Riba comes from an Arabic noun which is from the verb Raba, meaning ‘to grow’, ‘to exceed’, and ‘to increase’. It includes interest which is paid by banks or on loans such as home loans, car loans or credit card debt including indirect interest through purchase.
There is a lot of evidences showing that riba is haram and one of the most serious sins in Islam.❖ This verse clearly prohibits riba for those with true faith in Allah and the Quran: (Surah Al-Baqarah: 275)
“…Allah has permitted trade and has forbidden riba.”❖ Allah declares war for those who deal with riba: (Surah Al-Baqarah: 278-279)
“O you who believe, fear Allah and give up what remains of your demand for riba, if you are indeed believers. If you do it not, take notice of war from Allah and His Messenger.”❖ Riba is haram in all of its aspects, as the Prophet (peace be upon him) said (Hadith Narrated by Muslim),
“Allah has cursed the one who consumes riba, the one who gives it, the one who witnesses over it, and the one who writes down the transaction.”
Ibn Qayyim discusses the question of riba which is the core in conventional banking and financial practices and he states that the practice of riba is very contrary to the practice of zakat and sadaqah. Ibn Qayyim quoted verse 276 in surah al-Baqarahwhich means;
“Allah destroys riba and gives increase for charities(Sadaqah)..”
Ibn Qayyim divided riba into two types, which are Riba al-Fadl and Riba al-Nasiah. However, this writing focuses more on Ribaal-Fadl.
Riba al-Fadl is one of the recognized riba by Scholars. The prohibition of this riba is based on Sunnah. Hence, it is also called Riba al Hadith. Riba al-Fadl refers to the excess or increase which is taken in exchange of specific homogeneous commodities and encountered in their hand-to-hand buy and sell. This is explained in the famous Hadith:
It is related that, Abu Said al-Khurdi said: The Prophet Muhammad (peace be upon him) has said that gold in return for gold, silver for silver, wheat for wheat, barley for barley, dates for dates and salt for salt, can be traded if and only if they are in the same quantity and that is should be hand to hand. If someone gives or takes more, then he is involved with riba and accordingly has committed a sin.
Traditional Riba: Convert 15gram of 916 gold to 10gram of 999 gold; although the quality is different, but since both are gold, then the weight must be the same during the exchange.
Modern Riba: Dividend that granted to the depositors of the Banks is also considered as Riba. This is because the money which deposited into the depositor’s account is considered as loan to the Bank by the customer andwill be used as a source of funds to the Bank for their investment. This practice of modern Riba in the banking sector relates to Riba al-Fadl because the borrower is obligated to pay more than he borrowed and repayment will take place in the future.
Why Riba is Haram?
The main reason that Riba is haram is because Allah states it so. Besides that, the Muslim Scholars have suggested the following reasons why riba is haram:• Riba is one of the main contributors to inflation.• Riba can cause trauma and depression as debt increases.• Riba is contrary to the spirit of brotherhood and sympathy, and cause of oppression of each other.• Riba creates a monopoly in society, where the rich are valued for being rich, while those who are not forced to pay extra.• Riba is a definite profit without any possibility of loss, therefore all risks are borne by the borrower, rather than sharing the risk and profit with both parties.
How can I avoid or Riba?• Opening up riba-free bank accounts such become an Islamic banking customer only.• Not involve into contracts that stipulate riba penalties, even though one intends to pay on time.• Not buying insurance but prefer to choose takaful products.• Rent if cannot afford to buy something and make sure the rental is done without usury.• Accepting/organizing a “goodly loan” (Qard al-Hasan), which is a loan by means of which one intends to show kindness to another, which does not involve taking riba.
Riba can happen via conventional Payment Gateway
Nowadays, technology continues to evolve in line with the passage of time. Payment gateway is one of the facilities created and used in accordance with current technological developments. Payment gateways are merchant services provided by e-commerce application service providers that allow credit card or direct payment processing for e-businesses and online retailers. When a customer orders a product from a merchant using a payment gateway, the payment gateway will perform various tasks to process the transaction.
Riba in purchase transactions also can happen via conventional payment gateway. It’s happened through profit that earned by charging interest on capital. Time value is the basis for charging interest on money or capital. Interest is charged even in case the organization suffers losses by using the banks funds. Therefore, it is not based on profit and loss sharing at all. Besides that, Conventional banks use money as a commodity which leads to inflation.
PayHalal™ Islamic Payment Gateway
Everyone knows direct riba which comes from borrowing or receiving interest on deposits, but we like to draw your attention on Riba al-Fadl which happens daily through sales transactions and how you can avoid it with PayHalal™.
PayHalal™ is the World’s First Shariah compliant Islamic payment gateway, that facilitates all payment transactions by eliminating Riba’, Gharar and Maysir. PayHalal™ offers Shariah Compliant payment solution such as WebPay, MobilePay, Offline Payment including LinkPay such as SocialPay, EmailPay, QRPay and e-Wallet making the process convenient.
PayHalal™ uses a form of artificial intelligence (AI) known as “robo advisory” to determine if any activity on the PayHalal™ payment gateway has involved the use of Shariah non-compliant funds. For example, some customers may have paid for purchases using a non-Islamic credit or debit card, tainting the funds collected by PayHalal™. The robo advisory analyzes transaction data and produces a report for PayHalal™ indicatingall instances of Shariah non-compliance. The report includes the robo advisory’s recommendations regarding how such instances should be treated. In some cases, the recommendation may involve “cleaning” the funds by donating them to charities. Dr. Yusuf Al-Qaradawi states that illegal property cannot be owned by anyone specifically but instead it belongs to maslahah ʻammah (public interest). PayHalal™ ’s Shariah Advisory Committee would review the robo advisory report and make a decision regarding the disposition of the funds.
The SNC Technology is built on with expendable function. The AI is able to analyze data’s and convert it to understanding according to Shariah diagnosis. From them, the system will issue a treatment advice the final decision will have to come from the Shariah panel from PayHalal™ on executing a treatment recommended by the SNC AI.
If you’re a Muslim consumer, insist your favorite eCommerce store or retailer to have PayHalal™ payment gateway to protect you from Riba.