An argument often presented by many Muslims is that ribaa mentioned in the Qur’an is actually different from what we call ‘interest’ nowadays. It is important, therefore, to look at what qualified as ribaa in the pre-Islamic times (Ribaa al-Jahiliyyah).
We find various kinds of of situations where ribaa comes into play. A brief look at these reveals that there is no difference between the pre-Islamic ribaa and the present-day notion of interest.
“Qatadah narrates that the ribaa of pre-Islamic times was that where one person bought property from another with a promise to pay at a later time. If the buyer could not pay the agreed upon amount on the settlement date, the seller would extend the payment period and the amount owed.”
According to this example by Qatadah, the Arabs of the pre-Islamic times considered as ribaa the increase in the amount owed from the original settlement date to the revised settlement date.
“Mujahid held the opinion that the ribaa of the pre-Islamic times was that where the borrower would agree to pay more than the borrowed sum if given a specific time horizon to pay.”
This is increase in amount owed due to failure to pay or additional time is precisely what we call interest in the present-day economic system. In both cases, we see the debt being swapped for a larger amount based on the passage of time.
“According to Imam Razi the norm of the pre-Islamic days was that the borrower of monies would agree to pay an agreed upon amount on a monthly basis for an agreed upon period of time. At the expiration of that period, the borrower would return the original sum. However, if he could not pay, he would be given more time in return for higher monthly payments.”
These monthly payments were also called ribaa by the pre-Islamic Arabs.
Sources: Mawdudi, Abul Ala. Muashiat-e-Islam. 11th ed. Karachi: Ma’araf Islami, 1986. 232.
Obaidullah, Mohammed. Islamic Financial Services. Jeddah: Islamic Economics Research Center, 2005. 24.