<i>Riba</i> and interest in Islamic finance: semantic and terminological ıssue
Ugi Suharto
International Journal of Islamic and Middle Eastern Finance and Management4/16/2018·DOI·Read paper
Abstract
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<jats:title content-type="abstract-subheading">Purpose</jats:title>
<jats:p>The aim of this paper is to argue analytically that interest and <jats:italic>riba</jats:italic> are not exactly the same and not an interchangeable terminology. There are similarities and differences between the two at the conceptual level.</jats:p>
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<jats:title content-type="abstract-subheading">Design/methodology/approach</jats:title>
<jats:p>To support the argument, the paper shows that it is possible to prove cases where the <jats:italic>riba</jats:italic> is involved but the interest is not. Hence, there is a situation of the presence of <jats:italic>riba</jats:italic> without interest. Furthermore, it is also possible to prove cases where the interest is involved but the <jats:italic>riba</jats:italic> is not. Hence, there is a situation of the presence of interest without <jats:italic>riba</jats:italic>. The notion and concept of interest in finance are analysed critically in comparison with <jats:italic>riba</jats:italic> in Islamic jurisprudence (fiqh Islami). So a comparative conceptual analysis is the main methodology of the paper.</jats:p>
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<jats:title content-type="abstract-subheading">Findings</jats:title>
<jats:p>The paper finally suggests that the correct expression should be that Islamic banking and finance is “a ribawi free of banking and finance” instead of “interest free of banking and finance” as it is popularised.</jats:p>
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<jats:title content-type="abstract-subheading">Research limitations/implications</jats:title>
<jats:p>The paper is conceptual in nature. No empirical analysis is pursued.</jats:p>
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<jats:title content-type="abstract-subheading">Practical implications</jats:title>
<jats:p>Islamic finance should not claim it self as interest-free finance, rather <jats:italic>riba</jats:italic>-free finance.</jats:p>
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<jats:title content-type="abstract-subheading">Social implications</jats:title>
<jats:p>It is more truthful to the society to say that Islamic finance is <jats:italic>riba</jats:italic>-free finance.</jats:p>
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<jats:title content-type="abstract-subheading">Originality/value</jats:title>
<jats:p>The paper is expected to contribute in the conceptual level of Islamic banking and finance’s understanding by clearing up the basic confusion and misconception about <jats:italic>riba</jats:italic> and interest. This would consequently minimise or even eliminate the taken-for-granted tendency of denoting the semantic of <jats:italic>riba</jats:italic> and interest as an interchangeable term, especially when writing in English and addressing the finance’s students and scholars. The semantic clarification between interest and riba hopefully becomes the main contribution of this paper.</jats:p>
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