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Usury/Riba is without doubt forbidden in Islam. All contention concerning usury has only ever been about which types of transactions can be categorised as either ill earned or justly earned.

Compound interest in particular is frowned upon, even by some non Muslim movements, because it is often intuitively recognised that paying for money that has not even been borrowed is unfair on the borrower (since the borrower pays interest on interest, which is money that isn’t usable by the borrower. As an example, think of the second time period’s compound interest calculation $r(b+I)$ where $r$ is the rate, $b$ is the money loaned and $I$is the first year’s interest.

Based on this, I personally think that compound interest would absolutely fall under usury, by most metrics of what is considered “unjust earnings” But what do the scholars/jurists of the past (and present) say, have they all categorically prohibited interest (compound along with simple) or have any of them concluded simple interest to be halaal and restricted the ruling of usury on interest (unjust earnings) to only compounded interest? If so, please cite them and their works.

Jazakallah

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All forms of interest fall under Riba regardless of how they are calculated. If you gain interest from something it’s Riba and impermissible in Islam.

These articles might be helpful and discuss the various positions of the Ulema (scholars) and the Sharia regarding Riba: https://islamqa.info/en/answers/1507/accepting-interest-does-not-make-it-permissible

https://islamqa.info/en/answers/20695/what-should-be-done-with-interest

https://islamqa.info/en/categories/very-important/62/answers/128923/the-difference-between-riba-based-banks-and-islamic-banks

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