What Is Riba?
Riba literally means "excess" or "increase". In Islamic finance, it refers to interest or usury. Riba is explicitly forbidden in the Qur'an (2:275-276).
Two Types of Riba
Riba al-nasiyah (interest on loans): Borrowing money and paying interest. Example: mortgage with 4% interest.
Riba al-fadl (excess in exchange): Trading unequal quantities of the same commodity. Example: trading 1 ounce of gold for 2 ounces (haram).
How to Avoid Riba in Stocks
- ✅ Buy halal company stocks (avoid banks)
- ✅ Use margin? NO — margin involves interest
- ✅ Hold long-term (3+ years)
- ✅ Avoid interest-heavy bonds
Riba in Different Investments
| Investment | Riba Risk? |
|---|---|
| Halal stocks | Low (purify interest income) |
| Bonds | High (interest payments) |
| Sukuk (Islamic bonds) | None (profit-sharing) |
| Margin trading | High (riba) |
| Savings accounts | High (interest income) |