1.0 INTRODUCTION
1.1 Meaning Riba’
1.1.1 Riba’ in Holy Quran :
Since the ages of legacy by Prophet Muhammad S.A.W., he has encourage and forbid public to never take riba (interest) in debt and also in doing business. The societies of Arab Jahiliyyah in the past were among the peoples in Arabic land before the birth of our Prophet was actively charged higher interest or riba in doing their business. Until Allah S.W.T sent the message to the Prophet in Holy Qur’an (Surah al- Baqarah, verses 278-81):
O believers, fear God, and give up the riba that remains outstanding if you are believers. (278) If you do not do so, then be sure of being at war with God and His Messenger. But, if you repent, you can have your principal. Neither should you commit injustice nor should you be subjected to it. (279). If the debtor is in difficulty, let him have respite until it is easier, but if you forego out of charity, it is better for you if you realize. (280). And fear the Day when you shall be returned to the Lord and every soul shall be paid in full what it has earned and no one shall be wronged. (281).
1.1.2 Riba’ in Hadith :
Moreover, Prophet Muhammad S.A.W. also encouraged his followers to not accepting riba in dealing business and loan. It is clearly stated in the hadith as from two examples below:
From Abu Hurayrah: The Prophet, peace be on him, said: “On the night of Ascension I came upon people whose stomachs were like houses with snakes visible from the outside. I asked Jibrail who they were. He replied that they were people who had received riba.” (Ibn Majah, Kitab al-Tijarat, Bab al-taghlizi fi al-riba; also in Musnad Ahmad).
From Abu Hurayrah: The Prophet, peace be on him, said: “God would be justified in not allowing four persons to enter paradise or to taste its blessings: he who drinks habitually, he who takes riba, he who usurps an orphan’s property without right and he who is undutiful to his parents.” (Mustadrak al Hakim, Kitab al-Buyu).
1.1.3 Definition Riba’ :
A forced means demanded, requested, agreed etc. Any of the above or similar words which are related with “forced” category that define and create a liability on other party.
Increase in value means the increase in terms of value which comprises the quantity and the quality, just increase no matter how small or large it is and how that increases is defined.
The medium of exchange means anything that can serve the purpose of exchange of good(s) and/or service(s) in the society at any level i.e., international, national, or local.
2.0 TYPES OF RIBA’
Despite there are many types of Riba prevalent in the world and the Quran never stipulated any specified one, the fact of its prohibition in Quran is the prohibition of interests which were common in the pre-Islamic days. Riba is forbidden on the basis of Quran, Sunnah and Ijma’ (consensus) as the Prophet Muhammed (SAW) said, "Do not sell one dirham for two dirhams, for I fear for you regarding Riba”. In the purview of Islamic jurisprudence, there are two types of interests.
2.1 Credit Interest
Within the parameters of credit interest, money and other wealth include. This type of interest is sub-divided into other two types:
2.1.1 Riba al- Jahiliyyah
Interest of the age of ignorance: the Arabic terminology used for this is Riba al- Jahiliyyah. It is the interest imposed by the lender to the debtor in high level if he couldn’t repay it in the stipulated date. Actually, it is an increase on the original loan which is not mentioned during the contract. It was common before the advent of our Prophet Muhammed (SAW). This type of interest could be seen, nowadays, in the financing modes of conventional finance institutions related with the deferred  payments. The main objective of this is to earn a large amount of excess money abruptly in pretext of the deferment.
  2.1.2 Riba al-Qardh
Loans Interest: in the Arabic terminology, it is known as Riba al-Qardh. This Riba al-Qardh is the interest as an increase on the original loan money which is required in the contract. The difference between this and the previous one is in the stipulation during the contract.
 2.2 Sales Interest
This type of interest is confined to transactions in gold, silver and commodities of rice, wheat, barley, millet and dates. But, some Muslims jurists broadened the commodity data as they allow the inclusion of staple and basic commodities. Like the credit interest, the sales interest is also of two kinds. They are:
2.2.1 Riba al-nasi’ah
The term nasi’ah means to postpone. It refers to the interest on the loans. It occurs when the similar kinds of commodities are exchanged in trade, it is needed juristically transact each other immediately although their quantities may be equal. In modern operations, it indicates to the time period that is allowed for the borrower to repay the loan in return for the addition of the premium. In the view of Islamic jurisprudence, the fixing of an excess over the original loan amount in advance as a reward for waiting is forbidden.
2.2.2 Riba al-fadl
Riba al-fadl is the increased money over the original amount of the loan. It lies in the payment of an addition by the debtor to the creditor in exchange of commodities of the same kind. Riba al-fadl is forbidden according to the Hadith that Abu Said al-Khurdi said: “the Prophet Muhammad (SAW) has said that gold in return for gold, silver for silver, wheat for wheat, barley for barley, dates for dates and salt for salt, can be traded if and only if they are in the same quantity and that is should be hand to hand. If someone gives more or takes, then he is engaged in Riba and accordingly has committed a sin.”
In short, these two types of the sales interest is prohibited by the following Quranic verse: “Allah has allowed trade and prohibited Riba”. Extracting from the above-mentioned verse, the Riba-al nasi’ah relates to loans while the Riba al-fadl relates to trade.
3.0 PROHIBITION OF RIBA’
The rationale for the prohibition of interest the Islamic economic framework highlights how the risk-reward sharing would be more conductive to the realization of equity and the promotion of entrepreneurship. In fact, the interest-based banking system relies heavily on collateral and gives inadequate consideration to the strength of the project or the ultimate use of the financing. Even though collateral and cash flow are indispensable for ensuring repayment of loans, giving them undue weight result in a relative misestimating of the purpose for which borrowing takes place. Hence, that system tends to enforce the unequal distribution of capital by allocating financial resources mainly to the rich, who have the collateral and cash flow.
Islam considers even interest-based loans taken for investment in a productive activity as not equitable because in the profits that may accrue from it is not required to be known forehand and if there is a loss, the entrepreneur has to bear the entire loss in spite of all the risk and engagement he took, whereas the money lender, who did less sacrifice than the entrepreneur, gets an effortless profit determined by a positive rate. In Islam both risks and rewards should be shared by the different parties.
And since the unrestricted power of the creditor to make profit from interest has no regard to the financial ability of the debtor to repay indebtedness, middle-class consumers, as well as the developing countries, could be caught up in a never-ending debt-trap. And because the Riba system encourages living beyond one’s means for both individuals and governments, it results in an accentuation of macroeconomics, inflation and external imbalances in addition of squeezing the resources available for development. This leads some poorer countries to the over-exploitation of their earth’s resources and thus to the destruction of the ecological system.
Moreover, the high degree of interest rate volatility in the modern economies injects great uncertainty into the investment markets and makes it difficult for entrepreneurs to have a long-term investment vision and to make their decisions with confidence. This turbulence in the financial markets and the rise to fictitious assets tend to aggravate economic instability.
4.0 WAYS TO AVOID RIBA’
Living in a capitalist society makes it difficult to completely avoid riba. However, this should not be used as an excuse to freely indulge in it. An obvious way to steer clear of this evil is to not take out a loan which involves paying riba. Other solutions include:
Opening up riba-free bank accounts.
Not entering into contracts which stipulate riba penalties, even though one intends to pay on time.
Making bill payments on time so as not incur a late penalty.
Meeting any conditions required to continue trading without the use of riba.
Borrowing money from family or friends where possible.
Dealing with Islamically compliant banks.
Renting if you cannot afford to buy a house without riba.
Accepting/organising a “goodly loan” (al-qard al-hasanah), which is a loan by means of which one intends to show kindness to another, which does not involve taking riba
With regard to the interest that the bank has given you, do not return nor consume it. Rather, spend it on charitable causes, such as giving it to the poor, buying disposable items (like toilet paper) for Islamic centres and mosques, and helping debtors. However, do not expect reward for this.
The most effective way to avoid riba and determine which transactions are permissible, is by consulting Islamic scholars and utilising their knowledge.


5.0 CONCLUSION
None can doubt that riba is haram and a major sin, and no disobedience to Allah is worth the risk of His punishment. We must remember that the life of this world is short and fleeting, and that the purpose of our existence is not to lust after beauty and wealth, but rather to worship Allah correctly and live by His rules. Just because riba is widespread and common, it does not make it permissible.
“And whosoever fears Allah and keeps his duty to Him, He will make a way for him to get out (from every difficulty), and will provide him sustenance from where he never even imagined. And whosoever puts his trust in Allah, Allah is sufficient for him.” - Qur’an 65:2-3