Riba in Islam: Why Is It Strictly Prohibited?

Managing money in a way that aligns with Islamic values is a responsibility for every Muslim. Central to this is the principle of avoiding Riba in Islam, which refers to the prohibition of interest or usury. While Riba is widely used in conventional finance, Islam takes a firm stance against it. But why is it so important to avoid Riba?

What Is Riba in Islam and Why Is It Prohibited?

Riba in Islam refers to any guaranteed, predetermined gain made in a financial transaction without any effort, risk, or exchange of goods and services. It is most commonly associated with interest, which is widely used in conventional banking systems. However, in Islam, Riba is considered unjust and exploitative, as it benefits the lender at the expense of the borrower. 

Islam encourages trade, Shariah-compliant investment, and profit-sharing, where the risk and reward are shared between all parties involved. In contrast, Riba allows one party to earn a guaranteed profit regardless of the outcome, which can often result in financial hardship for the other side. 

The severity of Riba is clearly emphasised in the Qur'an. In Surah Ali' Imran (3:130), Allah (SWT) warns:

"O you who have believed, do not consume usury, doubled and multiplied, but fear Allah that you may be successful." 
(Surah Ali' Imran, 3:130)

This verse reminds believers not to engage in Riba, especially when it is compounded and unfairly burdens others. By avoiding Riba and being mindful of Allah (SWT), we are promised true success in this life and the next.

How to Avoid Riba in Your Finances

Avoiding riba in today’s financial system can be challenging, but with the right information and support, it may be possible to manage your finances in a way that aligns with your values.

Learn the Basics of Riba in Islam

Avoiding Riba in Islam begins with understanding how it works. Interest-based charges are often built into credit cards, conventional home loans, savings, and investment products. Educating yourself about Islamic finance principles helps you make informed decisions that protect both your wealth and your faith.

Review Your Savings, Super, and Investment

It’s easy to overlook how Riba might be embedded in your financial setup. Review your bank accounts, Superannuation fund, and investment portfolio. Are they earning interest? Are they invested in industries that go against Islamic values?

Many conventional Superannuation funds in Australia invest in interest-bearing assets like bonds or banks. That’s why it’s essential to reassess where your money is parked and how it’s growing.

Choose a Riba-Free Financial Product

With more halal financial products now available, Muslims can choose from Shariah-compliant home loans, investments, and Superannuation options. These alternatives can help you avoid Riba in Islam and manage your finances without compromising your faith.

Hejaz Islamic Superannuation, A Super That’s Riba-Free

Understanding Riba in Islam is an important first step. From there, you might consider exploring financial options that align with Islamic principles, such as Shariah-compliant Superannuation like the one offered by Hejaz. 

Hejaz Islamic Superannuation is designed to help Muslims grow their retirement savings without compromising their faith. Our products are carefully reviewed by qualified Shariah scholars and follow the standards set by AAOIFI (Accounting and Auditing Organisation for Islamic Financial Institutions).

We avoid all investments that generate returns through interest-based financial institutions, such as banks or bonds. We also ensure your super is not invested in industries considered haram, including alcohol, gambling, pork-related products, adult entertainment, weapons, or any business that engages in unethical practices.

The choice to avoid Riba in Islam reflects both financial awareness and spiritual commitment. With the right understanding, Muslims can manage their finances in a way that is responsible and Shariah-compliant.

Disclaimer:
This publication is prepared by Hejaz Asset Management Pty Ltd ABN 69 613 618 821, AFSL 550009, as the Fund Manager and the Promoter for the Hejaz Islamic Super and Pension products. The information contained in this publication is for general information purposes only. It is prepared without taking into account your objectives, financial situation, or needs. It is not an offer or recommendation to make any investment or adopt any investment strategy. Consider the PDS and TMD on our website before deciding whether the product suits you.