The Prohibition of Riba’

Introduction

Muamalat, which translates to "transactions," holds great significance in Islamic teachings. In Islam, it is crucial that all transactions align with the principles of Shariah. This is because Islam sets specific criteria that determine whether a transaction is permissible (halal) or prohibited (haram). One of the core principles of this system is the avoidance of three prohibited elements in transactions: riba’ (interest), gharar (uncertainty), and maysir (gambling).

This article will delve into the basics of the prohibition of riba' in Islamic finance and explore how the Bursa Suq As-Sila’ serves as a platform for trading commodities, enabling individuals and businesses to engage in Tawarruq transactions, as an alternative to riba’ based financial products.

Definition of Riba’

Riba’ is an Arabic word, that literally means ‘to grow’ or ‘expand’ or ‘increase’ or ‘inflate’ or ‘excess’. Riba’ from Shariah perspective technically refers to the premium that must be paid by a borrower to a lender along with the principal amount as a condition for the loan or for an extension in its maturity.

Riba’ refers to any unjust increase in a loan or debt, which is considered exploitative and unethical. It involves charging or receiving interest on loans, whether it be in monetary form or through other means of exchange.

The Prohibition of Riba’ in Quran and Sunnah

The Holy Quran, being the divine scripture of Islam, contains numerous verses that explicitly prohibit riba'. These verses serve as a powerful reminder for Muslims to abstain from engaging in any form of interest-based transactions.

“Those who consume interest1 cannot stand [on the Day of Resurrection] except as one stands who is being beaten by Satan into insanity. That is because they say, "Trade is [just] like interest." But Allāh has permitted trade and has forbidden interest. So whoever has received an admonition from his Lord and desists may have what is past, and his affair rests with Allāh. But whoever returns [to dealing in interest or usury] - those are the companions of the Fire; they will abide eternally therein.”

(Surah Al-Baqarah:275)

Allah commands believers to give up their claims to interest and warns them of the severe consequences they may face if they persist in dealing with riba'. This verse emphasizes the importance of adhering to ethical financial practices and promotes economic justice within society.

Ibn Mas'ud narrated:

"The Messenger of Allah (ﷺ) cursed the one who consumed Riba, and the one who charged it, those who witnessed it, and the one who recorded it."

(Jami` at-Tirmidhi 1206)

Narrations from the Sunnah further reinforce this prohibition, highlighting its severity and consequences. The narration above emphasizes the gravity of engaging in riba’-related activities. He narrated that the Messenger of Allah (peace be upon him) cursed not only those who consumed or charged interest but also those who witnessed it and even those who recorded it.

This narration serves as a clear warning against any involvement in riba’ transactions, as it shows that the condemnation extends beyond just the direct participants. The comprehensive nature of this curse underscores the importance Islam places on avoiding usury and promoting fair and ethical financial practices.

Role of Bursa Suq As-Sila’ in Islamic Finance

Tawarruq, also known as commodity Murabahah, refers to a financial arrangement where a buyer purchases an asset on credit and then sells it to a third party for cash. This allows individuals and businesses to access funds without resorting to interest-bearing loans. This versatile tool is not only used in structuring various deposit instruments but also serves as an effective method for managing risks through hedging instruments. The widespread adoption of Tawarruq on both sides of the balance sheet demonstrates its value and effectiveness within Islamic finance.

Bursa Suq Al Sila' is revolutionizing the financial industry by providing a platform for Tawarruq transactions, offering a viable alternative to riba’. By facilitating Tawarruq transactions, Bursa Suq Al Sila' is creating an environment where individuals and businesses can engage in ethical financial practices. This innovative platform enables participants to buy commodities at market prices and sell them at deferred prices, effectively avoiding the pitfalls of riba’.

Conclusion

The prohibition of riba’ is a fundamental principle in Islamic finance, aimed at promoting fairness and avoiding exploitation. In line with this principle, Bursa Suq Al Sila' has emerged as a platform to facilitate Tawarruq transactions, providing an alternative to conventional interest-based financing. Its presence not only promotes fairness and avoids exploitation but also fosters transparency within the industry. As we continue to witness the growth of Islamic finance globally, platforms like Bursa Suq Al Sila' will undoubtedly play a vital role in shaping its future trajectory.