Why is Usury Considered So Bad in Islam?

Usury, or riba as it is referred to in Islam, is a concept deeply rooted in religious and ethical principles. The motivations behind the prohibition of usury are multi-faceted and have far-reaching implications for economic justice and moral conduct.

Understanding Usury in Modern Contexts

The term 'usury' in contemporary economic theory often refers to the practice of lending money with an exorbitant interest rate. However, in the context of Islam, usury has a much broader and more deeply philosophical connotation. It is not merely about the rate of interest but the very act of charging interest itself.

The Banana Republic Parable

Imagine a fictional nation, Banana Republic, which needs to print money for its fiscal year. The government orders the Banana Federal Reserve to print 100 bananamarks. To fund this printing, the government must issue a bond to the Federal Reserve with an additional 1% interest on the 100 bananamarks. Thus, while the intended money supply is 101 bananamarks, the Federal Reserve prints only 100 bananamarks, inevitably leading to economic imbalances.

The Personal Spend and Payback Scenario

Consider another example where John must find $1 million to pay for his son's medical treatment. He borrows the money from James, who agrees to charge 10% interest. As a result, John is required to pay $1.1 million at the end of the loan term. Despite the inflated interest, James is not required to provide additional resources to support the principle. This disparity is seen as unjust in Islam, as it introduces an unequal and often unsustainable burden on the borrower.

Religious Foundations and Rationale

Islam does not provide a literal or empirical rationale for the prohibition of usury. Instead, it foundationalizes this rule on a broader framework of justice and ethical conduct. The Qur'an allows for trade and the earning of profits but explicitly prohibits usury. This is in line with the belief that every individual has the right to a fair and equitable existence.

Shahadah and Submission to Allah

A central tenet in Islam is the acknowledgment of God as the supreme being through the Shahadah - the declaration of faith. Once a person embraces this belief and submits to it, all of God's commands become binding laws. These include the prohibition of usury, along with other practices such as intoxicants, gambling, and anything else explicitly forbidden in the Qur'an and Hadith.

Implications of Usury Prohibition

The prohibition of usury in Islam is not merely a doctrinal statement but a practical guide to financial ethics. It seeks to ensure that financial dealings are fair and that parties involved in transactions benefit equitably. In this sense, the ban on usury is not arbitrary but a measure designed to maintain economic justice and stability.

Conclusion

While the concept of usury in modern times may seem straightforward, its prohibition in Islam is rooted in deeper ethical and moral responsibilities. Acknowledging these principles is a crucial part of the broader Islamic economic system, which aims to ensure that wealth is distributed and used in a manner that is just and equitable for all.