Interest and its Role in Economy and Life 1-3
INTEREST AND ITS ROLE IN ECONOMY AND LIFE (PART 1 OF 7): AN INTRODUCTION
Description: An Islamic view of the role of interest in society today, with a historical and contemporary study. Part One: Why Muslims have implemented the prohibition of Interest in the face of Christian and Jewish secularists’ call for its legalization.
By Jamaal Al -DIn Zarabozo
Interest is defined in the Oxford English Dictionary as, “Money paid for the use of money lent (the principal), or for forbearance of a debt, according to a fixed ratio.”
Actually, individuals and the world as a whole probably know too well the burden of interest, such that no one truly needs the above definition. Interest is something that is known to anyone living in a capitalist country. It has become so completely institutionalized and accepted in modern economies that it is almost impossible to conceive that there are some who completely oppose it and refuse any transactions that involve interest. But there are devout Muslims who refuse to deal in interest.
The actual reason why such Muslims do not deal with interest is that interest has been forbidden by the Islamic religion, as shall be detailed shortly. At the same time, though, Muslims believe that God’s guidance is based on His knowledge, wisdom and justice. In other words, God does not forbid something from humans for no reason whatsoever. Hence, there are definitely sound reasons—some of which we may be able to clearly recognize—why God has forbidden this practice.
In today’s world, Muslims are constantly being bombarded with arguments in support of dealing with interest. Many Muslims have succumbed to such pressure and supposedly rational arguments, leading them to accept the concept of interest.
Therefore, this short article is intended to discuss the Islamic stance on interest as based on the basic texts of the faith as well as enter into a rational discussion of interest to determine if the arguments given in favor of interest are truly valid.
God’s Guidance for Mankind
Islam teaches that God has mercifully given guidance to humankind for all aspects of life. This guidance covers not just acts of worship but everything from economics and business ethics to marital relations, international relations, ethics of warfare and so forth. It is one of the distinguishing traits of Muslims today that they still believe in such guidance from God while so many among humankind have discarded or preempted their religious teachings when it comes to “secular” issues.
There are a number of reasons why many Muslims have not followed the same path that, for example, numerous secular Jews and Christians have followed. One of the most important reasons is that the Muslim can be confident that the revelation which forms the basis of the Islamic religion has not been tampered with or distorted since the time of its revelation. In other words, there has been no human interference or distortion in the revelation. Hence, there is no need for humans to come along now and fix the mistakes of earlier humans, as secular Jews or Christians would argue. Indeed, the only result for Muslims would be humans, by their interference, damaging the revelation that has come from God.
Second, many Muslims believe that they have not been shown any strong or convincing evidence that somehow their religion is out of touch with reality or impractical in modern times. In Islam, for example, there has never been a conflict between religion and science, leading to a breakdown of trust in the church and a virtual revolt against the authority of religion as experienced in the West. Many people, even some Muslims, have called for many changes within Islam but, in reality, the arguments that they have presented have been faulty and flimsy, to say the least. The case of interest, this article’s topic, can be taken as an excellent example of this nature.
Interestingly, although Islam has been in the media quite often lately, it has been this author’s experience that many non-Muslims are not aware of Islam’s stance on interest. Hence, this article also sheds light on this important topic—a topic which is not a dead “medieval” topic but one which has extreme relevance for the world today.
Oxford English Dictionary Software (Oxford, England: Oxford University Press, 2002), entry, “interest.”
A classic work on the history of the Christian/European experience concerning the conflict between religion and science is John William Draper, History of the Conflict between Religion and Science (Order of Thelemic Knights, 2005). Note that his title should actually be corrected, since it is the history of the conflict between science and Christianity in Europe. In his work, A History of the Intellectual Development of Europe(Honolulu, Hawaii: University Press of the Pacific, 2002), the same John William Draper divides the history of Europe into the age of faith followed by the age of reason, highlighting once again the conflict that exists in Christianity in particular (but also in Judaism) but “reason” and “science” vis-à-vis “faith.” Again, Islam has never experienced such a crisis. In fact, Islam’s consistency with modern science is something that has actually drawn many converts into Islam. For example, a non-Muslim professor, Prof. Tejatat Tejasen of Chiang Mai University in Thailand, studied the relationship between Islam and modern science and finally stated the following:
“During the last three years, I became interested in the Quran… From my study… I believe that everything that has been recorded in the Quran fourteen hundred years ago must be the truth, that can be proved by scientific means. Since the Prophet Muhammad could neither read nor write, Muhammad must be a messenger who relayed this truth, which was revealed to him as an enlightenment by the one who is eligible [as the] creator… Therefore, I think this is the time to say…[at this point, Prof. Tejasen makes a declaration of Islamic faith].” [Quoted from I. A. Ibrahim, A Brief Illustrated Guide to Understanding Islam (Houston: Darussalam, 1997), p. 31.
This work, in its entirety, is available at www.islam-guide.com. Ibrahim reviews and summarizes the conclusions of many contemporary scientists.]
INTEREST AND ITS ROLE IN ECONOMY AND LIFE (PART 2 OF 7): THE ISLAMIC STANCE
Description: An Islamic view of the role of interest in society today, with a historical and contemporary study. Part One: A glimpse at some texts from the Quran and Sunnah which severely warn against the taking of interest.
The Islamic Texts on Interest
When one reads the Islamic texts concerning interest, one is immediately taken by how stringent the warnings are against any involvement in interest. Islam prohibits a number of immoral acts such as fornication, adultery, homosexuality, consuming alcohol and murder. But the variety of discussion and extent of warnings for these other acts is not of the same level of those related to taking interest. This has led Sayyid Qutb to write, “No other issue has been condemned and denounced so strongly in the Quran as has usury.”
The Quran, for example, contains the following verses concerning interest:
“O you who have believed, do not consume interest, doubled and multiplied, but fear God that you may be successful. And fear the Fire, which has been prepared for the disbelievers.” (Quran 3:130-131)
This rather strong warning towards the believers warns of a fatal consequence: being thrown into the Hell-fire that has been prepared for the disbelievers.
God also says:
“Those who consume interest cannot stand [on the Day of Resurrection] except as one stands who is being beaten by Satan into insanity. That is because they say, ‘Trade is [just] like interest.’ But God has permitted trade and has forbidden interest. So whoever has received an admonition from his Lord and desists may have what is past, and his affair rests with God. But whoever returns [to dealing in interest or usury]—those are the companions of the Fire; they will abide eternally therein. God destroys interest and gives increase for charities. And God does not like every sinning disbeliever.” (Quran 2:275-276)
These verses have many interesting points to them. Commenting on the first portion of the verse, Maudoodi has written,
Just as an insane person, unconstrained by ordinary reason, resorts to all kinds of immoderate acts, so does one who takes interest. He pursues his craze for money as if he were insane. He is heedless of the fact that interest cuts the very roots of human love, brotherhood and fellow-feeling, and undermines the welfare and happiness of human society, and that his enrichment is at the expense of the well-being of many other human beings. This is the state of his “insanity” in this world: since a man will rise in the Hereafter in the same state in which he dies in the present world, he will be resurrected as a lunatic.
Secondly, the verses make it quite clear that there is a difference between legitimate business transactions and interest. The difference between them is so glaring that the verse does not bother to explain them, which is one of the stylistic aspects of the Quran. Thirdly, these verses clearly state that God“destroys interest and gives increase for charities.” This is one of God’s “laws” which humankind cannot necessarily discover on its own. The ultimate and full negative effects of interest on the individual, community and world as a whole in both this life and the Hereafter are known only to God. However, a glimpse of some of those negative effects, testifying to the truth of this verse, shall be given later in this paper. In fact, perhaps highlighting the meaning of this verse, the Prophet (peace and blessings of God be upon him) also said, “Interest– even it is a large amount– in the end will result in a small amount.” Undoubtedly, in the Hereafter when the individual meets God, all that he amassed via such illegal means will be a source of his own destruction.
Shortly after the above verses, God further says,
“O you who have believed, fear God and give up what remains [due to you] of interest, if you should be believers. And if you do not, then be informed of a war [against you] from God and His Messenger. But if you repent, you may have your principal—[thus] you do no wrong [to others], nor are you wronged.” (Quran 2:278-279)
Who in his right mind would expose himself to a declaration of war from God and His Messenger? Undoubtedly, a stronger threat one will rarely find. At the end of the verse, God makes it very clear why interest is forbidden: it is wrongdoing. The Arabic word for such is dhulm, meaning a person has done wrong to, harmed or oppressed another person or his own soul. This verse demonstrates that interest is not forbidden simply due to some ruling of God without any rationale behind that ruling. Interest is definitely harmful and therefore it has been forbidden.
In addition to the verses of the Quran, the Prophet Muhammad (peace and blessings of God be upon him) also made many statements concerning interest. For example, the following statement clearly demonstrates the gravity of this action:
“Avoid the seven destructive sins: associating partners with God, sorcery, killing a soul which God has forbidden– except through due course of the law, devouring interest, devouring the wealth of orphans, fleeing when the armies meet, and slandering chaste, believing, innocent women.” (al-Bukhari and Muslim)
In fact, another statement of the Prophet (peace and blessings of Allah be upon him) should be sufficient to keep any God-fearing individual completely away from interest. The Prophet (peace and blessings of Allah be upon him) said:
“One coin of interest that is knowingly consumed by a person is worse in God’s sight than thirty-six acts of illegal sexual intercourse.” (al-Tabarani and al-Hakim)
The Companion Jaabir narrated that the Messenger of God (peace and blessings of God be upon him) cursed the one who takes interest, the one who pays interest, the witnesses to it [that is, the interest contracts] and the recorder of it. Then he said, “They are all the same.” (Muslim)
This is a basic principle in Islam. If something is forbidden and wrong, a Muslim should not participate in it or support it in any fashion. Thus, since interest is forbidden, it is also forbidden to be a witness to such contracts, to record them and so on. The Prophet’s words also explain that there is no difference between the one who pays interest and the one who receives it. This is because they are both involved in a despicable practice and, hence, they are equally culpable.
The Prophet Muhammad (peace and blessings of Allah be upon him) also said,
“If illicit sexual relations and interest openly appear in a town, they have opened themselves to the punishment of God.” (al-Tabarani and al-Hakim)
This statement is a reference to one of God’s “societal laws.” The punishment of God may come in different forms in this world or the next.
Sayyid Qutb, In the Shade of the Quran (Markfield, Leicester, England: The Islamic Foundation, 1999), vol. 1, p. 355.
The Arabic word used in these verses of the Quran is ribaa. Ribaa can be defined as, “an excess and an addition; an addition over and above the principal sum [that is lent or expended].” Cf., E. W. Lane, Arabic-English Lexicon (Cambridge, England: The Islamic Texts Society, 1984), vol. 1, 1023. Unfortunately, some translators of the Quran (including Abdullah Yusuf Ali, Khan and al-Hilali, and Pickthall) chose to translate the word ribaa as “usury.” This has led to some confusion, even among Western Muslims.The Oxford English Dictionary defines usury as, “The fact or practice of lending money at interest; esp. in later use, the practice of charging, taking, or contracting to receive, excessive or illegal rates of interest for money on loan.” In other words, at one time, the word “usury” was equivalent to the act of lending money on interest, back when this was still a despised act. After interest became completely legalized, the word usury began to mean “lending at excessive or illegal rates.” The Arabic term ribaa, in contemporary terms, must be translated as “interest” since it includes any and all payments made in addition to or above the principal.
Sayyid Abu Ala Mawdudi, Towards Understanding the Quran (Leicester, United Kingdom: The Islamic Foundation, 1988), vol. 1, p. 213.
Recorded by al-Hakim. See al-Albani, Sahih al-Jami al-Sagheer, vol. 1, p. 664, hadith no. 3543. Interest is all about amassing more money, even without putting the money at risk. This, in the long-run, however, does not necessarily produce happiness: “General Social Survey (GSS) study reported in Business Week (October 16, 2000) concluded that money was not buying happiness and the new life style and its aftershocks are causing the rise of unhappiness. According to that study, although there was a per capita increase in income between 1970 and 1998, Americans, to the contrary, grew less happy. The new social tendencies overshadowed any material gains. The study found that although extra income brings extra happiness, such impact was surprisingly poor. It also found that factors, such as gender and material status, weigh more heavily. Another find was that women are growing more unhappy than men. The increase in divorce and separation between spouses is having a negative impact on the family structure and the psychology of its members. Business Week concluded: ‘At the very least, it suggests that those who think income gains alone guarantee greater happiness are deluding themselves. And it implies that some apparent aspects of the New Economy, such as more bouts of unemployment and greater income inequality, carry significant psychological costs.’” Abdulhay Y. Zalloum, Painting Islam as the New Enemy: Globalization & Capitalism in Crisis (Technology One Group S.A. 2002), p. 357.
INTEREST AND ITS ROLE IN ECONOMY AND LIFE (PART 3 OF 7): RELIGION AND EARLY THINKERS
Description: Interest and Usury in the Bible (Judaism and Christianity) and according to early thinkers.
Islam, of course, is not the only religion that has banned interest and considered it a despicable practice. The prohibition of interest—at least to some extent—is a well-known law in both the Old and the New Testaments of the Bible. In numerous places in the Old Testament, reference has been made to “usury” or “interest.” (Again, usury and interest used to be equivalent but only over time did usury begin to mean an exorbitant or illegal amount of interest. Thus, as shall be noted below, the American Standard Version of the Bible repeatedly changed the King James Version from usury to interest.)
Deuteronomy 23:19-20 reads:
“Thou shalt not lend upon usury to thy brother; usury of money, usury of victuals, usury of any thing that is lent upon usury: Unto a stranger thou mayest lend upon usury; but unto thy brother thou shalt not lend upon usury: that the LORD thy God may bless thee in all that thou settest thine hand to in the land whither thou goest to possess it” (King James Version).
Similarly, Exodus 22:25 states:
“If thou lend money to any of my people that is poor by thee, thou shalt not be to him as an usurer, neither shalt thou lay upon him usury” (King James Version).
In Leviticus 25:37 one reads:
“Thou shalt not give him thy money upon usury, nor lend him thy victuals for increase” (King James Version).
In Jeremiah 15:10, the Prophet complains that he is being cursed although he has never done anything such as take interest, meaning that such curses would be appropriate for him if he were someone who took interest. Perhaps one of the harshest verses in the Old Testament concerning interest is Ezekiel 18:13:
“Hath given forth upon interest, and hath taken increase: shall he then live? he shall not live: he hath done all these abominations; he shall surely die; his blood shall be upon him.”
There are yet other verses of the Old Testament that indicate the prohibition of interest but what has been presented above should suffice.Easton’s Bible Dictionary has summarized the Mosaic Law concerning interest in the following passage:
The Mosaic law required that when an Israelite needed to borrow, what he asked was to be freely lent to him, and no interest was to be charged, although interest might be taken of a foreigner (Exodus 22:25;Deuteronomy 23:19,20; Leviticus 25:35-38). At the end of seven years all debts were remitted. Of a foreigner the loan might, however, be exacted. At a later period of the Hebrew commonwealth, when commerce increased, the practice of exacting usury or interest on loans, and of suretiship in the commercial sense, grew up. Yet the exaction of it from a Hebrew was regarded as discreditable (Psalms 15:5; Proverbs 6:1,4; 11:15; 17:18; 20:16; 27:13; Jeremiah 15:10).
Unfortunately, as is often the case on practical issues, the New Testament is somewhat vague on the issue of interest. According to The Encyclopedia of Religion and Ethics, “there are no direct precepts [concerning interest] to guide the Christian conscience.” However, in the teachings attributed to Jesus in the New Testament, there are some passages that seem to be clearly against the practice of interest. In one passage, Jesus is reported to have said:
“But love ye your enemies, and do good, and lend, hoping for nothing again; and your reward shall be great, and ye shall be the children of the Highest: for he is kind unto the unthankful and to the evil” (Luke 6:35).
In this passage, Christians are actually told to lend out money without hoping to receive the principal again. This may be considered one of the “hard sayings” and, as is well-known, Christian scholars differ as to how such passages are to be interpreted and implemented.
In Matthew 25:14-28, there is a lengthy parable wherein God gives different amounts of coins (called “talents”) to various servants. Some of them invest the money and bring back more to God than what God gave them. However, the person to whom God only gave one such coin is described in verse 18:
“But he that had received one went and digged in the earth, and hid his lord’s money.”
When God calls back His servants and asks about what they did with the money, the one who received only one talent stated to God:
“Then he which had received the one talent came and said, Lord, I knew thee that thou art an hard man, reaping where thou hast not sown, and gathering where thou hast not strowed: And I was afraid, and went and hid thy talent in the earth: lo, there thou hast that is thine” (Matthew 25:24-25).
The Lord then sternly replies to him:
“His lord answered and said unto him, Thou wicked and slothful servant, thou knewest that I reap where I sowed not, and gather where I have not strowed: Thou oughtest therefore to have put my money to the exchangers, and then at my coming I should have received mine own with usury. Take therefore the talent from him, and give it unto him which hath ten talents” (Matthew 25:26-28).
Commenting on this passage, the Geneva Study Bible states,
Bankers who have their shops or tables set up abroad, where they lend money at interest. Usury or loaning money at interest is strictly forbidden by the Bible, (Exodus 22:25-27; Deuteronomy 23:19,20). Even a rate as low as one per cent interest was disallowed, (Nehemiah 5:11). This servant had already told two lies. First he said the master was an austere or harsh man. This is a lie for the Lord is merciful and gracious. Next he called his master a thief because he reaped where he did not sow. Finally the master said to him sarcastically why did you not add insult to injury and loan the money out at interest so you could call your master a “usurer” too! If the servant had done this, his master would have been responsible for his servant’s actions and guilty of usury.
Based on the Old and New Testaments, the early Church Councils disallowed interest. Eventually all Christians were prohibited from indulging in interest, not simply the clergy. Christian fathers, such as St. Thomas Aquinas, dealt with the issue of interest in some detail. “In the Decree of Gratian, as subsequently at the Third Lateran Council (1179), a canon ordained that ‘manifest usurers shall not be admitted to communion, nor, if they die in their sin, receive Christian burial.’” The Fourth Lateran Council of 1215 condemned the practice but allowed it for the Jews. Catholics remained firmly against interest until the 19th Century. Martin Luther of the 16th Century, the Protestant leader, also condemned usury but, it is claimed, he allowed on it on a plea of human weakness. Calvin, more than anyone else, was the beginning of a softer view concerning interest among Christian leaders. Slowly civil legislation freed itself from Canon Law and interest began to be institutionalized over time.
It was not only those of the Judeo-Christian thinking that condemned interest. In fact, the Greek philosophers also took a very negative view of interest. Aristotle and other leading Greek scholars condemned interest. The famed Austrian economist, Eugen von Böhm von Bawerk (also known as Boehm-Bawerk), wrote in his important work, Capital and Interest,
The hostile expressions of the ancient world, not few in number, consist, in part, of a number of legislative acts forbidding the taking of interest and in part accidental utterance of philosophers such as Plato, Aristotle, the two Catos, Cicero, Seneca and Pantus etc. Greek philosophers regarded money as nothing but a medium of exchange and, therefore, they denied the productivity of money loans. A piece of money cannot beget another piece was the doctrine of Aristotle. The obvious conclusion was that interest is unjust.[
Initially, the Roman Empire as well prohibited the charging of interest. With the rise of trading classes, this was lessened a bit but there were still severe restrictions on interest lending as well as laws to protect debtors.
Shakespeare’s character Shylock in The Merchant of Venice (written just prior to the year 1600) demonstrates just how despised moneylenders who dealt in interest were. The obvious question arises as to how interest went from being a despised and forbidden act to a socially acceptable and institutionalized practice in the West.
The American Standard Version reads, “Thou shalt not lend upon interest to thy brother; interest of money, interest of victuals, interest of anything that is lent upon interest: unto a foreigner thou mayest lend upon interest; but unto thy brother thou shalt not lend upon interest, that Jehovah thy God may bless thee in all that thou puttest thy hand unto, in the land whither thou goest in to possess it.” Note that all quotes from Bibles, Biblical commentaries or Biblical dictionaries are, unless otherwise noted, fromThe Bible Collection CD (ValueSoft, 2007).
“If thou lend money to any of my people with thee that is poor, thou shalt not be to him as a creditor; neither shall ye lay upon him interest” (American Standard Version).
“Thou shalt not give him thy money upon interest, nor give him thy victuals for increase” (American Standard Version).
Cf., Psalms 15:1-5; Ezekiel 18:5-9 and Proverbs 28:8. The Old Testament also verifies that although the Jews were prohibited from taking interest, they were often guilty of falling into that act. See Nehemiah 5:6-7 and Ezekiel 22:12.
Quoted from Abdelmoneim El-Gousi, “Riba, Islamic Law and Interest” (Ph.D. Dissertation, Temple University, 1982), p. 113.
Do such sayings represent a perfectionist code, an impossible ideal, an “interim ethic,” or something else? Christian scholars have not been able to agree on the answer to this question. Cf., Lisa Sowle Cahill, Love Your Enemies: Discipleship, Pacifism, and Just War Theory (Minneapolis, MN: Fortress Press, 1994), p. 27.
A review of Aquinas’ thoughts on interest may be found in Rodney Wilson,Economics, Ethics and Religion: Jewish, Christian and Muslim Economic Thought(Washington Square, New York: New York University Press, 1997), pp. 82-85. In reality, though, like much of the Christian thought on just war, Aquinas was heavily influenced by pre-Christian Greek and Roman thought.
El-Gousi, p. 114.
Cf., Anwar Iqbal Qureshi, Islam and the Theory of Interest (Lahore, Pakistan: Sh. Muhammad Ashraf Publications, 1974), p. 8.
Boehm Bawerk, Capital and Interest (1959), Vol. I, pp. 10-11, Quoted from Afzal-ur-Rahman, Economic Doctrines of Islam (Lahore, Pakistan: Islamic Publications Limited, 1976), vol. III, p. 11. Also see Qureshi, p. 6; El-Gousi, p. 114.