 This module is entitled economic explication of Riba. I must say right from the beginning that Riba or its prohibition is not a purely economic phenomenon. It is a legal prohibition which has some economic implications as well. However, because interest plays an integral part in conventional economics, in conventional banking and finance, hence it is important to look at Riba and its prohibition in an economic context. We call it economic explication of Riba. In this way, we want to know what is the economic rationale for the prohibition of Riba? What are the effects of using Riba in a transaction and of course in an economic system? And of course we would be looking at the question like why should the prohibition of Riba be observed? Nature of Riba. In a previous segment, we looked into the definition of Riba and we said that any exchange which involves inequality of exchange of one asset that would involve Riba. Now, we will have to look at the inequality in which Riba is born. For example, we see that if a person gives a dollar to another person and he says that in exchange of this, he has to give us one dollar and ten cents. Now, if in a society, all people are doing the same way that by giving one dollar, they should ask for more than one dollar in exchange of that. So, the question arises, where would that additional amount of money come from? If there are ten people in a society and those ten people are playing with each other over interest and one person gives one dollar to another person and if there are ten people playing with each other over interest, then there would be twenty people. So, if one person gives one dollar to another person and in exchange of one dollar, the end result would be that in this society, there would be ten dollars in circulation when the entitlement of eleven dollars would be zero point one ten cents when we collect ten times, then it would be equal to one dollar. Now, the question arises, where would that additional one dollar come from? Usually, in societies, central banks would be actually printing more money to make sure that the entitlements on the money, they are actually in commensurate with the supply. When these additional money are printed, then you also know and every person knows that the effect of this is on the money. So, a natural outcome of dealing in interest is inflation. Now, if the money is not printed, then what will happen? Then it happens that the dollar on the 11th, the entitlement of the people is made but it is not present. So, if society as a whole actually owns eleven dollars but the actual supply of money in that society is only ten dollars where would this additional entitlement come from? How will the entitlement of eleven dollars be fulfilled? This could be considered as a form of deception and this is one reason that many Islamic economists would have a problem with interest from purely an economic viewpoint. I told you about inflation, it is one reason that it becomes expensive. Now, the situation is that when you are doing all the work on the interest then the value of the money decreases. Now, a phenomenon which actually erodes the value of the asset in which people are dealing how can this be a valuable concept? If you do the work on the interest, if the value of the money decreases, then such a phenomenon can never be said to be beneficial or useful. And understanding this is very important from an economic viewpoint. This is not just a legal or juristic prohibition but its implications are at the individual level, its implications are at the community level and of course it has implications for the economy as a whole as well. What happens at the individual level? Whenever there are interest-based transactions in a society, then there is a dispute, there is a dispute. Individual relationships, they go bad. Frictions arise within the community. And in a macroeconomic context, there is a problem like inflation and many more. In an international context, if inflation in a country is problematic, its creating problems, it would have some effect on the exchange rate of the currency of that country with respect to other currencies in the world as well. So, if we look purely from an economic viewpoint, then this justification cannot be done on the interest, on the business, on the government. This doesn't make any sense at all. If the concept of interest is actually responsible for eroding the value of money, which is the main subject matter of interest rate mechanism. So, instead of saying that the prohibition of interest is not only religious, it is not only a religious requirement, but a lot of problems we observe in the world, they may be attributed to the interest rate mechanism. Hence, there is a clear cut prohibition of interest in an Islamic economic framework.