the concept of Ribā al-Fadl that it ‘vetoes a naïve understanding of Ribā as simply a ban on compensation of credit.’ (Vogel and Hayes 1998, p. 76). What has emerged as a consequence of accepting the notion of Ribā al-Fadl is a weird, quite often incomprehensible, set of rules of Ribā and their moral and logical justifications that normally escape comprehension of a normal, intelligent mind.28

ii. Freedom from Unnecessary Restrictions

Although the difficulties posed by the concept of Ribā al-Fadl are primarily conceptual, the few uncalled for restrictions mentioned in Section 4 above will become unnecessary.

iii. Prohibition of Certain Forms of Financial Arrangements

Another consequence of this understanding would be that inflated price for credit sales (bay‘ murābahah) and cash purchases for deflated price (bay‘ sālim) will have to be considered prohibited. The reason for this conclusion is that as a result of the proper placement of Ahādīth that were hitherto alleged to be proscribing the imaginary notion of Ribā al-Fadl it has become obvious that in a loan transaction the obligation a borrower must discharge is the return of the same value. In bay‘murābahah and bay‘ sālim the borrower (euphemistically called the buyer in bay‘ murābahah and seller in bay‘ sālim) returns more. A vast majority of the present-day Muslim scholars accept both as Islamically legitimate. In fact the contemporary banking in the name of Islam (the so-called Islamic Banking) is based on bay‘ murābahah to a great extent and on bay‘ sālim to a lesser degree.29  

8. What are the Reasons of the Misunderstanding?

i. Sidelining the Qur’ān

The supporters of the concept of Ribā al-Fadl don’t accept the Qur’ān as the unchallengeable original text whose meanings can’t be altered by any external source.30 As a result, they don’t have any problems in allowing Ahādīth to insert meanings into the Qur’ānic text that its unbiased understanding can’t accept. The fact of the matter is that the Qur’ān cannot be altered in any manner by an external source.31 Alterations in the Qur’ānic text allowed by Muslim scholars have taken many forms, like restricting meanings of its message, inserting into its text what it refuses to accept, or explaining a term used in the Qur’ān in a manner that runs contrary to its own basic understanding. The notion of Ribā al-Fadl attempts to alter the Qur’ān in the last way. The Prophet’s obligation was to explain the Qur’ān. The traditional understanding of Ribā al-Fadl is not explaining it; instead, it is adding a dimension in the scope of its meanings which has nothing to do with the original injunction.32

The correct approach in pursuing to understand the meaning of Ribā al-Fadl should involve, as has been attempted in section 6, an explanation of the meanings of the Ahādīth on the subject that promise consistency with the Qur’ān. In other words, instead of allowing Ahādīth to dictate meanings to the Qur’ān, it is the Qur’ān that should have been allowed to give meanings to Ahādīth.

ii. Elevating Hadīth to the Status of Unchallengeable Source

The reason why the simple and clear-cut guidance of the Prophet (sws) has been so badly misunderstood is that many Muslims have tended to be too credulous in the matter of Hadīth. Although the Ahādīth of the Prophet (sws) quoted above make it quite obvious that the arrangement condemned is relating to credit transactions alone, there are many other Ahādīth in the books of Hadīth literature on the same subject which do not make that point clear.33 Some Muslim writers insist on accepting each word in the Ahādīth as if they were the very words of the Prophet (sws) instead of trying to make sense out of them by carefully studying all the Ahādīth relating to a subject. The result is that they find themselves in difficulty in understanding some of the concepts of Islam properly.34

The correct way of dealing with Hadīth literature is to collect all Ahādīth on a subject together in such a way that the ones promising to be consistent with the Qur’ān should be accepted while others not in line with it should be explained away in some acceptable way. The following are some of the reports that clarify that Ribā al-Fadl is unacceptable:

Ibn ‘Abbās quotes Usāmah Ibn Zayd who said that the Prophet of Allah, may Allah’s blessings be upon him, said: ‘There is no Ribā in spot exchanges’ (Muslim op. cit., 219). He is also reported to have clarified that ‘There is no Ribā except on credit.’ (Bukhārī op. cit., h. 2023)35 Moreover, the Prophet (sws) is reported to have bought a slave for two slaves in a spot transaction (Abū Dā’ūd 1985, p.954). It is reported that Ibn ‘Abbās, a companion of the Prophet (sws), did not accept Ribā al-Fadl because, as he said, the Prophet (sws) had clarified that there was no Ribā except in credit (Nasī’ah) (Ibn Rushd 1983, p. 153). No wonder, then, that all differences of opinion among the earlier Muslim jurists with regard to Ribā have been concerning Ribā al-Fadl alone.36

iii. Blind Acquiescence to the Views of Elders (Taqlīd)

The tendency amongst Muslim scholars of the later times to consider the views of earlier scholars as sacred has contributed greatly in perpetuating the concept of Ribā al-Fadl. When the right of forming opinions is reserved exclusively for the people of the earlier generations and any inclination to critically review their understanding is considered almost a sin, it is quite understandable that a mistake like the incorrect understanding of Ribā al-Fadl, once committed by the elders continues to pass on from generation to generation unchallenged.

The present body of knowledge that has been conferred the title of Islamic Economics accepts the views expressed by the earlier jurists, especially in areas where they all tend to agree, as authentic beyond the scrutiny of all critical examination. When a concept becomes sacred through Taqlīd, it hardly matters to the people of later generations whether it runs contrary to the Qur’ānic understanding of Ribā, or it clearly creates contradiction in the text of Hadīth literature, or there is a strong disapproval expressed by a knowledgeable companion of the Prophet (sws) on it.37 The very fact that it has been approved by the earlier people is considered enough reason to dispel all contesting arguments against it.38  

9. Conclusion

The only Ribā prohibited in Islam is the one mentioned in the Qur’ān, which is, simply stated, interest charged by lender from the borrower, whether the loan is taken for commercial purposes or for personal needs. The Prophet (sws) applied the understanding of Ribā in the practical life and taught his followers various aspects of its application.39 His teachings and practices were later mentioned in books of Hadīth. Since these Ahādīth involved chains of narrators involving four or five individuals belonging to different generations spread over a period of more than two hundred years, the contents of some of these reports got altered in a way that the basic understanding of the message was affected. As a result, some Ahādīth on the subject conflicted with the Qur’ān and other Ahādīth. Instead of finding consistency between the Qur’ān and the Ahādīth on the one hand and different Ahādīth on the subject on the other, many Muslim scholars insisted that all Ahādīth that satisfied the condition of reliability established by the doctors of Hadīth called muhaddithūn should be acknowledged as fully acceptable.

As a result, the concept of Ribā al-Fadl has come to be accepted by a vast majority of Muslim scholars, even though it is illogical and, as a result, apparently extremely complex when attempts are made to bring out a consistent law of Ribā on the basis of it.40

This article has proposed to either do away with or modify those aspects of Ahādīth on the subject that threaten to be inconsistent with the Qur’ānic concept of Ribā and read through them a message that promises to explain clearly the Qur’ānic verses on the topic as a coherent message instead of confusing it. The most plausible explanation that emerges as result of the above-stated concern is that the Ahādīth on Ribā are clarifying two things: i) the Qur’ānic prohibition of Ribā is concerned with credit exchange. ii) In case of an arrangement of credit, when the loan period lapses, it is necessary that the borrower should return absolutely the same value to the lender otherwise the arrangement would be Ribā-ridden. 

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Zaheer, K. (1994), An Enquiry into the Basic Concept of Banking as Perceived by the Spirit of Islamic Economic Justice, University of Wales

1. See the Qur’ān, 2:275-281

2. Also see Judgement of Federal Sharī‘ah Court on Ribā 1992, pp. 206, 219, and 224.

3. Arabic words have been italicized in this article except names of individuals, places, and books.

4. Muslims are expected to invoke God’s mercy for the Prophet when his name is mentioned, which has been abbreviated as (sws) for writing purposes.

5. Hadīth (plural Ahādīth) is a report that claims that the Prophet (sws) said or did something. The claim is supported by the evidence of the names of the individuals who were involved in the different stages of the process of its communication from the Prophet (sws) to the compiler of Hadīth (Muhaddith). When placed together in the chronological sequence these names form a chain of narrators. This chain is normally mentioned in the books of Hadīth literature before the actual text of a Hadīth is quoted.

6. Interestingly, some scholars include Ribā al-Jāhīliyyah as a third category to the list of Ribās condemned in Islam. They believe that whereas the Qur’ān prohibited Ribā al-Jāhīliyyah, Hadīth dealt with the other two categories of it: Ribā al-Nasī’ah and Ribā al-Fadl. See Saleh 1985, p. 13. My understanding is that Ribā al-Jāhīliyyah – where in a lender would ask a borrower at the time of maturity if he will settle the debt or increase it for a delay – is one form of Ribā al-Nasī’ah, the real ribā. The distinction between the two is unnecessary. Encyclopaedia of Islamic Banking and Insurance has done the same classification as I have suggested. See Ausaf 1995, p. 16.

The distinction attempted by some writers between Ribā al-Qurud (Ribā involving loans) and Ribā al-buyū‘ (Ribā involving trade) is likewise unnecessarily adding to the already existing confusion in the discipline. See Lewis and Algaoud 2001, p. 35.

7. Any event or statement of the Prophet (sws) that has been reported by a unique chain of narrators qualifies to be categorized as an independent Hadīth. The uniqueness in the chain may sometimes involve only one new name which is distinct from those mentioned in another. Thus one finds at times scores of Ahādīth reported in the books of Hadīth literature on a single incident or a statement.

8. The Ahādīth on the subject are being numbered with a view to conveniently refer to them in the later parts of the article.

9. Another version of the understanding is this: An economic transaction is inflicted with Ribā al-Fadl when: ‘money is exchanged for money hand-to-hand, but in different quantities.’ (El-Gamal 2000, p. 4)

10. As a matter of fact the understanding is quite unclear in this area of Ribā al-Fadl as well, like it is in others. While some Ahādīth suggest that no unequal exchange of commodities is allowed even on spot (see Hadīth iva) there are others that suggest exchanges of unlike commodities on spot is allowed.

11. See the words ‘the same weight and the same quality’ in Hadīth number iii.a. The following is the relevant Arabic text: waznan biwaznin mithlan bimithlin

12. It is the real Ribā. It refers to the premium that must be paid by the borrower to the lender along with the principal amount as a condition for the loan or an extension in its maturity. It is thus equivalent to interest. (Usmani op. cit. p. 254)

13. ‘What is [exchanged] on spot, there is no problem [of Ribā] in that but that which is [exchanged] on credit [and there is a variation in the value of commodities exchanged] then that is Ribā’ (Muslim op. cit., p. 211).

14. Abduhu, Rida, and Sanhuri, three of the most outstanding Egyptian scholars of the early twentieth century had somewhat similar opinions on the relationship between Ribā al-Fadl and the real Ribā. See Saleh op. cit., pp. 28-29.

15. See, for instance, Khan, W.M 1985, p. 25

16. Despite being one of the most outstanding defenders of the Islamic law proscribing Ribā, Shaikh Mahmud Ahmad hasn’t even mentioned Ribā al-Fadl in the over five hundred pages of his book ‘Man and Money: Towards an Alternative Basis of Credit’, which was primarily written to defend the case of Islamic condemnation of Ribā. See Ahmad 2002, p. 553.

18. See Zaheer op. cit., pp. 82-88.

19. The Qur’ān tells the Prophet (sws) to clarify the meanings of its text to the people: ‘And now We have sent down the reminder to you [O Muhammad], so that you may explain clearly to mankind as to what was sent to them.’ (Qur’ān, 16:44)

20. Bukhārī (d. 242 H) and Muslim (d. 252 H) widely acclaimed to be the two most authentic compilers of Hadīth literature, presented their books more than two centuries after the death of the Prophet (sws).

21. While translating this Hadīth and the next one, I have used Ghāmidī’s translation of the same Ahādīth in Urdu. See Ghamidi, 1991, p. 26.

22. Although the words inserted in brackets are not translating any Arabic equivalents in the original text, they are necessary to give text the right meanings which cannot be correctly understood by a literal translation. For a literal translation of the Ahādīth, the words within brackets should be omitted. Some of the verses of the Qur’ān also follow the same style of presentation wherein some words obviously implied in the text are omitted. The following is an example of a Qur’ānic statement falling into this category: ‘He is the One Who has made the night [dark] for you to rest therein and the day bright [so that you can seek His grace by making a living]. Indeed, there are signs in this for those who listen to His message. ( the Qur’ān, 10:64)

23. Those writers who insist on accepting Ribā al-Fadl as a definitely distinct entity find no acceptable way of accommodating this Hadīth. One of the explanations offered is this: ‘The Ahādīth with an emphatic mention of Ribā being in Nasī’ah (or loans) are not to be taken literally. The message is that chances of Ribā arising are greater in loaning than in other cases…’ (IIIE’s Blueprint 1999, p. 41)

24. ‘The selling of wheat for wheat is Ribā except if it is handed from hand to hand and equal in amount. Similarly the selling of barley for barley is Ribā except if it is from hand to hand and equal in amount, and dates for dates is Ribā except if it is from hand to hand and equal in amount.’

25. The expression ‘except if it is hand to hand and equal in amount’ is just emphasizing the same point and is not meant to allow an exchange of identical commodities on spot, which nobody would contemplate doing.

26. Interestingly, some writers have employed the same concept of Ribā al-Fadl to prove that indexation of financial assets is disallowed in Islam. See Chapra 1986, pp. 40-1 The line of argument these writers follow is that since the six commodities mentioned in the Ahādīth of Ribā al-Fadl (see Hadīth iia and iva) are themselves subject to price changes over time, they cannot be used as measures of value to return loans. In case they are used, what will be returned will either be more or less than the original value lent, which is a clear violation of the purpose of these Ahādīth. However, the reason why their point of view appears weak is that all Muslim scholars of jurisprudence, except a tiny minority belonging to the Zāharīs, agree that the six commodities mentioned in Ahādīth of Ribā al-Fadl are not the only ones that are applicable for the purpose. (ibid., 59). These commodities have only been mentioned by way of example. The real message of these Ahādīth is that whenever a credit exchange takes place, every attempt should be made to return the very same value. In attempting to do so through indexation, any list of relevant commodities could be chosen to make the arrangement fair to both parties.

27. The question of exchange of unequal values on spot is not a religious issue. People buy and sell commodities on the basis of their assessment that what they are buying is more valuable to them than what they are selling. Islamic teachings would not normally interfere in the freedom of the individual in such commercial decisions, unless there is a danger that one of the parties is being exploited because of its weak position.

28. See Vogel and Hayes op. cit., pp. 72-87

29. Bay‘ murābahah constitutes more that 70 % of the value of items on the asset side of the balance sheet of the banks that describe themselves as Islamic (See Adeel, Danial etc. 2003, p. 65)

30. A similar example of a change accepted in the Qur’ānic text is in the case of the punishment of stoning to death for adultery. Whereas the Qur’ān states that the punishment for Zinā (extra-marital sex) is hundred lashes (Qur’ān, 24:2), a vast majority of Muslim jurists believe, on the basis of Ahādīth, that the punishment for the married individual committing Zinā is stoning to death while that of unmarried individual committing the crime is hundred lashes and banishment.

31. See Al-Shātibī n.d., p. 7.

32. One prominent example of the Prophet’s explanation of the Qur’ānic text which is well within the limits allowed to him by the Qur’ān  is his practical guidance to believers on how to say Salāh (formal prayers). The Qur’ān doesn’t go beyond requiring believers to pray. The Prophet’s example clarifies what exactly has been required of them practically. The two are mutually bound in a coherent way in that the Qur’ānic text is giving the basic guidance, whereas the Prophet’s example is explaining it.

33. See sections 3 and 6.

34. See for an example of this approach the claim of an eminent Muslim economist, Muhammad Umer Chapra, who brands as Ribā activities such as entry of an unsophisticated competitor into a market and the rigging of prices in an auction with the help of agents. (Chapra op. cit., p.60). The eminent author has quoted a Hadīth indirectly (ibid., p.240) from a less reliable book (Sunan al-Bayhaqī) to make his point. Had he relied on the Qur’ān, the most reliable book, for unfolding the truth of such crimes in the marketplace, he would have certainly concluded that these activities come under the category of eating each other’s wealth wrongfully (aklu’l-māl bi’l-bātil). The Qur’ān says: ‘O believers! Do not consume one another’s wealth through unlawful means; instead, do business with mutual consent; do not kill yourselves by adopting unlawful means. Indeed Allah is Merciful to you.’ (the Qur’ān, 4:29) As for the mention in Hadīth, one can easily imagine that some narrator might have got it wrong. However, a clear understanding of the Qur’ānic concepts should never be compromised at the expense of accommodating each and every Hadīth on the subject.

35. Exactly the same words have been reported in the book Sahīh Muslim. See Muslim op. cit., p. 219.

36. See Mawdūdī op. cit. p.307

37. See Ibn ‘Abbās’s opinion in 8 ii. above.

38. The Qur’ān mentions that the tendency to blindly follow the elders led to the misguidance of many people of the earlier generations. It says: ‘When it is said to them: “Follow what Allah has revealed.” They reply: “Nay! We will follow what our forefathers practiced.” Well! Even if their forefathers had no sense at all and lacked guidance?’ ( the Qur’ān, 2:170) The idea in quoting this verse is not to suggest that the elders who formed the opinion on Ribā al-Fadl were misguided; however, what emerges from the understanding of this verse is that it is a highly erroneous principle that the opinion of the elders can’t be reconsidered even if strong evidence from religious sources is available to refute it.

39. The claim made by some authors that during the times of the Prophet (sws), Ribā was also charged on exchange of commodities in barter transactions is correct provided that Ribā in barter should be understood to mean unequal exchange on credit. See Chaudhry 1999, p. 35.

40. In a way, the views expressed in this article are a reiteration of the strong protestation made by the Egyptian scholar Rashid Rida, who believed that it was wrong to consider that the Qur’ānic prohibition of Ribā included both Ribā al-Nasī’ah and Ribā al-Fadl. He believed that the large body of legal rulings developed by the jurists on Ribā was ‘irrational and unsubstantiated by scriptural authorities.’ See The Text… 1999, p. 233. The significant difference between the views expressed in this paper and Rashid Rida’s is that while the latter accepted Ribā al-Fadl as a condemned practice only as a preventive measure (ibid.), this article emphasizes that Ribā al-Fadl is a mistaken view that was never intended by the Prophet (sws) as another, completely different, kind of Ribā.