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How to create Riba (Interest) Free System

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In the current world order, how can anyone avoid involving in the system of Riba (interest)?

The existing economic system of world is based on RIBA, the economic institutions provide interest based loans to different countries and the countries make financial policies for collecting the funds from people for repaying those debts. Directly or indirectly, every person has become a part of this global economic system which is based on RIBA.

The situation is not different at individual level, I am constructing my house and need some loan to complete the construction work. The banks are ready to provide me the loan @ 13% markup rate, there is not a single institute in my country which can provide me interest free loan. The question for me now is that should I construct the house in this limited worldly life by fighting war with Allah & His Apostle?  I think, no sensible person will prefer to do that. Similarly, I have seen many people using credit cards & interest based loans for fulfilling their financial needs.

If we look at the Islamic banking concept, we see the use of interest rates with slightly different names. They also charge the interest in their calculations but tell us it is interest free because they have fatwa from so & so Molvi. 

Please share your view point on Islamic financial system. Do we have any financial system in Quran? What was the financial system introduced by Prophet Muhammad (pbuh)?  And how can we implement & modernize those laws & values present in the Quran & Sunnah?

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There are a few ways to approach this.

My personal opinion is that equating riba (usury) to modern-day banking systems that use interest is nothing short of qiyas.  The modern banking systems did not exist in 7th century Arabia and comparing them is problematic.

However, if you do believe that modern interest banking is the same as riba and is therefore forbidden, there is an alternative.  I have seen at least one or two banks that do this method, but I can't remember their names (google Islamic mortgage and you should have some success).  Basically the contract is written up like this:

Purchaser puts a down payment (hypothetically we will say 10% of the cost) while the bank loans the rest of the cost (90%).  Thus, the bank owns 90% of the house and the person owns 10% of the house.  The person pays the bank, month by month, a fixed amount of rent for the 90% of the house that they do not own, plus a fixed amount towards the purchase of more percents of the house.  Let me break it down with real numbers to make it easier to understand (note that this is only an example and the rates are numbers that I just pulled out of my imagination, they probably have zero basis in reality.)


Cost of house: $100,000

Buyer pays: $10,000

Bank pays: $90,000


Each month the buyer will pay the bank $1,500.

$500 of that money is rent for the part of the house that they do not own.  $1,000 of that money is to purchase an additional percent of the house each month.  So after 90 months (7.5 years) the person will own the house and cease making payments to the bank.  The bank will have gotten their original $90,000 back in the form of the person buying the house 1% at a time, as well as $45,000 in rent money for the 7.5 years that the person lived in the house without fully owning it.  Thus the bank will be profitable and the person paying will have avoided paying interest (if only technically).


Again, please note that these numbers are unrealistic and used only as a demonstration of concept.  Contact your local Sharia bank for real numbers that can be used..

Edited by Guerrilla

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