A Sale Is Like Riba: Riba Revisited, #7

By Nizar Abdulrahman Alshubaily

It is perhaps the most famous verse about Riba in The Qur'an.

Revealed over 1400 years ago, it is still a cause of mystery for many.

But so obviously absent from it is an explanation of the difference.

{Because they said a sale is like Riba, and Allah has permitted a sale and forbidden Riba}

Why did they say a sale is like Riba?

Which type of sale is similar to Riba?

What are the similarities, and how did great interpreters and scholars of The Qur'an explain the revelation?

Why is one permitted, while the other is forbidden?

How does it relate to modern Islamic Finance?

Why are some people still confused?

Is it a lack of differentiation between Illah and Hikmah?

This volume of the Riba Revisited Series explores this famous verse, its explanation, and implications to the modern Islamic Banking industry.

• Language: English
• Publisher: Nizar Abdulrahman Alshubaily
• Release date: Jul 12, 2021
• ISBN: 9781393149514

Book preview

In

Memory

Of

My

Parents

Also By The Author

Riba Revisited Series:

Riba In Mubadalah

Riba In Jewelry

Riba Complexity

Riba In Contracts

The Book Of Quotes

The Names Of Riba

The Hadith Of Riba

Myths Of Riba

The Verses Of Riba

Essays In Islamic Finance Series:

Essays In Islamic Finance I

Essays In Islamic Finance II

Essays In Islamic Finance III

A Sale Is Like Riba

Volume VII

Riba Revisited Series

Copyright © Nizar Abdulrahman Alshubaily, 2021

All rights reserved. No part of this publication may be reproduced, stored in a retrieval system or transmitted in any form or by any means, electronic, mechanical, photocopied, recorded, or otherwise, without prior written permission of the copyright holder, except for reference and citation, with proper acknowledgment.

Cover Page: Photo of Manuscript of Sahih Al-Bukhari courtesy of Alukah.net

EBOOK ISBN: 9781393149514

A Sale Is Like Riba

Nizar Abdulrahman Alshubaily

An analysis of the well-known revelation from Verse 275 of Surat Al-Baqarah

Volume VII

Riba Revisited Series

2021 

Introduction

This is a short book about a seemingly complex and important subject. This is because very little has been written about it to fully explain it. What little has been written is dispersed in many books, both classical and modern. It is also the case that many individuals are confused by this issue.

Having written several books about Riba, and posted much educational material on the subject in social media, I still find that some subjects need more analysis and clarification.

I have decided therefore to elaborate on this issue, which was part of The Revelations in The Qur’an, namely Verse 275 of Surat Al-Baqarah.

This issue in fact has remained complex for many for over 1400 years. It remains today as a thorn in the side of the Islamic Finance industry.

Countless are the times that observers ask this same question: Why is it permissible to charge a margin for time when selling goods but not charging for time when lending? Are they not the same? Do they not lead to the same financial results?

Part of the problem resides in understanding evidence in Shari’ah. In financial transactions, permissibility is the basis, thus one has to provide proof for prohibition and not permissibility.

Some view a deferred payment sale with a margin as similar to Riba, and therefore they seek to find evidence of its permissibility. There is plenty of evidence in fact. I have included some in the last chapter.

The similarity between a deferred payment sale and a Riba loan bothers many. They seek to understand the difference. And here is the problem; they seek the difference in a material aspect, which is the financial result. When invariably they see very little difference, this creates suspicion.

That is because for many the wisdom of the prohibition of Riba must reside in an economic difference. Obedience and benevolence do not seem to be enough to convince many. As such, some have even gone to claiming a preference of equity over debt in Shari’ah. Of course, no such juridical preference exists.

I start with a prologue explaining something very important, which is obedience and how some scholars viewed it. In the end, a religion is about obedience to The Creator, without which, commandments may see nothing more than economic theories.

Many scholars in the past understood this point very well, which is why in their writings they seemed to have no difficulties in understanding the difference between a sale and Riba. Because they reasoned that one was forbidden, while the other permitted by Allah, nothing else mattered.

Others, namely modern observers of Islamic Finance were not so disposed as they wished to understand the economic wisdom behind the prohibition. For many, finding no convincing economic answer meant suspicion towards many products structured by Islamic Financial Institutions.

Many confused the Illah and the Hikmah. There is a big difference and it matters a lot in understanding how Islamic Finance works.

I hope this book goes a long way to clarify some of the confusion.

Nizar Abdulrahman Alshubaily,

July 2021

Prologue

The Matter Is Mine

This is an important point, which is why I begin with it to emphasize it. If from the beginning, the obedience to a rule is simply based on human intellect and its reasoning of good and bad, then religion has no place