Is Interest Haram Or Halal? What Islamic Values Justify In 2023

Reviewed by: Shakira Ahmed
Fact Checked by: Shahina Islam

Is Interest Haram Or Halal

Is Interest haram? According to Islamic principles? This subject has provoked much debate and thought among the Islamic world. The idea of interest, or riba in Arabic, has major ramifications for Islamic-governed financial transactions and economic systems.

Let us go into the question of interest in Islamic finance and examine the many opinions on its permissibility or restriction.

Interest is regarded as haram in Islamic finance since Allah expressly forbids it. According to Islamic beliefs, participating in haram action cannot be excused by mutual permission or approval.

Is Interest Haram?

Receiving and paying interest, often known as riba, is absolutely forbidden in Islam. However, in today’s financial system, it is typical for individuals to accrue interest accidentally through their bank accounts or other financial instruments, even if they do not actively pursue it. This highlights the question of what to do with the accumulated interest.

  • It is not permitted to employ riba for one’s personal profit, according to Islamic beliefs. As a result, donating the collected interest to charity is a suggested course of action. Individuals can dispose of haram funds in a Shariah-compliant way, providing that they do not gain directly from them.
  • While there is no stated religious incentive to give interest, the conduct is in accordance with Islamic ethical principles. It allows individuals to purify their financial resources of unlawful profits and redirect them to charitable activities that benefit society. 
  • Donating earned interest to charitable organisations or using funds to support activities that promote social welfare and alleviate poverty can serve as a kind of atonement while also helping others.

It is critical to underline that individuals should seek out proactive measures to minimise or limit the accumulation of interest in their financial transactions. Investigating alternative Shariah-compliant Islamic financial goods and services, such as Islamic banking, investment accounts, and ethical lending, can help achieve this.

Reasons Why Is Riba Considered As Haram?

Reasons Why Is Riba Considered As Haram

Is Interest Haram? Riba, or interest, is haram in Islam for a variety of reasons that accord with the concepts of justice, fairness, and ethical behaviour. Riba is forbidden by the Quran and Hadiths, as well as by larger Islamic principles and values. Here are some of the main reasons why riba is considered haram in Islam:

Poverty exploitation: 

Islamic beliefs place a premium on social justice and compassion for the less fortunate. Interest on loans can lead to financial abuse of the economically poor. It permits the rich to amass greater money at the expense of those in need, hence perpetuating economic inequality and social injustice.

Concerns about ethics: 

Riba is seen as an expression of greed and a desire for personal gain at the expense of others. Islam encourages kindness, compassion, and self-sacrifice. Engaging in interest-based transactions opposes these precepts and goes against the Islamic culture of giving and charity.

Keeping Dignity and Fairness: 

In Islam, individual dignity and well-being are highly prized. The charge of interest can trap borrowers in a debt cycle, destroying their dignity and limiting their ability to improve their financial situation. The riba prohibition seeks to uphold justice and protect others from being exploited.

Economic sustainability: 

Because excessive interest accumulation may promote societal imbalances and inequalities, interest-based systems can lead to economic instability. Islam promotes a rational and balanced economic structure that ensures equitable wealth distribution and economic stability for the benefit of society as a whole.

Spiritual and moral growth: 

Individuals are taught to shun riba in order to grow spiritually and morally. It elevates self-discipline, happiness, and reliance on God’s provision over exploitative financial practices. Islam emphasises the importance of cleaning one’s money and avoiding ill-gotten gains.

By prohibiting riba, Islam wants to build an economic and financial system that promotes justice, compassion, and fairness. Individuals are reminded by the constraint to value ethical behaviours, social responsibility, and communal well-being.

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Is Investment In The Stock Market Halal Or Haram?

Are Roth IRA And 401K Investing Halal Or Haram?

Is It Halal To Take Interest?

Is Interest Haram? Accepting riba (interest) does not make something halal in Islam. This is a key premise that separates Islamic Shariah from secular laws. Mutual permission to participate in haram conduct does not make it legal in Islamic beliefs.

Individual consent does not render acts like zina halal, and the same logic applies to financial transactions containing interest. Even if a person freely accepts to receive interest or engage in interest-based transactions, the underlying ban on riba in Islam remains.

According to Islamic beliefs, actions or transactions that are intrinsically haram will stay such until the Day of Judgement. Riba is regarded as a heavenly command that cannot be violated.


In Islamic Finance, What Alternatives To Interest-Based Transactions Are Available?

Islamic finance offers Shariah-compliant alternatives to interest-based transactions. These include profit-sharing arrangements, equity-based financing, leasing contracts, and Islamic banking and investment products. 

What Should I Do If I Inadvertently Accrue Interest On My Financial Transactions?

If you mistakenly collect haram monies, it is best to dispose of them in a Shariah-compliant way. One option is to contribute the accrued interest to charitable causes or utilise it to assist social welfare activities. 

Is It Legal To Invest In Stocks Or Shares That Pay Interest?

Islamic scholars vary on whether it is permissible to invest in stocks or shares of firms that are involved in interest-bearing activities.


Is Interest Haram? Finally, the topic “Is Interest Haram?” has been extensively investigated, revealing insight into the Islamic viewpoint on the prohibition of interest (riba). Because of its exploitative nature, violation of justice principles, and disagreement with the spirit of giving and compassion, Islam categorically proclaims interest to be haram.

Islamic beliefs place a premium on social justice, fairness, and economic stability, all of which are threatened by interest-based transactions. It is critical to recognise that mutual permission to participate in haram conduct does not render it legal under Islamic rules. Accepting interest does not make it a halal practice .

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