“Riba in Modern Finance: The OIC Perspective on Interest and Islamic Principles”
"All forms of interest charged or paid by conventional banks fall under riba and are prohibited (haram)."
Definition of Riba (as per OIC / Islamic Fiqh Academy):
The Islamic Fiqh Academy defines riba as:
“Any stipulated increase over the principal amount of a loan or debt, without a corresponding legitimate consideration, is considered riba.”
Key Elements Riba;
1. Increase over principal: Any extra amount charged beyond the original loan.
2. Pre-agreed / stipulated:The increase is agreed upon at the time of contract.
3. Without counter-value:There is no real economic activity, risk-sharing, or asset backing.
Types of Riba Recognized:
The OIC framework broadly acknowledges classical categories:
– Riba al-Nasi’ah (Deferred Interest): Extra charged due to time delay in repayment (most common in modern banking).
– Riba al-Fadl (Excess in Exchange):
Unequal exchange of similar commodities (e.g., gold for gold with excess).
OIC Position on Modern Banking Interest
The Islamic Fiqh Academy has clearly resolved that:
“All forms of interest charged or paid by conventional banks fall under riba and are prohibited (haram).”
