Why Muslims Reject Interest (Riba)
today 20 March 2014 GMT

Any transaction that involves interest will necessarily hurt one of the two sides; it is essentially a gamble, which is also prohibited by Islam.

Muslims consider interest as a modern equivalent to Riba; that is an income that is not earned or is unfair. The main problem with Riba is that from the very start it represents an unfair situation for one of the two parties in a business transaction or loss. Regardless of the circumstances, Muslims consider that the very concept of an interest rate is inherently unjust either to the lender or the receiver. Usury, the common translation for Riba, is simply an excessively high interest rate.

Since an excessively low interest rate would also expose the lender to a loss, Muslims consider that interest is not congruent with an equal distribution of income. Any transaction that involves interest will necessarily hurt one of the two sides; it is essentially a gamble, which is also prohibited by Islam.

Another problem with the concept of interest is that it is an earning that is not based on whether the capital was used or not. It is not earned nor deserved, and comes from an imaginary source. Muslims reject earnings that have absolutely no real value to the community or to the real world. Riba forces the debtor and, indirectly, the community, to take a financial risk. Interest inherently results in unfair income distribution and guarantees that the people that already have capital will earn money regardless of their investment or business. An example of the hurtful effects of interest rate manipulations can be clearly seen in the global financial crashes of 2008 and 2009.

Muslims consider that Riba is not only an oppressive practice, it also involves exploiting those in need. A fundamental part of being a Muslim involves that those who have wealth need to assist those that do not. Involving a guaranteed income from the loans, regardless of the result of the business venture or investment, is an unfair practice. Muslims would consider it fair if both parties earned an income based on the profit of the investment, rather than from an imaginary, unearned source. A society in which the wealth is accumulated only among those that are already wealthy increases the difference between classes. It also restricts wealth circulation, since lenders would only lend money to those that can pay the interest rates. Islamic economics considers that a healthy economic system exists in a state of balance between those that consume and those that produce. In an Islamic economic system, practices such as interest-free lending, charity, profit sharing, and restrictions on legitimate ways to gain returns on capital help fix this imbalance that has become such a severe problem in traditional capitalism. Interest allows a certain social class to gain income from their capital without contributing to society at all. A society in this state ultimately stagnates and starves from their lack of contribution.


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