Fatwa #40187 November 2001United States of America

Please explain in detail the definition of Riba.

Question

People don't understand the difference between Interest and Riba. My understanding is when an Owner is financing, he can use any 'interest rate' to set his profit. Riba gets in the picture if the financing is done by a third party (This is when, ONE FORSAKES THE PROPHET FOR PROFIT).

Answer

Rasulullah (Sallallaahu Alayhi Wasallam) said, 'Every loan that draws a profit is Riba and Haram'.

The Hadith is general. It includes the direct party being the owner as well as the third party.

and Allah Ta'ala Knows Best

Mufti Ebrahim Desai
FATWA DEPT.

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