Riba is one of the foundational concepts in Islamic finance and refers to any guaranteed increase or excess obtained without corresponding risk, effort, or productive economic activity. The prohibition of Riba is firmly established in the Qur'an and Sunnah and serves as a central principle distinguishing Islamic finance from conventional interest-based financial systems.
Classical Islamic jurists generally categorize Riba into two main types: Riba al-Nasi'ah, which arises from deferment or delay in repayment and is commonly associated with interest on loans, and Riba al-Fadl, which refers to an unequal exchange of certain commodities in barter transactions.
The prohibition of Riba aims to promote fairness, justice, and equitable distribution of wealth while discouraging exploitation, excessive indebtedness, and unearned financial gain. Instead of earning returns through lending money at interest, Islamic finance encourages profit-and-loss sharing, trade, leasing, and asset-backed transactions.
Modern Islamic financial institutions structure products such as Murabaha, Mudarabah, Musharakah, and Ijarah to provide financing solutions that comply with Shariah principles while avoiding elements of Riba.