The Riba Dilemma: How Divergent Perceptions of Bank Interest Shape Muslim Entrepreneurs' Business Strategies

Abstract

Muslim entrepreneurs differ in their perceptions of bank interest; some consider it usury (riba) while others do not. This difference influences their business decisions. This study aims to understand these perceptions. A qualitative phenomenological approach was used—the sample selection technique employed purposive sampling. Data were collected through interviews with participants and then analyzed using NVivo. The study found two distinct perceptions. First, entrepreneurs who view bank interest as usury (riba). This group's business decisions involve avoiding bank interest, opting for independent financing or financing from Muslim communities based on profit-sharing principles, being more selective in their business partners, and sometimes delaying business expansion. This group views the differences between Islamic and conventional banks as merely terminological, while the practices are similar. This group has strong community ties and relatively minimal financial pressure. Second, entrepreneurs who consider bank interest not usury (riba) make more flexible business decisions regarding financing, access bank funds more quickly for expansion, often face financial pressure due to installments, and feel less trusted by business partners who prefer to avoid usury. This group has weak business community ties. These findings have implications for the development of financing models and partnership strategies that take into account the diverse perceptions of Muslim entrepreneurs regarding bank interest.