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Interest (riba) in plain terms: meaning and the four schools

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Quick answer: Riba (Arabic for “increase”) is the term for an extra amount stipulated in a loan, or for an unequal or delayed exchange of certain goods. Scholars of all four Sunni schools treat a stipulated increase on a loan as prohibited, though the schools define the goods covered by the second type of riba in different ways. This article reports what the schools and fiqh councils state; it doesn’t give a ruling for any personal case.

What the word means

In Arabic, riba literally means “increase” or “growth”. In Islamic law the word usually points to two concepts, riba al-fadl and riba al-nasi’ah, which are explained below.

Scholars phrase the legal definition in several ways. The economist and scholar Monzer Kahf, writing on IslamOnline’s fiqh section, describes riba as any contractual (conditional) increment in a loan contract or an exchange contract of certain items. A classical formula, noted in Wikipedia’s overview of riba, calls it “surplus value without counterpart”.

Both definitions turn on the word “stipulated”. A lender who is thanked with a gift, or a trader who earns a profit from a real sale, is not described by these definitions. The increase written into the contract as a condition of the loan is the focus.

What the Quran says

The central passage is in Surah al-Baqarah. One academic paper counts at least seven verses on riba in the Quran, in chapters 2, 3, 4 and 30, and verses 2:275 to 2:279 are the ones most often cited in the discussion that follows. They separate trade from riba, tell believers to give up outstanding riba, and warn of serious consequences for those who persist.

ٱلَّذِينَ يَأْكُلُونَ ٱلرِّبَوٰا۟ لَا يَقُومُونَ إِلَّا كَمَا يَقُومُ ٱلَّذِى يَتَخَبَّطُهُ ٱلشَّيْطَٰنُ مِنَ ٱلْمَسِّ ۚ ذَٰلِكَ بِأَنَّهُمْ قَالُوٓا۟ إِنَّمَا ٱلْبَيْعُ مِثْلُ ٱلرِّبَوٰا۟ ۗ وَأَحَلَّ ٱللَّهُ ٱلْبَيْعَ وَحَرَّمَ ٱلرِّبَوٰا۟ ۚ فَمَن جَآءَهُۥ مَوْعِظَةٌۭ مِّن رَّبِّهِۦ فَٱنتَهَىٰ فَلَهُۥ مَا سَلَفَ وَأَمْرُهُۥٓ إِلَى ٱللَّهِ ۖ وَمَنْ عَادَ فَأُو۟لَٰٓئِكَ أَصْحَٰبُ ٱلنَّارِ ۖ هُمْ فِيهَا خَٰلِدُونَ ﴿275﴾ يَمْحَقُ ٱللَّهُ ٱلرِّبَوٰا۟ وَيُرْبِى ٱلصَّدَقَٰتِ ۗ وَٱللَّهُ لَا يُحِبُّ كُلَّ كَفَّارٍ أَثِيمٍ ﴿276﴾ إِنَّ ٱلَّذِينَ ءَامَنُوا۟ وَعَمِلُوا۟ ٱلصَّٰلِحَٰتِ وَأَقَامُوا۟ ٱلصَّلَوٰةَ وَءَاتَوُا۟ ٱلزَّكَوٰةَ لَهُمْ أَجْرُهُمْ عِندَ رَبِّهِمْ وَلَا خَوْفٌ عَلَيْهِمْ وَلَا هُمْ يَحْزَنُونَ ﴿277﴾ يَٰٓأَيُّهَا ٱلَّذِينَ ءَامَنُوا۟ ٱتَّقُوا۟ ٱللَّهَ وَذَرُوا۟ مَا بَقِىَ مِنَ ٱلرِّبَوٰٓا۟ إِن كُنتُم مُّؤْمِنِينَ ﴿278﴾ فَإِن لَّمْ تَفْعَلُوا۟ فَأْذَنُوا۟ بِحَرْبٍۢ مِّنَ ٱللَّهِ وَرَسُولِهِۦ ۖ وَإِن تُبْتُمْ فَلَكُمْ رُءُوسُ أَمْوَٰلِكُمْ لَا تَظْلِمُونَ وَلَا تُظْلَمُونَ ﴿279﴾

[275] Those who consume interest cannot stand [on the Day of Resurrection] except as one stands who is being beaten by Satan into insanity. That is because they say, "Trade is [just] like interest." But Allah has permitted trade and has forbidden interest. So whoever has received an admonition from his Lord and desists may have what is past, and his affair rests with Allah. But whoever returns to [dealing in interest or usury] – those are the companions of the Fire; they will abide eternally therein. [276] Allah destroys interest and gives increase for charities. And Allah does not like every sinning disbeliever. [277] Indeed, those who believe and do righteous deeds and establish prayer and give zakah will have their reward with their Lord, and there will be no fear concerning them, nor will they grieve. [278] O you who have believed, fear Allah and give up what remains [due to you] of interest, if you should be believers. [279] And if you do not, then be informed of a war [against you] from Allah and His Messenger. But if you repent, you may have your principal – [thus] you do no wrong, nor are you wronged.

Scholars read the closing verses as limiting what a creditor can claim. A fiqh academy page, discussed below, summarises the position this way: a loan has to be repaid in the same amount, without any stipulated increment. A loan given on that basis is what the classical books call qard, and the lender’s reward is left with Allah.

The two kinds of riba

Riba al-nasi’ah: the increase for delay

This is the type most people mean today. It arises when a contract states that the lender will be repaid an extra amount for accepting a delay in repayment. Because the Baqarah verses address it directly, it is also called riba al-Quran.

Example (invented numbers): A lends B 10,000 units of currency. The contract says B will repay 10,500 units after one year. The 500 units are the stipulated increase, and in the scholars’ definitions this is the standard case of riba al-nasi’ah. Whether the rate is 1% or 20% doesn’t change the category in the way they describe it.

Riba al-fadl: the excess in an exchange

This type comes from a report about six goods, listed in the research as gold, silver, wheat, barley, dates and salt; the report is cited to Sahih Muslim in this overview. Taqi Usmani’s definition, as summarised on Wikipedia, covers a barter exchange between two weighable or measurable commodities of the same kind, where the quantity is unequal or delivery of one side is deferred.

Example (invented numbers): Two traders swap 10 kg of wheat of the same quality for 11 kg of wheat, hand to hand. The extra 1 kg is the excess that the classical definitions call riba al-fadl. If the swap is 10 kg of wheat for 12 kg of barley, Kahf explains that for different items quantities may differ but delivery must remain immediate.

Why have a second category at all? Kahf says the prohibition of riba al-fadl is a kind of protection of the prohibition of riba mentioned in the Quran. In other words, it guards the door that leads to the first type.

Where the four schools differ

All four schools agree that the six named goods are covered. They differ on the underlying reason (‘illah), which decides whether other goods, including modern money, follow the same rules.

The table below sets out the positions as summarised in a 2025 University of Leeds-linked doctoral thesis hosted by White Rose eTheses, with a paper from the Loyola University Chicago journal archive and a page of the Dorar al-Saniyyah fiqh summary as cross-checks.

School Cause (‘illah) as summarised Effect on goods beyond the six
Hanafi Any good measured by weight or volume, of the same kind Extends to many weighed or measured goods; items not measured this way, such as sheep, fall outside
Maliki Currency (gold and silver); food that is nutritious and storable Extends to storable staples; medicine is not included
Shafi’i Currency (gold and silver); food in general, including items eaten as nutrition, medicine or dessert Extends to edible goods and, by some, to other forms of currency
Hanbali Currency; food measured by weight or volume (other recorded positions follow the Hanafi or Shafi’i view) Extends to measured foodstuffs and to currency

The thesis lists the Hanafi cause as any good measured by weight or volume, so fungibles not measured this way, such as sheep, are not eligible. For the Maliki school it gives currency (gold and silver) and nutritious, storable foodstuffs, excluding medicine. For the Shafi’i school it gives currency and foodstuffs, meaning anything consumed as nutrition or medicine or used to preserve food.

On the Hanbali side, the thesis gives currency and foodstuffs measured by volume or weight. A charity’s explainer on riba types notes that Hanbali sources record two positions matching the Hanafi and Shafi’i views, with a third that requires edible goods measured by weight or volume. Ibn Taymiyyah is reported to have chosen the last of these: the Dorar summary quotes him giving edibility combined with measurability by volume or weight as the cause for riba al-fadl.

The Zahiri school, which is outside the four, limited the goods to those named in the hadith.

What this means for modern money

Because Malikis and Shafi’is tie gold and silver to their role as currency, the same logic reaches banknotes. One journal article on the gold ‘illah says that the majority, including the Maliki and Shafi’i schools and Ibn Taymiyyah, treat fiat money as a ribawi item. A Hanafi weight-or-volume reading reaches the question by a different route, since banknotes aren’t weighed or measured. The sources found here don’t set out how each school handles the point, so it is not covered in detail.

What fiqh councils have stated about bank interest

Classical books didn’t discuss modern banks, so contemporary councils have addressed the question. The International Islamic Fiqh Academy (IIFA) of the Organisation of Islamic Cooperation hosts a resolution page on arrears in Islamic financial institutions at iifa-aifi.org. That page states that interest on bank deposits is prohibited riba according to the Quran and the Sunnah.

The same page lists earlier statements. These include a 1965 conference in Cairo attended by 85 scholars and representatives of 35 Muslim countries, whose first resolution said that interest on all types of loans is prohibited riba. It also mentions the Islamic Fiqh Council of the Muslim World League, which in its 9th session in 1986 affirmed that money procured as interest is prohibited riba. The page concludes that these opinions are a clear consensus of contemporary Muslim scholars on banking interest.

Not every writer uses the same definition. Wikipedia notes that Muslims agree riba is prohibited, but not all agree on its precise definition, and that some modern authors favour a narrower reading such as “excessive interest” or “compound interest”. The councils above take the broad view, and that is the position this article reports as the mainstream one.

Reasons scholars give for the prohibition

Scholars link the prohibition to fairness between lender and borrower. Wikipedia’s summary of the broad definition says it rests on the grounds that a fixed lender’s return is “unearned profit” and imposes “an unfair obligation on the borrower”. A study of Surah al-Baqarah 2:275 describes usury as an additional or excess payment prohibited because it harms one party in an economic transaction.

The verse itself draws a line between a sale and a loan with an increase. The Islamic Finance Guru primer on riba applies this to conventional mortgages, which charge interest for accepting a delay in repayment, a form of riba al-nasi’ah. Later articles on this site look at how Islamic home financing is structured.

What sits on the other side of the line

Trade with real goods and a real profit is the contrast that the Quran draws. A seller who buys goods and sells them at a margin takes the risk of ownership, and Islamic finance products are generally built around that kind of exchange, around leasing, or around profit sharing.

Qard hasan, the benevolent loan, is the loan form in which the principal comes back unchanged. The IIFA page above describes the Shariah position on loans in exactly those terms: repayment in the same amount, with no stipulated addition.

Scholars also treat a late-payment charge, a “service fee” tied to the amount lent, and a renamed interest payment as questions for case-by-case review. The IIFA material cited above is the place to start for the councils’ wording, and a qualified local scholar can look at a specific contract. Details differ between a UK mortgage, a US credit card and a student loan, so the general definitions here are a starting point for that conversation.

Sources

This article explains what the four Sunni schools say and links its sources. It is education, not a fatwa and not financial advice. For your own situation, ask a qualified scholar.

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