بِسْمِ اللَّهِ الرَّحْمَٰنِ الرَّحِيمِ

The word Riba / رِبَا is from root word (ر ب و). This root word conveys the meaning of increased,augmented, excess,addition, to grow and swell etc. Ar-Riba (الرِّبَا) when used in Quran, means ‘the increase’ referring to a specific increase. Lets review ayahs of Quran to see what is this specific increase:

4:161 وَأَخْذِهِمُ الرِّبَا وَقَدْ نُهُوا عَنْهُ وَأَكْلِهِمْ أَمْوَالَ النَّاسِ بِالْبَاطِلِ ۚ وَأَعْتَدْنَا لِلْكَافِرِينَ مِنْهُمْ عَذَابًا أَلِيمًا

And their taking of Ar-Riba / The Increase and without doubt they were prohibited about it. And they ate the wealth of the people with falsehood and We have prepared for the rejecters among them a painful punishment.
The above ayat states that Ar-Riba/the increase is prohibited. Also we come to know that Ar-Riba/the increase is related to the wealth of the people and eating Ar-Riba is related to eating wealth of the people to which it rightfully belong. So we try to find where the wealth of the people is defined in Al-Quran.

8:41 وَاعْلَمُوا أَنَّمَا غَنِمْتُم مِّن شَيْءٍ فَأَنَّ لِلَّهِ خُمُسَهُ وَلِلرَّسُولِ وَلِذِي الْقُرْبَىٰ وَالْيَتَامَىٰ وَالْمَسَاكِينِ وَابْنِ السَّبِيلِ إِن كُنتُمْ آمَنتُم بِاللَّهِ وَمَا أَنزَلْنَا عَلَىٰ عَبْدِنَا يَوْمَ الْفُرْقَانِ يَوْمَ الْتَقَى الْجَمْعَانِ ۗ وَاللَّهُ عَلَىٰ كُلِّ شَيْءٍ قَدِيرٌ

And know that whatever Ghanim / Profit / gain you get from anything, if you believe in Allah then surely, One Fifth is for Allah and for the Messenger and for the relatives and for the orphans and for the needy (poor) and for the sons of the way, and whatever We sent down over Our servant on the day of the division, the day when the two accumulations meet. And Allah has power over everything.
In the above Ayat we see that Allah is ordering what ever we gain from anything, the fifth portion of that wealth is for certain categories e.g Allah, messenger (i.e for propagation of message of Allah), orphans, poor and for way-farers. So Allah has ordered that one fifth portion of our savings (gain=which is saved after expenses over a certain period of time) is the defined wealth for these categories for distribution among them. However, if one does not pay the defined portion of his savings as per above instruction then he is increasing his own wealth by holding back on Allah’s prescribed portion, and this is therefore the increase (Ar-Riba) which Allah has forbidden.

2:278 يَا أَيُّهَا الَّذِينَ آمَنُوا اتَّقُوا اللَّهَ وَذَرُوا مَا بَقِيَ مِنَ الرِّبَا إِن كُنتُم مُّؤْمِنِينَ

O’ you who believe, take guard of Allah and leave off, what remains from Ar-Riba/the increase, if you are believers.
When the ayahs related to Ar-Riba become clear to believers, they are asked to leave that portion of the wealth which they have been holding back from the deserving categories. That is if they have been paying less than 1/5th portion of their savings on the deserving categories, then they are now advised to pay the prescribed amount.

2:280 وَإِن كَانَ ذُو عُسْرَةٍ فَنَظِرَةٌ إِلَىٰ مَيْسَرَةٍ ۚ وَأَن تَصَدَّقُوا خَيْرٌ لَّكُمْ ۖ إِن كُنتُمْ تَعْلَمُونَ

And if he is in difficulties, then respite is given to him towards easiness and that you give sadaq / charity, that is better for you if you would have known.
If some one is not currently able to pay the prescribed amount to the categories after doing calculations of 1/5th of savings, (the gain is the increase in your net worth from the last calculation period) then the same will remain in his account to pay, and he can pay them later on, upon ease of his financial situation. Please see previous post on Zakat (https://topicsfromquran.com/2017/11/04/zakatcharity/ )

3:130 يَا أَيُّهَا الَّذِينَ آمَنُوا لَا تَأْكُلُوا الرِّبَا أَضْعَافًا مُّضَاعَفَةً ۖ وَاتَّقُوا اللَّهَ لَعَلَّكُمْ تُفْلِحُونَ

O’ you who believe! eat not Ar-Riba, double redouble and take guard of Allah so that you may prosper.
Warning to believers not to pay less than the amount of charity prescribed in Quran. If you are paying 2.5% only, instead of prescribed 20% then you are eating the ‘wealth of the categories of people’ multiple times.

2:279 فَإِن لَّمْ تَفْعَلُوا فَأْذَنُوا بِحَرْبٍ مِّنَ اللَّهِ وَرَسُولِهِ ۖ وَإِن تُبْتُمْ فَلَكُمْ رُءُوسُ أَمْوَالِكُمْ لَا تَظْلِمُونَ وَلَا تُظْلَمُونَ

Then if you do not, (leave off, what remains from Ar-Riba/the increase),so take a notice of war from Allah and His messenger. And if you turn back, so for you are the heads of your wealth. You do not oppress and you will not be oppressed.
Please note that the notice of war has been given by Allah to the people who believe but eat Riba/Increase. The notice of war is given only in this ayat in the whole Quran and it is issued to the momineen/believers. And when you pay heed, for you are the heads of the wealth i.e 80% of the savings and the remaining 20% is for the categories of people (deserving of Sadqa/Zakat).

8:69 فَكُلُوا مِمَّا غَنِمْتُمْ حَلَالًا طَيِّبًا ۚ وَاتَّقُوا اللَّهَ ۚ إِنَّ اللَّهَ غَفُورٌ رَّحِيمٌ

So, enjoy what you have saved, lawful and good. But fear Allah. For Allah is Oft-forgiving, Most Merciful.
80% of the savings after paying the 20% portion to the categories, is lawful for us to spend. The Ayat 2:279 informs that for you is the heads of the wealth i.e after paying the prescribed portion in Zakat.

2:261 مَّثَلُ الَّذِينَ يُنفِقُونَ أَمْوَالَهُمْ فِي سَبِيلِ اللَّهِ كَمَثَلِ حَبَّةٍ أَنبَتَتْ سَبْعَ سَنَابِلَ فِي كُلِّ سُنبُلَةٍ مِّائَةُ حَبَّةٍ ۗ وَاللَّهُ يُضَاعِفُ لِمَن يَشَاءُ ۗ وَاللَّهُ وَاسِعٌ عَلِيمٌ

The example of those who spend their wealth in the way of Allah is like the example of grain that grows seven ears and in every ear is 100 grains. And Allah multiplies for whom He wills. And Allah is All spacious, All knowing
The money spent from your wealth (after paying the due share of categories) increases in multiples in the nearness of Allah.

3:39 وَمَا آتَيْتُم مِّن رِّبًا لِّيَرْبُوَ فِي أَمْوَالِ النَّاسِ فَلَا يَرْبُو عِندَ اللَّهِ ۖ وَمَا آتَيْتُم مِّن زَكَاةٍ تُرِيدُونَ وَجْهَ اللَّهِ فَأُولَٰئِكَ هُمُ الْمُضْعِفُونَ

And what you give from Riba/increase, to increase in the wealth of people (the categories) then it does not increase in the nearness of Allah and what you give from Zakah/ justification) intending the face of Allah so they are those who will get manifolds.
If you have not paid the full due share of 20% from savings then any charity you give is being given from Ar-Riba/the increase which you are holding back from the wealth of categories (by not giving from the Allah’s allotted share to them). So this charity does not grow in the nearness of Allah, as it was already their share, not your wealth.

2:276 يَمْحَقُ اللَّهُ الرِّبَا وَيُرْبِي الصَّدَقَاتِ ۗ وَاللَّهُ لَا يُحِبُّ كُلَّ كَفَّارٍ أَثِيمٍ

Allah removes Ar-Riba/the increase , and increases Sadqa/charities , and Allah does not love any rejecter, sinner.
There exists an inverse relationship for the Al-Riba and Al-Sadqat. As you spend from Sadqat the Ar-Riba decreases (if you have held the due share to be paid from savings)

2:275 الَّذِينَ يَأْكُلُونَ الرِّبَا لَا يَقُومُونَ إِلَّا كَمَا يَقُومُ الَّذِي يَتَخَبَّطُهُ الشَّيْطَانُ مِنَ الْمَسِّ ۚ ذَٰلِكَ بِأَنَّهُمْ قَالُوا إِنَّمَا الْبَيْعُ مِثْلُ الرِّبَا ۗ وَأَحَلَّ اللَّهُ الْبَيْعَ وَحَرَّمَ الرِّبَا ۚ فَمَن جَاءَهُ مَوْعِظَةٌ مِّن رَّبِّهِ فَانتَهَىٰ فَلَهُ مَا سَلَفَ وَأَمْرُهُ إِلَى اللَّهِ ۖ وَمَنْ عَادَ فَأُولَٰئِكَ أَصْحَابُ النَّارِ ۖ هُمْ فِيهَا خَالِدُونَ

Those who eat Ar-Riba/the increase, do not take a stand except like one, who stands to madness from the touch of Satan. That is because they say that Al-Bai/the deal is the example of Ar-Riba . And Allah has made Al-Bai/the deal lawful and has made Ar-Riba/the increase unlawful so he to whom comes the sermon from his Lord then he abstain, that is past for him. And his affair is towards Allah, and whosoever returns , then they are the companions of the fire. They will live forever in it.
The common perception however in the society is that Ar-Riba is the interest i.e a periodical charge on the original amount of loan. They say that if you loan some one money and charge an amount in addition to the original amount, then this is Ar-Riba. Most people think, that the interest bank charges on loans, is Ar-Riba, while Al-Bai is ‘a deal’ i.e a normal trade transaction. Normally when banks give a loan they make a deal with the loanee and both parties agree on the loan amount and the interest to be charged on the loan. Those people who equate Ar-Riba (which is the increase in wealth by not paying the prescribed charity) with Al-Bai (that is the deal which, is made with the bank or any other loaner or trading partner), are declared as crazy people. They are two different things. Deals are lawful and Ar-Riba is not lawful.
We know that there is a time value of money. If you loan some one a certain amount of money in currency and if he returns the same denomination of currency, in lets say 20 years time, the purchasing power of that amount of currency would have been reduced multiple times. In fact, it will not be fair to you, to be returned the same amount of currency, loaned several years earlier keeping in view the factor of depreciation of currency.
Also we know that any thing of value when we borrow it from the owner, we have to pay rent for it. For example if we live in some one’s house, we pay rent for it. Similarly if we rent someone’s car we have to pay rent for it. Will it be fair to the person whose house we are borrowing, not to pay him any rent? Similar is the case of money, as it has a value attached to it. Will it be fair to get a loan from someone and not to pay any rent on that loan? Consider the example of a house valued at one million dollars. When you rent this house, you will pay a certain amount of rent on it. If instead of a house, you borrow, one million dollars in currency, is there no obligation on you to pay the due amount of rent to the loaner? If you borrow a thing of value and do not pay any rent for it, is definitely not fair to the lender.
The justification we normally hear is that instead of making a deal of paying fixed amount interest, we should share in profit and loss of that business. However, we know that a majority of people in the society are not business oriented people. They don’t have the capability of carrying out a business profitably. At best they will be sleeping partners and then depend upon the active partners for the fair returns and the fees charged for being active partners. Many people in the society simply cannot take the risk of being involved in businesses e.g widowers and retired people, they do not have the risk taking capability nor any risk taking is suitable for them. Then why should they be forced to take un-necessary risks on which they don’t have any control. Similarly it is banks’ business to give loans to people who can do business and take risks. However, banks cannot be in partnership of profit and loss sharing with all those people who take loans from banks. It is simply not possible to handle so many businesses and risks for banks. Therefore interest is the factor which keeps the economic cycle running i.e deposits by general public to the banks or Government institutions and operation of banks, in turn by lending the money to prospective people or groups who can invest and run businesses and utilize loans for their businesses.
Usury i.e very high interest rates is definitely a social evil as the poorest of people fall victims to it. Normally, the interest rate you will get depends upon your credit rating. The people with the best credit ratings will get the best rate of interest on their loans. Those people who are at the highest risks of being able to return the loan, get the highest rates of interests on their loans. These very people are the ones who deserve the charity of people (20% share for categories)or subsidies from the Government, instead of getting loans from loan sharks on high interest rate. While Quran does not prohibits interests or deals that people make with one another, it is the duty of the Government to curb un-fair deals as like other social or criminal evils.

Notes:

The Arabic Word for ‘Interest’ is (فائده ).

links to a lecture by scholar Mohammad Shaikh on Ar-Riba:

https://www.iipccanada.com/2017/10/26/riba-increase-2007/

https://www.iipccanada.com/2017/12/02/riba-2006/ (in Urdu)

Usage of root word (ر ب و) in Quran:

raba vb. (1) perf. act. 22:5, 41:39 impf. act. 30:39, 30:39 pcple. act. 13:17, 16:92, 69:10 rabwah n.f. 2:265, 23:50 riba n.m. 2:275, 2:275, 2:275, 2:276, 2:278, 3:130, 4:161, 30:39 rabba vb. (2) perf. act. 17:24 impf. act. 26:18 arba vb. (4) impf. act. 2:276 LL, V3, p: 189, 190