Riba al-fadl

Riba al-fadl is a form of interest or excess that occurs when there is an unequal exchange of similar goods, such as trading different amounts of gold or silver. For example, exchanging 10 grams of gold for 12 grams of gold is prohibited because it involves giving more for less, which can lead to unfairness and exploitation. This concept exists in Islamic finance to promote fairness and honesty in trade, ensuring that exchanging similar items is equal and free from unjust gains. It emphasizes that trading should be honest and equitable without excess or greed.