Title: Further Discussion... Question/Comments: Asalamu Alaikum ! I excitedly read your much-awaited response with happiness today because I realized I might not have made myself clear. In fact, I am in TOTAL agreement with you that the depreciation of the currency is not Ribbah . That is merely depreciation based on the economy. As I stated previously that part of interest is not haram according to sources (and common sense!). As you said, asking for an adjustment on a loan because of the depreciation of the currency does not make it haram . I totally agree! What I was trying to say is simply that Ribbah does not equal interest. Rather, a PART of interest (or the whole of it DEPENDING on the rate of interest charged) is the ribbah . I do not believe INTEREST IS RIBBAH in the DEFINITION of the word. We know what Usury is and that does not translate into interest. In fact people have come up with the assumption that interest and ribbah are one and the same. The question is: "HOW MUCH ribbah are we paying when we deal with interest?" It could be a small bit, it could be a lot, it could be all. We know ribbah is involved but we cannot state that all interest is ribbah or that all ribbah is interest. For example, I want to buy a car (all money up front or in payments) for the blue book price of $20,000 dollars. The dealer wants to sell it to me for $25,000. $5000 of this is interest and a VERY small percentage is responsible for depreciation (in the USA it is small), which we have agreed isn't haram . Since the car is marked ABOVE the recommended buying price we can safely assume that there is quite a bit of ribbah involved. Let's not forget the profit of the dealer of course - that's another issue in itself! So we can't determine how much ribbah exactly is involved but we know it plays a role. Obviously if the car is worth $30,000 as per the selling price in the blue book and I am charged less then ribbah has no play here. I hope you understand what I have tried to illustrate in this email. I have found some excellent sources; one by Baqir As-Sadir , and I also like Qaradawi's views regarding some of these issues. Thank you for clarifying the verse for me. :) Awaiting your reply. Answer: It seems that I could not fully make my point understood in my previous reply . Please accept my apologies for not being able to present my views clearly, which caused the confusion. I shall try again. I had written in my previous letter: However, any adjustments to account for a fall in the value of paper currency should not precede the actual fall in the value of the paper currency. In other words, such inflationary adjustments should only be contingent upon an actual change in the value of the paper currency. This implies that the rate of adjustment in the outstanding amount of loans for a rise/fall in the value of the paper currency, if predetermined, translates into Riba , while if kept contingent upon the actual rise/fall the value of the currency, is neither Riba nor expressly prohibited in Islam. This really implies that in my opinion: When an agreement (of a loan or a credit purchase etc.) stipulates a predetermined increase in the amount returnable by the debtor, for allowing the debtor the time to return the amount, this increase in the returnable amount comes under the ambit of Riba and, therefore, the whole amount, without exception, shall stand prohibited in the Shari`ah . For instance, when you buy a car worth $20,000 and agree to pay an additional $5,000 for being allowed to pay the amount in a fixed number of installments, the whole additional amount (i.e. $5,000) shall be Riba and, therefore, prohibited in Islam. When an agreement (of a loan or a credit purchase etc.) stipulates a predetermined rate (with reference to time) of increase [1] in the amount returnable by the debtor, for allowing the debtor the time to return the amount, this increase in the returnable amount comes under the ambit of Riba and, therefore, the whole amount, without exception, shall stand prohibited in the Shari`ah . For instance, when you buy a car worth $20,000 and agree to pay an additional 1% per month for being allowed to pay the amount in a fixed number of installments, the whole additional amount shall be Riba and, therefore, prohibited in Islam. The concept of inflationary adjustment is not comparable to Riba . Islam has disallowed charging Riba on loans, yet adjusting a loan for any depreciation in the value of the currency is not prohibited by the Shari`ah and may, therefore, be resorted to. However, such an adjustment cannot be made at a predetermined rate or through a predetermined increase in the repayable amount, as is explained in the two preceding points. On the contrary, inflationary adjustments in loans may be made through any method, mutually agreed upon between the debtor and the creditor, which does not entail the element of a predetermined increase in the returnable amount or a predetermined rate of increase in the amount loaned. One of the methods for such inflationary adjustment may be to relate the amount loaned with the value of gold, or with that of the consumer indices etc. Nevertheless, whichever method is adopted, such inflationary adjustment should be according to the actual rather than the projected rate of inflation, which implies that it could only be made after there is an actual depreciation in the value of the currency. Keeping the above three points in perspective, it should be clear that I do not agree with the point that the particular part of the predetermined rate of increase in the loan which is equal to the rate of inflation is NOT Riba . On the contrary, in my opinion, any predetermined rate of increase in the loaned amount - whether it is exorbitant or even lower than the rate of inflation - is Riba , and is therefore not allowed to be charged in the Shari`ah . You write: In fact people have come up with the assumption that interest and ribbah are one in the same. The question is: "HOW MUCH ribbah are we paying when we deal with interest?" It could be a small bit, it could be a lot, it could be all. We know ribbah is involved but we cannot state that all interest is ribbah or that all ribbah is interest. I would suggest that rather than confusing the issue by comparing Riba with interest or vice versa, the matter should be kept simple by keeping the given explanation of Riba in mind, according to which, all predetermined increases on the returnable amount of a loan (or a credit purchase etc.) is Riba and is, therefore, prohibited in the Shari`ah . September 19, 2000 [1] The fact that the rate is higher or lower than a given standard has absolutely no bearing on it being 'Riba' .