Riba
An increase over principal that Shariah prohibits: extra stipulated on a loan, or an unequal exchange of certain like-for-like goods.
Riba is the increase that Islamic finance treats as prohibited. The IFSB describes it as an increase in return for deferment in a qard, or loan, contract, known as riba al-nasiah, or in an exchange contract, known as riba al-fadl. Avoiding riba is why Islamic banks earn returns through sales, leases, partnerships and fees instead of interest on loans.
Sources
This entry explains a term; it is not a Shariah ruling. Approving a product is for each institution's own Shariah board and regulator.
Related terms
Riba al-nasiahRiba of deferment: an increase stipulated in return for extra time, most commonly on a loan.Riba al-fadlRiba of excess: an unequal exchange of the same kind of certain goods, such as gold for a larger quantity of gold.QardA loan of money to be repaid in an equivalent amount; any benefit stipulated for the lender is riba.MurabahaA sale at cost plus an agreed, disclosed profit; the seller must own the asset first. Payment is often deferred in instalments.Al-ghunm bil-ghurmThe legal maxim that entitlement to gain comes with liability for loss: whoever takes the profit must also bear the risk.