What Is the Legal Reason for Interest According to the Hanafi School?

Answered by Ustadh Tabraze Azam

Question: Assalam alaykum

What is, according to the Hanafi school, the legal reason for interest?

I’m referring to the interest with money, not the interest with the six items mentioned in the hadith. Also if the legal reason (‘illa) isn’t present then will the prohibition still remain? And if so, why?

Answer: Assalamu alaikum wa rahmatullah,

Usury or interest (riba), defined as a contractually-stipulated specified increase for one of the transacting parties, is categorically impermissible. This excess is the legal reason (‘illa) for its prohibition, as understood from the legal terms: amount (qadr) and genus (jins).

Allah Most High says, “O believers! Fear Allah, and give up outstanding interest if you are true believers. If you do not, then beware of a war with Allah and His Messenger! But if you repent, you may retain your principal. Do no wrong and you will not be wronged.” [2:278-279]

This is irrespective of its being termed “interest” in the contract or otherwise as what counts is the meaning aforementioned, and not the presence of the word itself in a given context.

Contemporary jurists (fuqaha) have explained that fiat currencies are considered to be genera of intrinsic value (athman). As a consequence, all rulings related to gold and silver will apply similarly to, for example, USD, GBP and all others. This is the position that was chosen by the Islamic Fiqh Councils (al-majma‘ al-fiqh al-islami) of Makka and India. Other interpretations also exist, but the conclusions are effectively the same.

Otherwise, you are correct in that [normally] the ruling (hukm) stands as long as the legal cause or reason is present; and if absent, the ruling, too, would no longer apply. There are obviously a number of nuances in these discussions, but I think this is sufficient to answer your question.

[Maydani, al-Lubab fi Sharh al-Kitab (253); Halabi, Multaqa al-Abhur (410); Ibn ‘Abidin, Radd al-Muhtar ‘ala al-Durr al-Mukhtar; Usmani, Fiqh al-Buyu‘ (2.693); Fatawa Fiqhiyya Mu‘asira (136)]

Please also see: How to Avoid Riba (Usury): A Reader and: How Do I Get Rid Of Haram Money?

And consider taking the following free course.

And Allah Most High alone knows best.

wassalam,

[Ustadh] Tabraze Azam

Checked and Approved by Shaykh Faraz Rabbani

Ustadh Tabraze Azam holds a BSc in Computer Science from the University of Leicester, where he also served as the President of the Islamic Society. He memorised the entire Qur’an in his hometown of Ipswich at the tender age of sixteen, and has since studied the Islamic Sciences in traditional settings in the UK, Jordan and Turkey. He is currently pursuing advanced studies in Jordan, where he is presently based with his family.