Modern Islamic banking is based on an interpretation of riba which is accepted by various traditional Islamic schools of law. From the 1960s onwards, Islamic banking theorists and practitioners have been engaged in putting this interpretation into practice. Their success in this endeavour is, however, questionable. This study is an initial attempt to question the validity of this interpretation of riba and the claims made in the literature for its successful implementation. It is also both an attempt to highlight the moral and humanitarian emphasis given in the Qur'ān and sunna to the issue of riba and an argument in support of the view that such an emphasis would be valid in the current debate on riba and Islamic banking.
Riba and Islamic banks. Examination of the issue of riba in the Qur'ān suggests that the Qur'ānic prohibition was based on moral and humanitarian considerations, not legalistic ones. Investigation into the nature of riba as practised in the pre-Islamic period revealed that what was prohibited in the Qur'ān was basically exploitation of the needs of a person in financial difficulty, rather than an 'increase' accruing to the creditor in a loan transaction as such. Such a view is supported by the Qur'ānic comparisons of riba with ṣadaqa (charity), and also the specific mention of the rationale of prohibition, that is, injustice, in the final verses prohibiting riba. The sunna had little to say on the nature of riba prohibited in the Qur'ān since its focus was on certain forms of sales. The jurists essentially focused on the forms of riba prohibited in the sunna, almost exclusively building their theory of riba thereon, at the expense of developing a theory based on the Qur'ān.
The moral and humanitarian considerations of the Qur'ān in its prohibition of riba were not emphasised in the fiqh literature, and juristic discussion gradually became more and more legalistic and semantic in nature. Riba, as interpreted by the jurists, did not address the issue of peoples' need for borrowing and lending for non-humanitarian purposes. Instead of developing a suitable mechanism for lending for such purposes, the jurists confined the institution of lending (qard) to that required solely for humanitarian purposes. Since there was no adequate mechanism in the sharī'a to deal with loans for non-humanitarian purposes, and jurists had blocked any redefinition of qarḍ, people had to resort to various stratagems in order to lend and borrow. These stratagems, which appear to be largely the invention of jurists, became widely accepted and utilised by Muslims since the need was there, while the stratagems were regarded as lawful by the jurists themselves who were seen to be the guardians of the sharī'a. These stratagems enabled