The Importance of Understanding Riba and Avoiding it for Muslims

One of many things that is considerably important for Muslims is understanding riba as thoroughly as possible. Fundamentally it is there in the scope of banking or financial system within the scope of Muslims. Of course, knowing the concept of this particular thing is also pivotal for Muslims who deal with banking or financial matters often. It is also beneficial for those who are not Muslims to know about it in the first place.

The Fundamental Idea and Definition

So, what is riba? It seems like no word in English could describe it accurately. Nevertheless, the words usury and interest are known as the closest ones to the base idea of riba. It is that way because riba comes from Arabic. At this point, it is easy to understand that this matter relates to the matters of banking or finance.

So, what is the more definitive idea to understand when it comes to riba? Fundamentally it refers to the so-called unjust or unequal fees or charges upon lending or borrowing money. Interest is one thing that is widely understood as an example of riba. In other words, interest charges are not allowed in Islamic banking with the understanding of riba in the first place.

Understanding riba is crucial, especially for Muslims who need to follow the Sharia law guidelines. The simplest way to understand it is similar to the idea that some foods are forbidden to eat for Muslims. Therefore, there are always the so-called Sharia versions of banking and financial services that follow Sharia law for Muslims in the area.

Referring to the idea that the so-called riba is forbidden in Islam, the reason is that it tends to be exploitative. Of course, there is a widely vast interpretation regarding this concept. Some believe that any form of interest is not allowed because it is riba. Some others believe that rational and reasonable interest according to the inflation value remains acceptable.

One thing for sure is that most Muslims understand that riba is forbidden under Sharia law. It often leads to the different ways of Muslims in doing financial and banking transactions for many purposes. For others, it can be a way to bring a realization that excessively high-interest rates will not be good in many ways. Some even believe that it can enlarge the gap between the rich and the poor in any society.

Different Types of Riba

Understanding riba thoroughly means that the types of riba should be included. Generally, there are two types of riba that scholars refer to that idea or concept. The types are Riba al-Nasiyah as well as Riba al-Fadl. The so-called Riba al-Nasiyah means the interest that occurs in a loan contract. Meanwhile, Riba al-Fadl is the type of riba that happens in an exchange or sale contract.

Knowing the types of riba can help avoid it whenever necessary. On the other hand, there is also the idea of murabaha concerning riba. It is different from riba in a way that it involves an agreement between the buyer and seller. Both agree on a specific amount of cost and markup under the concept of a cost-plus financing system.

Best Ways to Avoid Riba

Following the idea of understanding riba, it is crucial to know the best ways in avoiding it in many ways. Understandably, Muslims who believe in this particular concept will always avoid riba at all costs. Nevertheless, it may not be too easy to do since the general system of financing and banking is not in line with it in the first place. So, how to avoid it appropriately?

The most straightforward way to do it is of course to choose Islamic financial services whenever possible. The providers of this type of service will certainly follow the guidelines of Sharia law that include the avoidance of riba. Nevertheless, it may not be easy to do in places where the majority of people there are not Muslims. So, what to do then?

Another thing to do is to avoid financial and banking contracts that lead to interest penalties. Understanding riba means that interest is forbidden. So, it is best to avoid contracts that come with penalties in the form of high-interest rates. It is one of the simplest ways to do this in the field of interest-based financial services out there today.

Just in case it is impossible to secure a financial or banking service contract without an interest penalty system, pay the bill on time at all costs. On-time payment of bills means that there will not be any interest penalties at all. The idea is that there is no riba when there is no interest penalty to pay in the first place. Therefore it is necessary to plan for any bill on hand with the risk of interest penalty for late payment.

Lastly, it is best not to use any given interest from the bank as a result of any contract or saving for personal purposes. Returning it to the bank is not an option as well though. The best way is to spend it or use it for charitable causes. It is the most suggested thing for those who want to avoid riba but find it hard to find Islamic banking and financial services around.

Well, one more thing for those who come to the understanding of riba and avoid it is that going back to the old-fashioned way can be the best thing to do. For example, do not keep the money in the bank through a savings service or contract because there will always be interest in it. Instead, keep it somewhere and save it at home or else.

Keep on Learning

At this point, it is necessary to continue learning about the idea of riba for Muslims. It becomes more crucial whenever there is doubt in mind about it. So there is no need to hesitate to contact or visit Muslim scholars nearby to talk about it. In many ways, understanding riba is a pivotal concept in the life of Muslims around the world.