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Types of Riba

There are two types of Riba: Riba al-Jahiliyah and Riba al-fadl.

Riba al-Jahiliyah

Riba al-Jahiliyah means “the riba used during the age of ignorance and paganism.” It is also called riba al-nassee'aa (the riba that is constrained by a time limit and is time dependent). This type of riba was widely practiced

by the pagan Arabs at the advent of Islam. This practice was conducted by the person borrowing money (i.e., renting it at a price called interest) and agrees to return it at a certain date. If the debt was not paid on time, the creditor would levy an additional sum as a penalty in order to agree to prolong the payment term through debt restructuring. This type of lending is similar to what are called today interest-only loans with a balloon payment at maturity. In this type of loan, the borrower pays only the interest (the rent on the money he owes) and, at maturity, he/she pays the original debt. If he/ she does not, then a new agreement is concluded that increases the principal amount and prolongs the maturity date.

This type of lending was prohibited in the original sources of Judaism and Christianity, as well as in Islam; reinforcing the thesis advocated in this book that calls the law (Shari'aa) the Judeo-Christian-lslamic law. As the world grew and became more sophisticated, these types of loans were also used by others for business and for other commercial needs. In Islam, there is no doubt that this type of lending is prohibited[1] as ordained in the original sources — the Qur'aan and the Sunnah (tradition and living example)[2] of Prophet Muhammad (pp) — and in adherence to the original teachings of Judaism and Christianity. This makes this type of lending prohibited in the Judeo-Christian-lslamic tradition.

Another interesting practice by the pagan Arabs was of nass'ee, or transposing the months of the lunar calendar system they used in order to suit their needs due to the variability in the methods used to cite the crescent of the new month's moon. Nass'ee could involve shifting the end of the calendar year by manipulating the authentication of the new month based on the citation of the moon and to coincide with a special event; in many cases, the calendar could be accelerated or manipulated to render large riba-based contracts in default. By manipulating the calendar and making the loan appearing to have not been paid in the agreed upon payoff time, the lenders could generate a large amount of delinquency payments by the borrowers or can proceed to foreclose on collateral properties through the practice of riba al-nassee'aa or the time-based rental of money as if money is rented on a daily basis at so much money per day. The Qur'aan has in it verses that explain about the prohibition of this type of riba:

9:37 Verily the transposing (of a prohibited month) is an addition to Unbelief: the Unbelievers are led to wrong thereby: for they make it lawful one year, and forbidden another year, in order to adjust the number of months forbidden by God and make such forbidden ones lawful. The evil of their course seems pleasing to them. But God guides not those who reject Faith.

This variety of riba has been prohibited in the original teachings of Moses (pp) and Jesus (pp), but was relaxed later. The law (Shari'aa) still renders these transactions as haram (divinely prohibited).

  • [1] From the Farewell Speech Ceremony of Prophet Muhammad (pp) before he died: “Vo, everything of the affair of jahiliyyah (paganism and ignorance) is let fall under my feet, the Riba of jahiliyyah is let fall, and the first Riba I abolish is the Riba of al Abbas son of Abd al Muttalib, it is discarded, all” (principal and increase); reported and authenticated by Muslim.
  • [2] The Hadeeth (sayings of Prophet Muhammad [pp]), narrated by Abu Dawood and Tirmidhzi, reads: . . . and every Riba of Jahiliyyah is abolished. Neither shall you make [the debtor] suffer injustice [loss], nor shall you be made to suffer injustice, But the Riba of al Abbas son of Abd al Muttalib [the uncle of Prophet Muhammad (pp), who was active in Riba transactions before he became Muslim], it is discarded, all.
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