Glossary
Riba
Any extra amount a lender gets back on top of what was lent, which Islamic law forbids.
رباribā
Riba literally means increase. In Islamic law it covers two things: charging extra for the use of money over time, which is what interest is, and certain unequal exchanges of the same commodity. The prohibition is not a minor rule. AAOIFI's Shariah Standard No. 2 calls it 'prohibited in terms of either taking or giving' and says the prohibition is established by the Qur'an, by direct and certain hadith and by the consensus of Muslim scholars. Everything else in Islamic banking exists because of this one prohibition, including the whole apparatus of sales, leases and fees that replaces lending at interest.
Related terms
Riba al-fadlGetting more back than you gave when swapping two lots of the same thing, like trading one kilo of good dates for two kilos of poor ones.Riba al-nasi'ahThe extra you are charged simply for being given more time to pay.GharamahA fine for paying late, charged to make you pay on time rather than to cover a real loss.Ta'widhCompensation for money the bank actually lost because you paid late.Qard HasanA loan on which the lender gets back exactly what was lent and nothing more.
Sources
- AAOIFI, Shariah Standards, Standard No. (2), Appendix B item 3