Classification of Riba in Islamic Finance

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Types of Riba Transactions

There are two principle types of riba transactions described in the Quran and Sunnah and deduced by earlier Muslim jurists from the sources of Islamic Law. The two types are:

1. Riba an-nasiah (interest on delayed payment)

2. Riba al-fadl (interest on excess in countervalue in trade)

While riba an-nasiah relates to loans, riba al fadl relates to trade and commercial transactions generally. Riba an-nasiah is also known as riba al-duyun (riba on loans), riba al jali (obvious riba), riba al-mubashir (direct riba), riba al jahiliyyah / al Quran (riba prohibited by the Quran). Riba al-fadl is also known as riba al-buyu’u (riba in trade), riba ghayr al-mubashir (indirect riba), or riba al-khafi (hidden riba).

Source: Introduction to Islamic Banking and Finance by Hasan, Kayed, Oseni

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