RIBA AND MORTGAGES: 20 Commonly Asked Questions
A brief look at history is instructive.Commercial interest, as practiced today even at single digitrates, was well-known and widely-practiced among Abrahamicsocieties, even over four thousand years ago, mostly as a form of institutionalized agricultural ﬁnance, not just as a form of usurious consumption ﬁnance, borne out by substantial historicalproof.
Later, even the concept of credit risk became wellunderstood, with Byzantine traders contemporary to the Prophet(Allah bless him and give him peace) borrowing on standardizedrates of interest, rates that varied by profession.
The Prophet (Allah bless him and give him peace), hisCompanions, among whom many were previously moneylenders,and all those trading in the Arabian peninsula during the 7thcentury were thoroughly familiar with the widespread practice of commercial interest-based lending: charging for the use of moneywith an additional sum over the principal amount.Modernist Islamic discourse on the inadequacies of aninterest-free economy is highly reminiscent of the argumentsfavoring interest given by medieval Christian theologians. Threecenturies before pro-interest Calvinism reached its full stride, theslippery-slope justiﬁcations that marked the beginning of the endof the Church’s interest prohibitions began, most openly, in the13th century with the introduction of a time-based penalty chargeon an interest-free loan.The charge was called “interesse.” About a hundred years later, this charge evolved into onethat could be incorporated into the contract itself as part of theloan, not just as a penalty for late payment, but as a charge just forthe use of the funds.
The last stage of this recidivism came in 1920 when theChurch itself issued the following statement: “…in lending afungible thing, it is not itself illicit to contract for the payment of the proﬁt allocated by law, unless it is clear that this is excessive, oreven for a higher proﬁt, if a just and adequate title be present…”
Even the modern dictionary attests to the true origins of theword “usury”: “1. the practice of lending `money at an exorbitantinterest rate. 2. an exorbitant amount or rate of interest.3.
.Interest paid for the use of money…”
The ﬁrst two deﬁnitionsare the norm, the third, the point. That it became obsolete(
) is testament to the fact that usury was once regarded asnone other than non-exorbitant interest.From the beginning of Islam to the present day, theoverwhelming majority of Muslims, both scholars and laymen,have regarded riba, usury, and interest as but one in meaning. Tofollow this is to follow the words of the Prophet (Allah bless himand give him peace) to “adhere to the jama’a (overwhelming majority of Muslims).” (Ahmad)
2. How does interest harm society? Isn’t it a necessary part of every economy.
Muslim societies are a living example of the debilitating effects of interest-based ﬁnance. Most sadly reﬂected in just aboutevery Muslim country in the world, with daily-ballooning interestpayments to the World Bank, International Monetary Fund, andother industrialized nations’ agencies; notably, at low rates of interest. Interest payments that, quite unproductively, draw valuable funds away from healthcare, education, sanitation,infrastructure, and any number of other governmentalresponsibilities.
ETHICA INSTITUTE OF ISLAMIC FINANCE™