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excess, increase, augmentation, for salt – like for like, equal i. Ta’widh may be charged
expansion or growth. The for equal, and hand-to-hand. on late payment of
prohibition of riba appears in If the commodities differ, financial obligations
Quran in surah al-Baqarah, verse then you may sell as you wish, resulted from exchange
275: contracts (such as sale
provided that the exchange is and lease) and qard;
“….whereas Allah has hand-to-hand”.
permitted trading and Hence, riba al-nasiah occurs when ii. Ta’widh may only be
forbidden riba usury….” the specified increase is in return imposed after the

for postponement of, or waiting settlement date of the
The revelation establishes a clear financing become due
distinction between trade and for, the payment. While riba al- as agreed between both
riba. The text of the ayah in Surah fadl occurs when the increase is contracting parties;
al-Baqarah defines the prohibition irrespective of the postponement
of riba, which is any increment and is not offset by something in iii. Islamic financial
being added to the principal. return. Muslim jurists also discuss institution may recognise
Engku Ali (n.d) explains that any the wisdom behind the prohibition ta’widh as income on the
extraneous addition, however small of riba. It can be summarized as the basis that it is charged
the amount, is considered as riba. elimination of injustice and the call as compensation for
Thus, the lender shall receive only for cooperation. actual loss suffered by the
the principal amount. Furthermore, Consequently, is the institution;
Engku Ali (n.d) explains that the practice of the application of iv. Gharamah shall not be
riba, which is prohibited by the late payment charge on Islamic recognised as income.
Quran, are called riba’ al-duyun, or financing Shariáh compliant? The Instead, it has to be
riba’ al-jahili, or riba’ al-nasiah. compliance can be confirmed channelled to certain

At the same time, there are by checking the BNM Shariáh charitable bodies”.
also many narrations regarding Resolution (BNM 2010, p. 129) The statement above explains the
the prohibition of riba in the on the imposition of ta’widh and basis of ruling in the BNM Shariah
Sunnah. Among the narrations are gharamah. The Shariah Advisory Resolution (BNM 2010, pp. 130-131).
the prohibition of riba in general. Council (SAC) of BNM is referred The ruling is as follows:
Additionally, there are also the to in order to ascertain a Shariáh
prohibition of specific types of compliant mechanism to deal The permissibility of
riba namely riba al-nasiah and with this issue. The Council is the imposing ta’widh on a defaulted
riba al-fadl. One the hadiths on highest authoritative body in the customer is considered based
the prohibition of riba’ al-nasiah is ascertainment of Shariáh matters. on the following evidences and
from Anas bin Malik: The Prophet The SAC resolution in the matter arguments:
Muhammad SAW says: of late payment charge is as
follows: i. The following hadith of
“If a man extends a loan to Prophet Muhammad
“The SAC, in its 4th meeting
someone, he should not accept dated 14 February 1998, 95th SAW considers intentional
a gift.” meeting dated 28 January 2010 delay in debt payment
by a person who is able
and 101st meeting date 20 May
Additionally, the explanation to pay as oppressive:
on riba’ al-fadl include one from 2010, has resolved that the late “From Abu Hurairah that
Ubadah bin al Sami, who narrates payment charge imposed by Prophet Muhammad SAW
that the Prophet Muhammad SAW an Islamic financial institution had said: Delay by a rich
says: encompassing both concepts person (in payment of
of gharamah (fine or penalty) debt) is a tyranny.”
“Gold for gold, silver for silver, and ta’widh (compensation)
wheat for wheat, barley for is permissible, subject to the ii. There is also a fiqh maxim
barley, dates for dates, and salt following conditions: extracted from a hadith
relating to this matter:

UIM Bulletin 27