This excerpt is taken from Dr. Yusuf al-Qaradawi's book Halal and Haram in Islam, translated into Urdu by Muhammad Tahir Naqqash.
The Prohibition of Usury
Islam has permitted making wealth profitable through trade (trading for increase). The Divine command is:
يَا أَيُّهَا الَّذِينَ آمَنُوا لَا تَأْكُلُوا أَمْوَالَكُم بَيْنَكُم بِالْبَاطِلِ إِلَّا أَن تَكُونَ تِجَارَةً عَن تَرَاضٍ مِّنكُمْ
"O you who have believed, do not consume one another's wealth unjustly but only [in lawful] business by mutual consent."
Reference: (Surah An-Nisa: 29)
And Allah Almighty has praised those who travel for the purpose of trade. However, Islam has prohibited every method of making wealth profitable through usury (interest). Thus, every amount of interest, whether small or large, is declared forbidden. The Jews have been strongly condemned for continuing to consume interest despite prohibition. The following verses of Surah Al-Baqarah belong to the last revealed part of the Quran:
يَا أَيُّهَا الَّذِينَ آمَنُوا اتَّقُوا اللَّهَ وَذَرُوا مَا بَقِيَ مِنَ الرِّبَا إِن كُنتُم مُّؤْمِنِينَ 278 فَإِن لَّمْ تَفْعَلُوا فَأْذَنُوا بِحَرْبٍ مِّنَ اللَّهِ وَرَسُولِهِ ۖ وَإِن تُبْتُمْ فَلَكُمْ رُءُوسُ أَمْوَالِكُمْ لَا تَظْلِمُونَ وَلَا تُظْلَمُونَ
"O you who have believed, fear Allah and give up what remains [due to you] of interest, if you should be believers. And if you do not, then be informed of a war [against you] from Allah and His Messenger. But if you repent, you may have your principal - [thus] you do no wrong, nor are you wronged."
Reference: (Surah Al-Baqarah: 278-279)
The Messenger of Allah, peace be upon him, declared war against both interest and usurers and made it clear that interest is a very dangerous and deadly disease for society: when interest and adultery appear in a town, people invite the punishment of Allah.
Reference: Mustadrak Hakim: 4/118, Mu'jam al-Kabir al-Tabarani: 10/460
Islam is not the first heavenly religion to declare interest forbidden; interest was also forbidden in the Jewish religion. In the Old Testament, it is stated:
If your brother becomes poor, help him; do not seek profit or interest from him.
Reference: Exodus 22:24
And regarding the Christian religion, in the Gospel of Luke it is stated:
Do good to others and lend without expecting anything back; in such a case, your reward will be great.
Reference: Luke 6:24-25
The unfortunate thing is that in the Old Testament, by distortion, the meaning of brother was taken specifically as a Jew. Thus, in the book "Deuteronomy," it is stated: You shall lend to a foreigner interest, but to your brother, you shall not lend interest.
Reference: Deuteronomy 23:20
The Wisdom Behind the Prohibition of Usury
Islam has considered the moral, social, and economic interests of humans in strictly prohibiting usury (interest). Islamic scholars have explained its rational reasons, and modern research has further clarified these interests. We will suffice by presenting the light shed on this issue by Imam Razi, may Allah have mercy on him:
Firstly: Usury requires that a person’s wealth be acquired without compensation. A person who sells one dirham for two dirhams gains one dirham without compensation. Whereas a person’s wealth is meant to fulfill needs and is something of great sanctity. As mentioned in the hadith:
The sanctity of a person’s wealth is like the sanctity of his blood.
Reference: Abu Nu'aym in Hilyat al-Awliya: 7/334, Dar Qutni: 3/26, Majma' al-Zawa'id: 4/172
Therefore, acquiring wealth without compensation must be prohibited.
Secondly: Relying on usury will result in people becoming lazy in earning through labor. Because for the owner of wealth, it will be easy to gain extra wealth through usurious transactions, whether in cash or credit. In such a case, why would he bother to work hard in business, trade, or difficult tasks? The result will be that the public interest will be harmed. In reality, the world’s benefit is connected to trade, industry, craftsmanship, and constructive work. There is no doubt that this interest is absolutely correct from an economic point of view.
Thirdly: As a result of usury, the well-known method of lending among people will end, because when usury is prohibited, the nature is inclined to lend one dirham and take back only one dirham. But if usury is permitted, the needy person’s need will compel him to take one dirham and return two dirhams. This will result in the end of human sympathy and kindness. (This reason is accepted from a moral point of view.)
Fourthly: Generally, the borrower is needy and the lender is wealthy. Therefore, if usurious transactions are permitted, the rich will gain extra wealth from the needy and weak. How can Divine mercy permit this situation? (This considers the social aspect.) In short, usury means sucking the blood of the poor for the benefit of the powerful. It increases the wealth of the rich and the poverty of the poor, and one class unjustly benefits at the expense of another, becoming wealthy. This creates mutual hatred and enmity in society, ignites conflict among people, and paves the way for extremist revolutions. History has recently proven how dangerous usury and usurers are for politics, governance, and local and national peace.
The One Who Gives Interest and the One Who Writes It Down
The one who consumes interest is both a debtor and a wealthy person. He gives money to the borrower so that he can return it with profit on the principal amount. There is no doubt that such a person is cursed by Allah and by people. However, Islam has not limited this sin only to the interest eater, but has also declared the one who gives interest equally guilty. The one who writes the document of interest and its witnesses are also considered partners in the sin.
The hadith states:
لعن الله أكل الربا ومو كله وشاهديه وكاتبه
"Allah has cursed the one who consumes interest, the one who gives it, the one who witnesses it, and the scribe."
Reference: Musnad Ahmad: 1/393-402, Abu Dawood Kitab al-Buyu, chapter on the eater of Riba and the one who orders it, hadith: 3333; Tirmidhi Kitab al-Buyu, chapter on what has been mentioned about eating Riba, hadith 1206; Nasa'i Kitab al-Zinah, chapter on insults, hadith: 1010; Ibn Majah Kitab al-Tijarat, chapter on strictness in Riba, hadith: 2277 from Abdullah bin Mas'ud (RA), and the wording is from Ahmad and narrated by the authors of the Sunan with the wording: The Messenger of Allah (PBUH) cursed... and with this wording Muslim narrated it in Kitab al-Musaqah, chapter on cursing the eater of Riba and the one who orders it, hadith: 1597 briefly, and from Jabir bin Abdullah (RA), hadith: 1598
However, if severe necessity demands engaging in an interest-based transaction, then only the one who consumes interest will be sinful:
1. Provided that the necessity is genuine. Mere personal needs or expansion in work or growth is not considered necessity. Necessity means that a person cannot do without it except by preparing to destroy himself. For example, food, clothing, and treatment which are indispensable.
2. This permission is only to the extent that the need is fulfilled. For example, if nine rupees suffice, then do not take a loan of ten rupees.
3. Every possible effort should be made to avoid interest-based transactions, and it is obligatory on Muslim brothers to help such a person. But if the needy person finds no other means except an interest-based loan, he may take it provided that he does not desire it and does not exceed the limit. In such a case, Allah is Forgiving and Merciful.
4. If he is compelled to take this course, he should do so reluctantly but express dissatisfaction until Allah creates another way for him.
شرعي مجبوري كا معنى يه هے كه اس كي جان كے تلف هونے كا انديشه هو اور فقط جان بچانے كے ليے سود كي رقم كا لقمه اسے ديا جائے ، اس سے زائد كچه نهيں. (ابو الحسن مبشر احمد رباني)
The Prophet ﷺ sought refuge from debt in Allah
A Muslim should be aware that Islam instructs moderation in social life and temperance in economy:
وَلَا تُسْرِفُوا إِنَّهُ لَا يُحِبُّ الْمُسْرِفِينَ
"And do not waste [resources], for indeed, He does not like the wasteful."
Reference: (Surah Al-An'am: 141)
وَلَا تُبَذِّرْ تَبْذِيرًا 27 إِنَّ الْمُبَذِّرِينَ كَانُوا إِخْوَانَ الشَّيَاطِينِ
"And do not spend wastefully. Indeed, the wasteful are brothers of the devils."
Reference: (Surah Al-Isra: 26-27)
The Quran's demand from the believers regarding spending in the way of Allah is not to spend all the wealth given by Allah, but to spend a portion of it. Whoever spends a part of his earnings may never become needy. This moderation and temperance require that a Muslim should not need to borrow. The Prophet Muhammad (peace be upon him) disliked debt because it causes worry day and night. He used to seek refuge from debt:
اللهم انى اعوذبك من غلبة الدين وقهر الرجال
"O Allah! I seek refuge in You from the burden of debt and from the oppression of men."
Reference: Abu Dawood, Kitab Al-Witr, Bab fi Al-Isti'adhah, Hadith: 1555, its chain is weak but supplemented by what Al-Bukhari narrated in Kitab Al-Da'awat, Bab Al-Isti'adh min Ghalabat Al-Rijal, Hadith: 6363 from Anas (may Allah be pleased with him), wording: Allahumma inni a'udhu bika min al-hammi wal-huzni wal-'ajzi wal-kasali wal-bukhli wal-jubni wa dhala'id-dayni wa ghalabatir-rijal. Al-Mustadrak Hakim: 1/347 and An-Nasa'i 549 from Ibn Umar (may Allah be pleased with him)
And he used to pray:
أعوذ بالله من الكفر والدين، فقال رجل اتعدل الكفر بالدين يارسول الله؟ قال نعمم
"I seek refuge in Allah from disbelief and debt." Someone asked: O Messenger of Allah! Are disbelief and debt equal? He said: Yes."
Reference: An-Nasa'i, Kitab Al-Isti'adhah, Bab Al-Isti'adh min Ad-Din, Hadith: 5475, 5476 - Al-Mustadrak Hakim: 1/532, Musnad Ahmad: 3/38, chain weak
In prayer, the Prophet (peace be upon him) often supplicated:
اللهم انى اعوذبك من الماثم والمغرم فقيل له إنك تستعيد من المغرم كثيرا يارسول الله، فقال إن الرجل إذا غرم حدث فكذب ووعد فأخلف
"O Allah! I seek refuge in You from sin and debt." Someone asked: O Messenger of Allah! Why do you often seek refuge from debt? He said: When a person becomes indebted, his condition is such that when he speaks, he lies, and when he makes a promise, he breaks it."
Reference: Bukhari, Kitab Al-Adhan, Bab Ad-Du'a, Bab Ma Yusta'adh Minhu Fi As-Salat, Hadith: 589
This hadith highlights how harmful being in debt is for one's character. The Prophet (peace be upon him) would not lead the funeral prayer for a person who had debt and did not leave enough wealth in inheritance to pay it off.
Reference: Bukhari, Kitab Al-Kafalah, Bab Ad-Din, Hadith: 2298; Muslim, Kitab Al-Fara'id, Bab Man Taraka Mala Falawarithahu, Hadith: 1619
The Prophet's method was to instill fear of debt in people, but when Allah granted him spoils of war, he personally took care of repaying such debts. The Prophet (peace be upon him) said:
انا اولى بالمؤمنين من أنفسهم فمن توفي من المؤمنين فترك دينا فعلي قضاؤه ومن ترك مالا فلورثته
"I am closer to the believers than their own selves. So whoever dies leaving debt, I will pay it off, and whatever wealth he leaves will go to his heirs."
Reference: Narrated by Al-Bukhari and Muslim; this addition is not in the original book but included here due to relevance (Kashif)
Also, the Prophet (peace be upon him) emphasized further regarding debt:
يغفر للشهيد كل شيء إلا الدين
"Every sin of a martyr is forgiven except debt."
Reference: Muslim, Kitab Al-Imarah, Bab Man Qutil Fi Sabilillah Kuffirat Khatayahu Illa Ad-Din, Hadith: 1886
In light of these instructions, a Muslim should not take any kind of debt without severe necessity. And if taken, one should always intend to repay it. The hadith states:
من أخذ أموال الناس يريد أداءها أدى الله عنه ومن أخذها يريد إتلافها أتلفه الله
"Whoever takes the wealth of people as a loan intending to repay it, Allah will repay it on his behalf; and whoever takes it intending to destroy it, Allah will destroy him."
Reference: Bukhari, Kitab Al-Istiqaradh, Bab Man Akhadh Amwal An-Nas Yuridu Ada'aha, Hadith: 2387
So, if a Muslim cannot take a lawful loan without compulsion, how can he take an interest-based loan?
