All termsconcepts
Riba
ربا
Interest charged or earned on a loan or deposit.
In Islamic finance, riba is any predetermined, guaranteed increase on borrowed money regardless of how the underlying business performs. It is this "guaranteed" element that scholars consider unjust, because it places all risk on the borrower.
Islamic perspective
Riba is explicitly prohibited in the Quran in multiple verses. The prohibition covers both charging and receiving interest. This is why conventional savings accounts, bonds, and loans are considered problematic for Muslim investors.
Example
Ahmed borrows £1,000 from a conventional bank at 5% interest. After one year he must repay £1,050 regardless of whether his business made any money. The £50 extra is riba.
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