What is Riba in Islam?

In Islam, the most common form of Riba is interest that is charged on borrowed money. This may be in the form of loans or deposits. The literal meaning of Riba in Arabic is ‘to exceed’, referring to the additional money which is added to that which has been borrowed.

Islam forbids interest (Riba), both receiving and paying it. Many of us can end up accumulating interest through our bank accounts even if we don’t want it, so what should we do with Interest money?

Since it is not permissible to utilise interest for one’s own benefit one should donate it to charity. Although there may be no religious reward for doing so, it disposes of the haram funds in a shariah-compliant way.

What is considered Riba in Islam?

In Islam, Riba is interest gained or paid on transactions or savings. This includes:

- Any interest earned from savings accounts, ISAs and other savings investments.

- Interest earned by lending money, property or goods.

- Payments of interest for credit card fees, loans or mortgages.

In the case of donating Riba to charity, you would be required to donate the amount of interest earned e.g. the money accumulated as savings interest.

What is difference between Riba and interest?

Essentially there is no difference. “Riba” is the Arabic word which is used in an Islamic context. As with all Islamic affairs, we would recommend consulting an Islamic expert on finance for any concerns, queries or questions you may have.

Why Riba is prohibited in Islam?

Allah (SWT) tells us in the Holy Qur’an to not engage in interest-based transactions/investments:

What should we do with interest money?

Ideally, we should not invest/engage in interest-based activities. However, this may not always be possible.

In this case, you can keep note of any interest earned and donate the money to charity in a Shariah-compliant way (for halal purposes).

Here at Islamic Relief, your donations help us save lives and are implemented in Shariah-compliant projects.