Understanding Riba, Usury and Interest: Conservatives’ versus Modernists’ Approach in Islamic Finance

This article analyses the different views on the acceptance of riba in the current age. Muslim scholars are divided whether the present-day practice of interest by lending institutions is riba, which has been proscribed by the Koran and Prophet Muhammad. Charging extra money over the principal amount by lenders is also disliked in Christianity. Interest is considered vital for the survival of capitalism. Money is taken as an independent factor of production. Therefore, it can yield interest or profit. The Islamic economics treat money unlike the capitalists do. This system of economy considers money merely a medium of exchange. Money cannot be exchanged with money. Modern Muslim economists opine that the Prophet Muhammad traditions and the Quranic commandments regarding prohibition of riba are not relevant in the present age when dynamics of the economy are multifaceted.