Interest and Its Role in Economy and Life pdf

Interest and Its Role in Economy and Life

INTEREST AND ITS ROLE IN ECONOMY AND LIFE

Introduction

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.”1 

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 inter-est 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 for-bid something from humans for no reason whatsoever. Hence, there are definitely sound reasons—some of which we may be able to clearly recog-nize—why God has forbidden this practice.

In today’s world, Muslims are constantly being bombarded with argu-ments in support of dealing with interest. Many Muslims have succumbed to such pressure and supposedly rational arguments, leading them to ac-cept 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 ra-tional 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 every-thing 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 re-velation. 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 articles topic, can be taken as an excellent example of this nature.

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 discus-sion 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 inter-est2:

“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.1

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, com-munity 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, testify-ing to the truth of this verse, shall be given later in this paper.

 In fact, per-haps highlighting the meaning of this verse, the Prophet (peace and bless-ings of God be upon him) also said, Interest “ even it is a large amount– in the end will result in a small amount.â€2 Undoubtedly, in the Hereafter