Bounding the Boundless: Understanding Commercial Exchange & the Excesses of Riba

In modern times, the prohibited excess or riba has attracted divergent opinions from scholars which are different from the ones in the pre-colonial era. This fact necessitates a clear understanding of riba by putting it into its proper context as against the efforts to understand it in isolation. The prohibition of riba points towards the existence of a concept of equivalent exchange and it is proven from the primary sources of Islamic law. Equivalent exchange is without excess or deficit caused by either party to each other or third parties. The guidance from the primary sources and legal literature reveals that riba is over and above an equivalent exchange and its manifestations are manifold. Primarily, these manifestations can be grouped as corporeal, incorporeal, and temporal. This article places the concept of riba into its larger context and compares and differentiates it from other components of the framework of exchange. Whereas profit and loss are the differences between two equivalent exchanges, riba and deficit are differences between unequal and equivalent exchanges. As per the definition of riba, the presence of excess over and above an equivalent exchange without counter-value renders the exchange unequal. The only form of exchange that is acceptable in Islam is an equivalent exchange, be it on the spot, credit, or a charitable financial accommodation.