Theme: Other Business Transactions That Are Considered Riba

The Prophet (ﷺ) said:

“Every loan that brings about a benefit is some form of usury”

Narrated by Fudhalah ibn ‘Ubaid رضي الله عنهما
(Source: Sunan al-Kubra lil Bayhaqi, No. 10243)

Interest charged by a creditor on a loan is known to be prohibited , but how about stipulating conditions that bring similar or other kinds of monetary benefits to the creditor?

The hadith above is an evidence for the prohibition of stipulating conditions that bring about a benefit to the creditor. The loan condition can be as simple as stipulating the borrower to pay for taxis above the loan amount. It can also be as complex as stipulating the borrower to sell his/her goods to the creditor below the market price.

Imam Qurtubi, in his book (al-Jaami’ li Ahkaam al-Quran), mentions that “it is an ijma’(consensus) of Muslim (scholars) in reference to the prophet’s (sunnah) that stipulating condition on loan contract is (deemed as) riba, even if (the stipulated condition) is a clenched of animal feed”. However, scholars deliberated extensively on what kind of beneficial conditions stipulated in a loan contract is considered riba. In conclusion, every loan contract in which stipulation brings benefit to the creditor and harm to the borrower is considered as riba.

For example, the creditor can stipulate a condition for the borrower to sell his/her goods to the creditor at the market price but not below than it. This is because the latter causes harm to the borrower while the former is favorable for both parties.

Imam Ghazali in his bookL, titled “Ihya’ Ulum al-Din” (Revival of Religious Sciences), mentions that: “there is no reason to the perpetual act of sin.. except for negligence and desire, and there is no (way) opposing negligence.. except knowledge, and there is no (way) opposing desire.. except patience in stopping the means for the desire”.