Why is Interest such a bad thing according to Islam?

Question

Source of quoted texts: islamqa.com.

"Those who eat Ribaa will not stand (on the Day of Resurrection) except like the standing of a person beaten by Shaytaan (Satan) leading him to insanity. That is because they say: "Trading is only like Riba," whereas Allaah has permitted trading and forbidden Riba. So whosoever receives an admonition from his Lord and stops eating Riba, shall not be punished for the past; his case is for Allaah (to judge); but whoever returns (to Riba), such are the dwellers of the Fire — they will abide therein"

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And it was proven that the Prophet (peace and blessings of Allaah be upon him) cursed the one who consumes riba and the one who pays it. Narrated by al-Bukhaari, 5962. In the transaction asked about here, both the individual and the bank are giving and taking riba. The Prophet (peace and blessings of Allaah be upon him) said: “A dirham which a man consumes as riba knowingly is worse before Allaah than thirty-six acts of zina.” Narrated by Ahmad and al-Tabaraani; classed as saheeh by al-Albaani in Saheeh al-Jaami’, no. 3375. And he said: “There are seventy-two types of riba, the least of which is like a man committing incest with his mother.” Narrated by al-Tabaraani in al-Awsat; classed as saheeh by al-Albaani in Saheeh al-Jaami’, no. 3537.

Assuming Riba here means Interest, similar to the Interest you receive in a bank savings account. I can clearly see that we have been told that Interest is one hell of a bad thing. What I can't see is why? Why is Interest such a bad thing other than the above facts what we have been told it's bad. Why exactly is receiving 1% interest on your savings so bad that its thirty-six times worse than zina?

If I have $100 USD in my bank account, and at the end of that year I have a total of $101 USD in my account because the bank account gave me 1% interest, that seems so harmless compared to thirty-six acts of zina... So that $1 of interest received after a whole year is comparable to thirty-six acts of zina?

Don't get me wrong, I accept that Interest is haraam, I accept that we have been told that it is haraam, but why is it such a big evil? If I could hold both evils in my hands, the $1 USD of Interest looks so minor compared to committing incest with your mother...

I am basically looking for an answer, which explains how $1 USD of interest after a year can be compatible to committing incest with your mother. Committing incest with your mother is such an evil act, but taking $1 USD of interest from the bank is such a minor thing, no one is harmed in such a transaction.

So my question, why is Interest such a bad thing according to Islam?

Sunni view preferred please.

Answer 1

Why is Interest so bad?

Riba has the potential to corrupt a society in a way that zina and other crimes can never do. Many religious figures and philosophers have commented about the evil nature of usury (interest):

• "To take usury for money lent is unjust in itself, because this is to sell what does not exist, and this evidently leads to inequality which is contrary to justice" -Thomas Aquinas^[1]

• "You cannot make money just with money." -Martin Luther^[2]

• "The most hated sort, and with the greatest reason, is usury, which makes a gain out of money itself and not from the natural object of it. For money was intended to be used in exchange but not to increase at interest. And this term interest (tokos), which means the birth of money from money is applied to the breeding of money because the offspring resembles the parent. Wherefore of all modes of getting wealth, this is the most unnatural.” -Aristotle^[3]

An important distinction that earlier religious clerics understood was that money is a means of exchange. It is not meant in it of itself to be a source of income. "You can invest money by buying goods and products and selling them as a businessman. But when you loan money and make money off the money, you have perverted the purpose of money which is a means of exchange. And you have made it an end." ^[4]

Today riba gives banks and the rich an incentive to lend money without fear of loss. Sequential years of banks lending/borrowing to the people helps stretch the gap between the rich and the poor. In the last few decades entire countries, governments and corporations have also gotten involved in riba on a massive scale. And we now live in a time where it's actually possible to see the aftermath dealing with Interest on a global scale. The global economy is collapsing and we have front row seats.

Consider going through some documentaries and see the key role Interest plays:

1. Money As Debt
2. 97% Owned
3. Money As Debt Part 2

Riba helps create massive and permanent gaps between the rich and the poor. And unless we make radical changes soon; you can expect this gap to only widen further:

• In 1960, the 20% of the world’s people in the richest countries had 30 times the income of the poorest 20% — in 1997, 74 times as much.^[5]
• The wealthiest nation on Earth has the widest gap between rich and poor of any industrialized nation.^[6]
• The poorest 40 percent of the world’s population accounts for 5 percent of global income. The richest 20 percent accounts for three-quarters of world income. ^[7]

At the end of the day, we can only make guesses about the full wisdom on why riba in all of it's forms is so evil. Whether it's $1 or $1000, by taking interest you are supporting this economic slavery system.

Allah knows best.

[1] [2] [3] [4] [5] [6] [7]

Answer 2

Take a look at these facts:

• receiving interest means you get money for literally doing nothing
• paying interest means you need to come up with money regardless of whether your business is even making money
• interest accumulates over time and often surpasses the original sum you lent
• for example: at a rate of 8% over 10 years the interest sums up to 115% of the original credit sum
• banks often charge 12-30 % interest when they lend you money
• when someone owing the bank money already paid back the original sum he is still a "slave" of the bank until the interest is paid... and: the longer he need to pay back the bigger the sum he must pay gets which in some cases leads to growing old and die with debt.

riba is not part of any natural process... the only process where riba is natural is how Allah rewards and multiplies good deeds. So anyone paying or receiving riba is emulating what is Allah's right alone.

Riba has also very bad long-term effects on society and on individuals...
The one receving riba grows used to making money risk-free and work-free... this leads to a lifestyle mainly based on consumption (which is bad for the environment etc.). But more importantly it leads to feeling much less responsible for one's own actions...

The one paying riba becomes more and more a slave of those who lent him money since the burden gets bigger over time... this leads to less self-empowerment and more dependency.

Now you can project these on a societal level... you will have lots of "money slaves" (poor) and a small quantity of "money owners/lenders" (rich)... look at the current crises - first the banks made money with non-existing values... then they got into trouble and the countries needed to save them which they mostly did by taking some credit... now the countries have much more debt which in turn is used by the very same banks they rescued against them to make more money... these things would be impossible without riba...

Answer 3

It's not just in Islamic Finance that interest is seen as problematic; the same holds for Christian Finance. For example in the Shakespearean play, A Merchant of Venice, Shylock 'hates' Antonio, a Christian who lends out money gratis (freely) as his religion does not allow usury (interest). Of course this is some time ago. The secular & commercial Europe does not.

Interest is the payment by the borrower to the lender for use of his capital; say in the same way you may pay someone to hire a car. The essential difference here is abstraction. The car is a physical good. Capital is an abstract good. Physical goods have friction, they're not easily moveable; whereas Capital is frictionless - it can be moved from one country to another incredibly easily - in fact barriers are put in place to reassert friction in the movement of Capital globally.

Where interest becomes a problem is how its open to abuse. (Slyly) in market-rigging, (openly) by loan-sharks.

There is also how it actually considers the concept of risk. If two parties open a new business, one expects, at least ethically the risks are shared. But if one party provides the capital often they can force the other party to take a much greater proportion, if not all the burden of risk. That is because Capital is often a signifier of Power & Force as materialised in Law backed by the State.

Ribaa to me signifies the glorification of Capital over the human sphere. Trading is permitted as it is part of the human sphere, but Interest exploits & imprisons the human sphere.

Of course, the picture is more complex than I've outlined here. For example, in India by VS Naipaul where he interviews a Jain trader in Bombay - he says he works in the stock exchange as building development was rife with the Bombay Mafia - and his ethics didn't allow him to get involved in extortion.

Answer 4

This post is based on my poor understanding of economics, however I do believe that the gist of it is somehow correct, anything not right in this post, please do comment and let me know.

Because it could make the poor poorer, and the rich richer.

Imagine someone who have 1000 million dollars, with an interest of 10 million dollar a year. compared to someone who have a small business, who is barely making a 0.5% interest each year.

The idea of the interest is to compensate for the decrease of the real value of money over time, so $100 1 year ago, is ~equal to $101 today, so people who are investing their money, will need to do allot of work and gain at least 1% just to maintain the value of money, and therefore, It will encourage people to put money in banks for long periods rather than letting it flow.

Overall, it will lead to decrease the real amount of money used in commercial transactions, while maintaining/increase the money reserved in banks, and overtime resulting in less money being 'liquid' in the market, which will lead to bad economical state.

Answer 5

At the beginning, I was also confused about Riba. But after watching the video about Prohibition of Riba, now I can understand why Riba is haraam, because Riba can make money is not circulated to the whole segement of the society. Riba will only make rich people become richer and poor people become poorer.

I recommend you to watch this video : The Prohibition of Riba There are nine video parts. I hope you can have deep understand after watching that video.

Answer 6

I used to wonder the same thing. Many good answers have already been given. I will only about about the money itself. The term Riba is not just confined to "interest" as we normally think of it.

We can divide money into two categories: Representative and commodity based. Representative money has no intrinsic value. Representative money includes fiat currency which is the dominant form of money in use today. Commodity money has some intrinsic or tangible value. Gold, silver, barley have all been used as forms of commodity money.

When the supply of representative money is increased, no real value has been created. It only encourages more competition for the existing resources and so we can see environmental exploitation as a result. When the supply of commodity money is increased, real value has been created.

While a little "interest" does not seem to be bad at first, we must understand that our entire economic system is founded on the riba of representative money, fractional reserve banking and legalized interest. This leads to distorted markets that cause unquantifiable human hardship and environmental destruction.

Thus there is a strong reasoning behind the prohibition of riba.

http://murujan.com

Answer 7

The reason the prophet regarded riba as such an evil was that poor debtors could be excessively burdened by riba doubled and redoubled, dispossessed of their land and cattle by unscrupulous moneylenders, and they (and their family) sold into slavery - the destruction of a life's work.

The following paper explains a reasonable modernist Islamic interpretation of riba and interest: https://www.academia.edu/2711594/Is_Interest_Really_Banned_in_Islam It explains the views of scholars Fazlur Rahman Malik and Abdullah Saeed.

Interest in modern regulated financial markets is not riba. Loan sharking and predatory lending on the poor is riba.

Its also worth looking at the wiki entry on riba for a wide variety of scholarly opinions.