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Philosophy and Fundamentals of Sharī’ah for Islamic Finance
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2. Ribā Hampers the Creation of New Wealth

The inherent nature of ribā is anti-sustainable wealth creation. The
artificial wealth created by ribā is detached completely from any real
commercial activities; instead wealth is created out of thin air by
imposing interest for lending money. The so called interest earned
will be deployed to create another bubble of wealth. Islamic finance
on the other hand, emphasises very much on the creation of wealth
that stimulates real economic activities. Profit in Islamic finance must
always be associated with the real economic activities.

3. Ribā Hampers Wealth Transfer

Wealth transfer is an extension of wealth creation. It refers to
the circulation of wealth by way of its proper distribution among
different parts of the societies. Ribawi system will definitely ruin
the circulation and proper transfer of wealth as there is no real
wealth is created. Thus, large segment of the society will not benefit
from the artificial wealth being created; instead it will bring harm to
the society at large. Case in point is the government’s exercise of
issuing notes and bond in order to raise funds, which will eventually
end up by issuing another debt instruments to cover the payment
of the expiring debt. This recurring exercise will certainly accumulate
burden that brings country into debt crisis.

Differences between Profit and Interest

Table 3 : Differences between Profit and Interest

Prohibition of Gharar

The Arabic word of gharar means deceit/fraud (khid‘ah), uncertainty,
danger/risk, and peril/ hazard (khaṭar) that might lead to destruction and
loss. Avoidance of gharar aims at avoiding any element that may give rise
to enmity, hostility and dispute among the contracting parties arise out of
uncertainty.