Profits Through Trade and Interest

What is the difference between profits made through trade and those made through Interest?

In verse 275 of Surah al-Baqarah, Allah starts off with a frontal attack on Riba describing those who take interest in the most severe terms:

“Those who devour interest stand up like someone lurching from Shaytan’s touch.”[1]

The verse compares one who consumes Riba to a staggering madman. Then the verse mentions the standard justification used by those who take interest:

“They say: trade is just like taking interest.”[1]

This justification is still the basis of one of the arguments used for taking interest today, which is that one must pay for the usage of someone else’s capital. If he had held that capital, he could have invested it and made a profit, so the borrower has to compensate the lender for the loss of his potential profits especially since the borrower will use the lender’s capital to make profits. However, Allah rejects their crafty arguments and twisted logic saying:

“But Allah has made trade permissible (Halal) and interest forbidden (Haraam).”[1]

There is no guarantee that had the owner of the capital invested it, he would have made profits, yet the lender wants to collect a guaranteed fixed profit whether the borrower succeeds in business or not. Logic would demand that the lender should not only share in the borrowers’ profits but also share his losses if his investments fail. This logical principle constitutes one of the basic principles of the Islamic Banking system. Allah then closes the verse with the solution to the problem of past interest-based transactions, saying:

“Whoever stops when the admonition reaches him is allowed to keep what is from the past and his case is with Allah, but whoever returns (to interest), is a true companion of the hell-fire wherein he will stay eternally.”[1]

Such is the terrible punishment for all those who know the truth yet reject it, because that is the essence of Kufr, covering up the truth about God.

In verse 276, Allah points to a reality which is incomprehensible to most people:

“Allah has deprived Riba of its value while causing charity to grow.”[2]

Though Riba may seem to increase the quantity of one’s wealth, it in fact decreases its blessing. On the other hand, charity which seems to decrease one’s wealth increases its blessing. Allah expresses His displeasure with those who persist in dealing with Riba, saying:

“And Allah dislikes the disbelieving sinner.”[2]

In the following verse, number 277, Allah promises those who give up interest-based transactions both material and spiritual rewards:

“Verily, those who believe and do righteous deeds, establishing Salah and paying Zakat, will have a reward with their Lord and they will not be overcome by fear or grief.”[3]

Those who believe are those who obey Allah’s command to leave Riba and perform well the other pillars of Islam. They will be protected by Allah in this life from the burdens of fear, and even more importantly grief, and will be greatly rewarded in the next life.

Verse 278 is comprised of a direct exhortation to the believers to comply with the prohibition on interest and a challenge to them to prove the reality of their Imaan (belief in God)

“O Believers, fear Allah and leave what interest remains if, indeed, you truly believe.”[4]

Allah identifies the crux of the matter as Taqwa (God-consciousness) and calls the believers to observe it internally as well as externally, because it is only the real fear of God’s displeasure which will drive man to give up the apparently sweet profits which appear in transactions involving interest. This fear is like an internal alarm that goes off whenever a believer nears the haraam acts, thereby helping him to tread the right path. It is not the same as the fear of harm or danger, which grips an individual from time to time, leaving him drained and weak. This fear, when fully developed is a much more intense and instinctual fear, which leaves its fortunate possessor in a unique state of happiness referred to by the Prophet (ﷺ) as the “Sweetness of Imaan.”

The last verse in the sequence, 279, contains a severe final warning unparalleled throughout the rest of the Qur’an in its harshness for such a seemingly minor sin:

“And if you do not (give up the remaining interest), then be warned of a war on you by Allah and His Messenger.”[5]

Such a war cannot but end in a total, devastating defeat for the enemies of Allah. Thus, anyone who refuses to give up transactions containing interest is classified as an open enemy of Allah and His Apostle, and is eligible for destruction at any time in this life as well as an abode in the Hell-Fire in the next. But Allah in His great mercy and sympathy, even at this point offers an alternative as well as some material incentive, saying:

“But if you repent, you may have back your principle investment. Do not do wrong and you will not be wronged.” [5]


[1] [Qur’an 2:275]

[2] [Qur’an 2:276]

[3] [Qur’an 2:277]

[4] [Qur’an 2:278]

[5] [Qur’an 2:279]

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