5 ideas
Money is a medium of exchange with no intrinsic utility, so it cannot legitimately be rented out or grow by itself the way a house or machine can. Profit is permitted only when money is converted into an asset or venture that bears risk. Charging a fixed return on lent money therefore earns income without owning anything that can be lost, and this is the core of what the prohibition on riba targets.
A return is justified only if the person claiming it also bears liability for loss. In a musharakah or mudarabah, losses fall on capital providers in proportion to their capital, and profits are shared as a percentage of actual profit, never as a fixed sum or as a percentage of capital. Guaranteeing a capital provider's principal or fixing their return converts the partnership back into an interest-bearing loan.
Cost-plus sale (murabahah) became the dominant Islamic bank product, but it is only a stopgap for cases where equity participation is impractical. It is valid only if the bank actually owns the goods and bears their risk before reselling them. Using interest rates as the benchmark for the markup doesn't make it haram, but it keeps the system psychologically tied to interest and defeats the purpose of reform.
In an ordinary sale such as murabahah, Usmani treats a transaction as a genuine sale rather than disguised interest only if the seller has taken physical or constructive possession of the goods and bears their risk; salam and istisna are explicitly permitted exceptions to this possession requirement. Once agreed, the price cannot be raised for late payment, and any late-payment penalty must go to charity rather than to the seller. Buy-back arrangements and rolling one debt into a new sale are ruled out because they reproduce a loan with a time-based charge.
In an Islamic lease the lessor remains the owner and so bears the risks that come with ownership, such as destruction of the asset and major maintenance. Rent may begin only once the asset is delivered and usable. This is what makes rental income legitimate where interest is not, because the lessor earns from an asset it owns and could lose. Rent may be pegged to a benchmark but cannot be charged on money before an asset exists.