Why is riba (interest) forbidden in Islam?

Riba refers to any guaranteed, predetermined increase charged on a loan of money or certain goods, regardless of whether the borrower's venture succeeds or fails. The Quran condemns it in the strongest terms, comparing habitual interest-takers to those "driven to madness by the touch of Satan" and declaring open war from Allah and His Messenger against those who persist in it. The underlying wisdom scholars point to is fairness in risk-sharing: in an interest-based loan, the lender earns a fixed return no matter what happens to the borrower, while the borrower bears all the risk alone. Islam instead encourages contracts like trade, leasing, and partnership, where profit is earned only alongside genuine risk and effort, and loss is shared rather than dumped entirely on one party. Riba is also seen as widening inequality over time, since money multiplies for those who already have it while burdening those in need. Trade, by contrast, is explicitly permitted because it involves real goods, services, and shared risk. This is why Islamic finance developed alternatives such as murabaha, mudarabah, and musharakah — to meet financing needs without the fixed, risk-free return that defines riba.

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