Paper Title: Why Is Riba Al-Fadl Unacceptable?

Author:        Khalid Zaheer

Publisher:    Journal of Islamic Accounting and Business Research, 15(4), 643-660.

An important instruction found in narrations of the prophet of Islam (Ahadith) regarding riba (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 riba.”

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 riba in a barter transaction) except that the exchange be spot”.

Author argues that 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 riba al-Nasiah), the prophet in these narrations, has prohibited another kind of Riba: Riba al-Fadl (interest in excess).

Author writes that 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 riba al-Fadl is another form of Riba prohibited in Islam.

Author in this paper claims that Prophet Muhammad (pbuh) clarified only the meanings of the Qur’anic concept of riba.

Riba 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 Ahadith according to which if gold, silver, wheat, barley, dates, and salt are exchanged against themselves, they should be spot and be equal and specified. If these conditions are not found, this transaction will become Riba al-Fadl.

According to the classical view, if one quality of gold is to be exchanged with another one of a different quality, then the Ahadith require that the differences of quality be ignored and the very same quantity or weight of both should be exchanged on spot.

Author writes that it looks 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.

Author argues that if the Ahadith of Riba al-Fadl are properly interpreted, they serve to clarify two important aspects relevant to the prohibition of riba: one that Riba 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 Riba-ridden.

Then, the author presents the interpretation of Ahadith which bring a uniform definition of Riba in Qur’an and Ahadith and which is very logical and rational from the economics and finance perspective as well.

In order to properly understand the meanings of the Ahadith, the translations given by the author below arrange to insert within brackets the words that either seem to have been implied when Prophet Muhammad (pbuh) 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. Here are the translations given by the author:

“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 riba.”

Likewise, as per the author, a more correct translation of another Hadith 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 Riba in a barter transaction involving the same commodity] except that the exchange be spot.”

According to the author, the word selling should be read as “selling on credit”, which is clarified in the subsequent part of Hadith 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. In other words, “except hand in hand” is disallowing what is not “hand in hand” i.e. credit.

Then, the author argues that there are some Ahadith which also clarify that Riba al-Fadl is unacceptable.

Ibn ‘Abbas quotes Usama bin Zaid who said that the prophet of Allah, may Allah’s blessings be upon him, said: “There is no Riba in spot exchanges” (Sahih Muslim, Kitab-ul-Musaqat, 3878; Sunan An-Nisai: 4580).

In Bukhari, Ibn-e-Abbas clarifies that He has heard Usama Bin Zaid saying that “There is no Riba except in credit.” (Sahih Bukhari: 2178, 2179).

The author concludes by stating that the only Riba prohibited in Islam is the one mentioned in the Qur’an. In Chapter Al-Baqarah, Qur’an encourages the lender to give relief to the borrower. The context is clear that Qur’an is referring to Riba an-Nasiah. If the Ahadith from which Riba al-Fadl is derived are understood in correct context and together with Ahadith which categorically also mention that Riba is in Nasiah, a clear and uniform picture emerges which solves any confusion and anomaly.

Riba is interest or excess charged by the lender from the borrower over the principal amount, whether the loan is taken for commercial purposes or for personal needs and whether the subject of loan is a currency or commodity.