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WHY RIBA IS COMMENDED IN ISLAM?

NAME : MOHD FEKHRI B. MOHD BAKRI ( 62283111078) NAME : MOHD NAUFAL B. SUHAIMI ( 62289111037) NAME : NADIAH BT SUMALI ( 62289111083) NAME : NUR DIYANA BT ABD SAMAD (62289111060)

INTRODUCTION TO RIBA
Riba literally means: increase (al-ziyada) grow(al-numuw) . Riba:
Defined as increase of money in consideration of extension of the terms of maturity, either from the date of maturity from the actual date of debt. (Homoud,1985) Not only Islam prohibit dealing with riba, the Jews, Greeks and Romans also in the same thought.

Prohibition against riba by the Quran.


Those who devour usury will not stand except as stands one whom the Evil One by his touch hath driven to madness. That is because they say: "Trade is like usury but Allah hath permitted trade and forbidden usury. Those who after receiving direction from their Lord desist shall be pardoned for the past; their case is for Allah (to judge); but those who repeat (the offence) are companions of the fire: they will abide therein (for ever). (Surah Al Baqarah 2: 275)

For the iniquity of the Jews We made unlawful for them certain (foods) good and wholesome which had been lawful for them; in that they hindered many from Allah's way. Thatthey took usury though they were forbidden; and that they devoured men's substance wrongfully; We have prepared for those among them who reject faith a grievous punishment.
( Surah An Nisa 4: 160 161) Other verse to proof the phohibition of Riba: Surah al imran (3:130) Surah al baqarah (2:278)

Prohibition against riba by the Hadith


Narrated bu Aun bin abu juhaifa:

My father bought a slave who practiced the profession of cupping. My father broke the slaves instrument of cupping. I asked my father why he had done so. He replied, The Prophet (p.b.u.h) forbade the acceptance of the price of a dog or blood, and also forbade the profession of tattooing, getting tattooed and receiving or giving riba and cursed the picture makers.

Types of riba
Riba have two types : Riba Al-Nasia - This is the stipulated interest which the lender takes from the borrower in consideration of the time given to the borrower to pay back the capital. Riba Al-Fadh - This applies to barter (exchanging one commodity for another), where commodities of the same type are exchanged in unequal amounts, especially the exchange of precious metals and foodstuffs, it is HARAM, by the Sunnah and the concensus of scholars; as it paves the way for Riba' Nasi'ah.

ISLAMIC PERSPECTIVE

CONVENTIONAL PERSPECTIVE

CONCEPT

Aqad between two parties

Charge profit without borrower knows

PRODUCT

Mudarabah Murabahah

AITAB Rules 78

EXAMPLE

Borrow RM 200 from bank pay RM 400 for the 4 years later Charge not interest or profit Its called UPAH Borrower know that amount they should pay at the last ended

Borrow RM 200 from bank pay RM 400 for the 4 years later Charge as a profit and interest

Borrower did not know the amount that they want to pay at the last ended

The effect of riba on social


Riba is injustice, because it takes a part of the property of another person while what the lender owns does not increase. Riba create the gaps between the rich and the poor. The rich (who are most likely to be lender) will exploit the poor (borrower). As a result, the rich becomes richer and the poor becomes poorer.

This generates envy and hatred among the poor toward the rich, resulting in social disorders, conflicts and at times breeds revolutions & movements.

Economic and Financial Effect


The capitalist is always looking for the maximum rate of interest. It is solely based from his selfish motives. Loans are normally for 10,20 or 30 years and at the same time the interest rate is fixed. The result would be that, such businessman will be bankrupt in order to pay back the capital loan.

Mechanism
Mudharabah (Cost plus Profit) process and definition. Via bank Islam structure