Usury means ‘excessive interest’ or ‘exploitative interest’. It refers to the charging of unreasonable or relatively high-interest rate on loans.

interest, on the other hand, is an extra amount received by the lender on the top of the principal amount for the use of money lent, or for delaying the repayment of a debt.

Most Islamic scholars agree that riba includes both usury and interest. The word “interest” is now widely accepted and is understood as Riba.

Any rate which is above zero would lead to exploitation in the long run. It is riba and haram. It does not matter as if it is negligible like 1% interest rate or usury (exploitative) like say 50%.

The aim to make a distinction between interest and usury is to doge mankind and to allow the same old robbery in a more presentable form.

Riba

Riba is an Arabic word and its English translation is ‘interest’.

Riba literally meaning is an excess or increase. Technically, it means an extra amount charged over the principal loan amount, transaction, on debt or in exchange transactions, which needs to be paid to the lender/creditor or a party to exchange. The extra amount is paid without providing an equivalent counter-value or recompense (‘iwad) in return to the other party (the debtor).

There are two types of riba in Islam.

Riba Al-Fadl

This type of riba is used in sale, trade or exchange transaction of a commodity. This only applies to physical goods such as dates for dates, wheat for wheat, oil for oil etc. The factor of riba can take various forms, for instance, bad quality for better quality like bad quality wheat exchanged with the same weight of better quality wheat. The other form would be riba in weight, for instance, exchange of 1 tonne of wheat for 1.2 tonnes of wheat. The third form would be the timing, a certain amount of a commodity on a differed date. The trade of products should, therefore, be equal and instant.

Riba Al-Nasiah

It is also called riba of delay or riba of debt. It is an increment on the principal amount of the loan payable by the borrower. It is a common practice when a lender lends money for any length of time and is expecting an additional amount on the top of the original amount.