Mansoor Danish – Ep 2 Understanding the Prohibition of Riba in Islamic Finance

			interest free financial transactions are they possible? Let us dive deep into the heart of Islamic
finance and unraveled together the concept of Riba and the rationale behind its prohibition.
		

			Salam alaykum Warahmatullahi Wabarakatuh. What is the concept of rebar? And what are the rationale
behind it prohibition Ribba, often translated as interest is the extra charge over the principal
amount in loan or financial transactions. But in Islamic finance, this concept has a unique
perspective. In Islamic finance, there is a focus to promote equity and fairness in all economic
dealings, and therefore, you don't find Riba in the ethical framework of Islamic finance. In fact,
on the contrary, Islamic finance focuses on asset based financing, it focuses not on the
relationship of a lender and a borrower which has interest at its heart, but rather it focuses on an
		

			investment relationship between the bank or the financial institution and the one who needs the
money. It also looks into a principal agent relationship. And therefore, the focus is on a real
economic growth rather than a growth which is based on purely interest and which may not be long
term in nature.
		

			The concept of interest allows for a widening of gulf between the rich and the poor. By doing away
with the concept of Riba or interest, Islamic finance aims to reduce the gap between the rich and
the poor. I hope the concept is clear to you. If you have any questions, feel free to post it in the
chat box, or feel free to post it in the comment section. Do remember to like this video, and
subscribe to our channel. In our next episode, we look into some of the innovative products which
are offered by Islamic financial institutions. Stay tuned for more episodes. Thank you for watching.