Riba

Interest or usury. One of the most strictly prohibited practices in Islamic finance, condemned in the strongest terms in the Quran (2:275-279). Includes any guaranteed, predetermined return on a loan or deposit regardless of the underlying economic outcome.

There are two types: (1) Riba al-Nasiah — interest charged on a loan based on time and amount (the most common form); and (2) Riba al-Fadl — exchanging unequal quantities of the same commodity (e.g., gold for gold in unequal amounts). Conventional mortgages, personal loans, credit card interest, and savings account interest are all forms of riba. The prohibition drives the entire Islamic finance industry, which has developed alternative structures like Murabaha, Musharakah, and Ijara to meet financing needs without interest.

Riba — any contractual excess on a loan or debt — is Islam's most severely condemned economic practice: Qur'an 2:278-279 commands believers to abandon what remains of it or face 'war from Allah and His Messenger,' language used for no other commercial sin. The prohibition has two classical branches: riba al-nasiah (the excess charged for time — every form of interest, from credit card APRs to mortgage rates to bond coupons) and riba al-fadl (unequal spot exchange of the same ribawi commodity — gold for gold, currency for currency — per the six-commodities hadith in Muslim).

Modern consensus among Sunni scholars treats bank interest squarely as riba al-nasiah; the marginal historical debate about whether 'bank interest' differs from 'usury' was settled negatively by the major fiqh academies (OIC Islamic Fiqh Academy, 1985 onward). What the prohibition does NOT cover matters equally: profit from sales (Murabaha markups), rent (Ijara), equity returns (dividends, capital gains), and inflation-adjustment mechanisms debated by scholars are not riba, because 2:275's rebuttal — 'Allah permitted sale and forbade riba' — makes the loan/sale distinction the entire point.

Practical U.S. implications: earning interest (savings accounts, bonds, money market funds) and paying it (cards, conventional loans) both fall under the prohibition; unavoidable interest received should be purified by donation; and the entire halal finance industry — from screening thresholds to Sukuk — exists to route around this one verse-anchored line.