The Concept of Riba in Islamic Banking and Finance

By Aishat Adegboyeva,

Edited by Sanaa Kadi


Rules and injunctions abound under Islamic Law that guides the Islamic way of life. As rightly believed by most Muslims, Shari’ah – especially the Quran and the Sunnah was revealed to guide the path of morality and conscientiousness, with matters such as ribā being seen as contrary to the injunctions of the Quran. Against this backdrop, more research is being conducted on these injunctions, especially regarding ribā, to determine how it juxtaposes modern conventional banking.

This blog post would address the concept of ribā, modern conventional principles, and whether ribā interoperates with current conventional banking or Islamic banking principles.

Understanding Ribā

Ribā is an Arabic word meaning “to increase” or ‘to exceed’, which is often used in reference to unequal exchanges or charges and fees for borrowing.[1] Matters on ribā still cause a major stir amongst scholars and Muslim jurists, especially as there exist different Islamic schools of law. Generally, ribā is considered haram (sinful) and impermissible with a strong consensus on ribā being forbidden under Sharia law.

Conventional Banking Principles – Trade or Ribā?

Ribā is synonymous with usury, which is the lending of money with an unreasonably high-interest rate.[2] Even though Islam does not prohibit banking, trading, and/or investment,[3] in Islamic banking and finance, investment, or commercial activities that return interest are considered haram (sinful) and therefore not allowed.[4] With the advent of the 20th century ushering in the practice of Islamic banking, there began the proponent of converting conventional interest-based banking and loans with the replacement of profit and loss-sharing investments.[5] The position of States choosing to set their own respective usury laws rather than prohibit them in their entirety is evidence of the prominence usury is having in modern conventional banking. The way Islamic banking has navigated this aspect especially is to provide financial transactions without charging interest rates, and in cases of advancing loans, enter a contract based on either partnership (e.g., Musharakah and Mudaraba) or sale base modes (e.g., Murabaha).[6]

Interest and loans appear to be widely accepted in conventional banking both in theory and practice,[7] which is in contrast with Islamic injunctions according to Muslim scholars.


[1] M.H. Khatkhatay and Shariq Nisar, ‘Sharī’ah Compliant Equity Investments: An Assessment of Current Screening Norms’ (2007) 15 Islamic Economic Studies 1.

[2] John Munro, ‘Usury, Calvinism, and Credit in Protestant England: From the Sixteenth Century to the Industrial Revolution’ (2011) <> accessed 26 February 2023.

[3] Choudhury Masudul Adam, Rahman Asmak and Hasan Abul, ‘Trade Versus Riba in the Qur’an with a Critique of the Role of Bank Saving’ (2018) 60 International Journal of Law and Management 701.

[4] Khatkhatay and Nisar (n1).

[5] Muhammad Zahid Siddique, ‘Modern Money and Islamic Banking in the Light of Islamic Law of Riba’ (2022) 27 International Journal of Finance and Economics 993.

[6] 6 Ibid.

[7] Ismail Abdul Ghafar, Possumah Bayu Taufiq and Ali Mohd Akil Muhamed, ‘What You Sell Is What You Lend? Revealing Complexity of Riba in Loan Contract’ (2018) 45 European Journal of Law and Economics 591


“Engaging Students in Islamic Business Law: A Successful Course at University of Helsinki with Published Blog Posts”

By Sanaa Kadi,

Between February 6th and March 3rd, 2023, the Faculty of Law at the University of Helsinki offered a unique course on Islamic business law for the second time. The course was held in the university’s main building, which is a true masterpiece of architecture in Helsinki, located in the heart of the city, it is considered one of the most beautiful buildings in Helsinki with its majestic facade and intricate details. The course attracted students from diverse backgrounds who were eager to learn about the principles and practices of Islamic finance. The last course was held in the autumn of 2021.

Designed to provide a comprehensive overview of Islamic business law, the 5 credits course covered a range of topics including the sources of Islamic law, the development of Islamic business law, the different Islamic financial transactions, dispute resolutions, and the principles of Maqasid-al-Sharia. Maqasid-al-Sharia refers to the objectives or goals of Islamic law, which are based on the teachings of the primary sources of Islamic law, namely the Quran and the Sunnah. These objectives include the preservation of faith, life, intellect, family, and property, as well as the promotion of justice, equality, and the common good.

Throughout the course, the law students were highly engaged and dedicated to understanding the principles of Islamic law and their practical applications in modern business transactions. Many of them come from non-Muslim backgrounds and are curious about the legal and ethical aspects of Islamic finance. To further enhance their learning, the students were required at the end of the course to present a blog post about one of the topics covered in the course. These blog posts are published in the university’s blog, Islamic Business and Financial Law.

The course was designed to encourage critical thinking about the principles of Islamic law and their relevance to contemporary business practices. To facilitate this, the students engaged in lively debates and challenged each other’s assumptions, which fostered a deeper understanding of the subject matter.

“There were sufficient materials and guidance to help with the learning. I mostly enjoyed the little ‘to-do’ tasks during and after the lesson. It was interactive and interesting.”

The course also emphasized experiential learning, allowing students to apply the principles of Islamic business law to real-world situations. For example, the students were required to work on different assignments and exercises that involved the development of solutions that complied with Islamic legal and ethical standards.

Overall, the course on Islamic business law at the University of Helsinki was a great success, attracting a diverse range of students who were eager to learn about Islamic finance and its principles. The course was engaging, practical, and thought-provoking, and helped foster a deeper understanding of Islamic law and its applications in the contemporary world. The blog posts written by the students provided valuable insights into the course topics and demonstrated their understanding of the principles of Islamic business law.


To visit the blog page, click on the link provided:


The supremacy of personal interests over ethics: Different views on wealth growth

     According to the Islamic concept of life, God has created enough resources that meet the needs of all humanity, therefore there should be no economic problem at all, and if a problem of that kind rises, it is because of the human neglect and lack of responsibility towards those resources and his insatiable desires for getting more. Therefore, Islamic view of the existence is that wealth should be considered as a means to satisfy one’s needs and not an end in itself. Once each individual satisfies his needs, he must then turn to his obligations towards his family, friends, neighbors and the society as a whole, thus, each individual is an important actor in an institution where every individual is a promoter of peace and goodwill for all.  Continue reading “The supremacy of personal interests over ethics: Different views on wealth growth”

Hello world!

I am a doctoral student at the University of Helsinki. My study is about Islamic financial institutions and the many faces and issues related to them, especially banking systems and interests on loans.

The basic principles of Islamic banking and finance especially on the prohibition of interest on loans and the speculations harmful results on the economy are taken directly from Sharia Law. Islamic law on transactions is very developed and highly regulated. However, Muslim countries’ legal systems are significantly influenced by Western legal systems. Therefore, banking law in the majority of Muslim countries is conventional and not governed by Islamic law. Continue reading “Hello world!”