Concept of Riba in Islam
Riba linguistically means increase. In Islamic law, it refers to any stipulated increase in a loan or exchange contract without a corresponding countervalue. It is strictly prohibited by the Quran, Sunnah, and scholarly consensus. Allah says: "And Allah has permitted trade and has forbidden riba" (Al-Baqarah 2:275). Riba is a major sin with severe economic and social harms.
Type 1: Riba al-Fadl (Riba of Trade)
Riba al-Fadl occurs when two identical ribawi items (e.g., gold for gold, dates for dates) are exchanged in unequal amounts. For example, selling 100g of gold for 120g of gold on the spot. Equality and hand-to-hand delivery are required for such exchanges. Islamic decentralized finance avoids any unjustified increase in asset swaps.
Type 2: Riba al-Nasi'ah (Riba of Loans)
Riba al-Nasi'ah is the stipulated increase in a loan due to the deferment of repayment. For example, lending $100 with the condition of receiving $110 after a month. This type is even more severe than riba al-fadl. In Islamic DeFi, a sale with deferred payment (murabahah) is used instead of a riba-based loan: the seller owns the asset and sells it at a deferred price.
Other Forms of Riba
Riba al-Jahiliyyah is essentially riba al-nasi'ah but applied when the debt becomes due: the creditor offers an increase in exchange for extending the term. Also, riba in fiat currency exchange within the same country (e.g., selling $1 for $1.05). All forms of riba, explicit or hidden, must be avoided.
How Qist Implements This
Qist ensures full Sharia compliance through an open murabahah contract on BaseScan: the seller owns the asset, payment is in USDC, no extra charge for deferment, and the deferred price is fixed. In case of delay, a 3-day grace period applies without any penalty or increase. Any surplus is returned. The contract is audited and transparent.
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Informational content, not financial advice