Riba and loan interest

Question

Could someone explain the reason for usury being forbidden in Islam?

Some background: I have some money, which I could take advantage of right now. Giving up this money, in the form of a loan would surely mean an opportunity cost for me, as time might not be entirely homogeneous for all. Moreover, I could simply place the money (safely) in my pocket. In this case, I am accepting a certain risk of default on part of the lender, which at most might eliminate the money, and at least cause some inconveniences to recover the money. If these basic costs are not covered by the loan, no incentive remains for lending money, which at large would slowdown the economy and disable wealth shift from the wealthier middle-age population to the more-in-need youth.

Answer 1

Usury/Riba is forbidden in Islam (3:130) because it is very cruel/harsh on the person that took the lone.

Usually a person that is desperately poor takes a lone but when he has to give back multiples times of what he took after a set time, it is going to be very hard upon him to return the Usury.

In Islam circulation of money amongst society is done through Zakat and alms and is very important so all the members of society can live an easy life.

Usury only makes the poor more poor and the rich more rich.

The factors such as the lender is loosing the opportunity in which he could have used that lended money or devaluation in the real value of his money does not mean that person should take interest.

I don't think taking interest would bring back the opportunity that the lender lost.

Increase/Decrease of money's value both occur.Loss and Gain is from Allah.

If something is set Haram by Allah, It doesn't harm or benefit Allah rather it is only for humanity's benefit.

Answer 2

Riba is haram because Allah says so (Quran 2:275-279), there does not need to be any justification for it as commands are primarily given to test compliance. And Allah is not bound to make His commands beneficial for people in worldly terms.

If you wish to benefit from your savings there are halal alternatives such as trade and business. And if you do not have time then there are halal alternatives like partnerships (Musharika or Mudarabah) where the investor can become a silent partner. Or Ijarah where a person can buy an asset and then give it on rent.

Allah does not mention any 'reason' for forbidding Riba, but some scholars suggested the following wisdoms:

• In a personal loan, charging interest is exploitation of the situation of the borrower.

• Lending, in Islam, is meant to be an act of kindness. Charging interest makes it a way to earn money.

• Interest discourages giving loans as a favor. And if interest is lawful then the needy people will have a hard time finding anyone willing to give them a loan without interest. In the absence of interest more idle funds will be available to them.

• In a business loan, the lender shares the profit but does not share the loss. The lender also receives a fixed payment regardless of the amount of profit that the borrower earns. This is unfair and harmful to the borrower.