Abstract
Modern Muslim scholars prohibit riba or interest, but they prohibit it on the basis of wrong reasoning or interpretation of the texts. Their faulty reasoning has led to confusion and difficulties in the implementation of Islamic banking and finance. This paper points our that these scholars cannot even give convincing reasons for why simple interest charged by the banks is prohibited by Islamic law and the texts. It is first shown why their reasoning is inadequate, and then the correct reasoning provided by the earlier Muslim jurists is elaborated. The paper ends with a comprehensive definition of riba that is based on the texts as elaborated by the earlier jurists.
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