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Home » Why riba is prohibited in Islamic banking?

Why riba is prohibited in Islamic banking?

In Islamic banking, the concept of riba stands as a fundamental principle. Under Sharia law, which governs Islamic finance, riba is strictly prohibited due to its perceived exploitative nature. Muslims worldwide adhere to this prohibition, viewing riba as a practice that contradicts the principles of fairness and justice inherent in Islamic teachings. However, defining riba and its implications within the context of Islamic finance has sparked considerable debate and interpretation within the Muslim community.

One of the primary reasons for the prohibition of riba in Islamic banking is the belief that it leads to exploitation. Riba, often translated as usury or interest, involves the charging or paying of interest on loans, which is seen as unjust enrichment at the expense of others. Islamic finance seeks to promote equity and ethical conduct in economic transactions, and riba is deemed antithetical to these principles. Therefore, its prohibition aims to safeguard the interests of all parties involved, ensuring that financial dealings are conducted fairly and without exploitation.

The debate surrounding riba extends beyond its definition to questions about its punishment and divine repercussions. While there is consensus among Muslims regarding its prohibition, differing interpretations persist regarding whether riba should be punished by human authorities or left to divine judgment. Additionally, some scholars argue that riba not only pertains to monetary transactions but also encompasses various forms of exploitative practices. Hence, the prohibition of riba in Islamic banking reflects a broader commitment to fostering economic justice and morality within the Islamic financial system.

(Response: Riba is prohibited in Islamic banking due to its exploitative nature, contradicting the principles of fairness and justice in Islamic teachings.)