Riba and Its Prohibition in Islam Page 1 of 22 RIBA AND ITS PROHIBITION IN ISLAM Dr Engku Rabiah Adawiah Engku Ali International Islamic University Malaysia “But Allah has permitted trade and forbidden riba..” 1 1.0 INTRODUCTION The Federal Shariah Court of Pakistan in a recent case, Mahmood ur Rahman Faisal v Secy. Miny. of Law 2 held that riba is unlawful and thus; made an order that all banks in Pakistan adopt Islamic principles in eliminating all elements of riba from its operation. The Federal Shariah Court also resolves that: (a) Any excess of profit on a loan for a deferred payment when the borrower is unable to repay it after the fixed period and similarly any excess or profit on a loan at the time of contract, both are riba forbidden in Shari'ah; (b) The alternate banks should be established according to the injunctions of Islam to provide economic facilities; (c) The Academy resolved to request all the Islamic countries to establish banks based on Shari'ah principles to fulfil all the requirements of a Muslim accord his beliefs so that he may not face any repugnancy. From the above decision, evidently the main element to be eliminated in the present banking system in order to make it conform to the prescription of the Shari'ah is riba. Hence, it is indispensable that the nature and rules pertaining to riba be clearly defined. This chapter discusses the nature of riba, its prohibition in the Quran and Sunnah, and, the juristic opinions and differences © All rights reserved. No part of this material may be produced, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, without permission of the author. Also, no opinion expressed in this paper can be cited or quoted without prior permission of the author. 1. Al Baqarah: part of ayah 275. 2. FSC, 1992, p.89