Further, these prohibitions originated in a different era, an era centuries before the existence of anything approaching modern finance. For instance, in the Roman era, loans were a purely private thing, and from what I could find, the rich elites who would loan out money would do so at rates potentially approaching 48% per year. It's fairly easy to see how a mostly poor, mostly minority religion during the time of the Romans would consider this practice sinful, considering it was likely a common tool used against their communities. As more modern commercial practices began to slowly form in the 1600s or so, average interest rates began to drop, and with it went much of the prior vehemence against usury.
Interest is what encourages a bank to lend me money now so that I can afford to build a house. The total value of the house is $200,000. I am willing to make a bet that over 30 years, I will earn enough that I can afford the purchase price of this house in present value dollars. However, the people building my house need to be paid now; materials need to be purchased now; and so on. Not in 30 years, but now. Who in their right mind is going to give me $200,000 to use now with no promise of recompense? At the very least we need interest to cover risk.
People no longer live in houses that they can build themselves with a modicum of diligence and work. (I am using houses here as just one example, but you get my point.) We have an unimaginably better standard of living than we did 2000 years ago. A large part of how we pay for that is interest. I'm just not clear how we could keep living in anything approaching an approximation of our current world without the existence of interest. Having idealistic visions of constant charity is not workable.
i can't believe we still need to explain this to people
That being said, I've seen some good attempts at producing proper Sharia compliant offerings. But most people will not want them, because they have true risk sharing, unlike the modern financial system which feeds off the poor and widens the gap.
Define "true risk sharing", if you mean what I think you mean, the opportunity for a borrower to file bankruptcy is true risk sharing.
Running an economy without lending for profit has already been proven to work, so the Book (Quran) most certainly isn't wrong about the evil of interest. Just look at Islamic history until post WWII and the fall of the Ottoman Empire, where colonialism followed and the occupiers brought with them and force installed their usurious financial systems. Even if you look at non-Islamic experiences: https://www.youtube.com/watch?v=Io2a4SOX22Y
True risk sharing is where there is no contractual obligation for the lender (or "investor") to profit. Islam declares that any loan that produces any sort of benefit to the lender (tangible or intangible) as Riba - a term used to encompass a class of impermissible financial transactions which includes, but not exclusive to, usury and interest.
More specifically, when the government openly inflates the money supply by a certain percentage every year, then investing your cash into T-bills could suddenly be seen as merely a defensive move, to protect your holdings, rather than a usurious transaction with you as the benefactor.
I am not arguing that point or another, but this is just one example out of many where the issue gets confused by the complications of the modern financial system. It could well be argued (and many do) that large swathes of the financial system is incompatible with Islamic principles, and that the only acceptable option is a radical reimagining of these structures. In that, they would agree with a growing secular movement who are increasingly discovering that the monetary and financial system is stacked against them, and enriches the few at the expense of the many.
I guess what I'm saying is that it makes little sense to rail against 'usury' while ignoring the realities of the 'modern' nature of money.
True. Which is another core problem. We should go back to proper money, not what we have today.
Let's take a step back. Why did the governments decide to detach money from gold and other metals? It's because they want to be able to print money at will to cover their ever increasing debts, due to interest. What effect does this have on the average person? They work hard to save money, only to have their savings devalued because of someone else's greed and incompetence. This is not sustainable.
The problem with rules against lending for profit is that you have no incentive to let anyone use what you have for their own benefit. If someone comes to me with an awesome business plan and wants some money, if I want to help them I am going to expect them to take the risk on their business plan rather than subject me to it.
> you have no incentive to let anyone use what you have for their own benefit.
Renting is a trivial counter-example.
> if I want to help them I am going to expect them to take the risk on their business plan rather than subject me to it.
Which is specifically one reason why lending with interest is prohibited. You don't get to profit off of the need or misery of others. There's a power dynamic difference that Islam aims to make more even. We've already seen countless times how this ended up throughout history. And we're living it today.
I've always disliked this appeal to scholars in Islam because Islam likes to set itself apart claiming there is no pope or interpretive authority on the law of God and then any time a person has a disagreement they appeal to an authoritative priesthood class to stifle discussion on issues that matter. For a religion that bills itself as easy to understand by the common follower of the religion, deference to human beings as authorities are quite common.
You're arguing against a strawman. I never said that people will be forced to lend money without compensation. With 0% interest rates, any lending will be purely out of charity. If people want to make money, they will invest it, as we've been doing for millenia. Invested in moral ways.
There exist today developers who will sell property in installments, without upping the price. I've seen this in at least one West Asian country, and I wouldn't be surprised if it were more commonplace.
I'm not calling you stupid or anything like that, but you're showing that you do not quite understand how lending and markets and even investing works. You're ignorant on this topic and I strongly advise you to do a lot of reading on it.
Think of it like this: if you are borrowing money for anything that does not increase your productivity, you're making a mistake. If you're lending money to someone for something that does not increase their productivity, you're increasing your risk of default substantially.
It isn't about greed, fact is, sometimes people need money they don't have, and sometimes people have money they don't need at this very moment, and if both parties make a good, sound judgment, both can benefit from this scenario. Every day people make their lives better by borrowing money. The view that lending and borrowing are innately bad is a very narrow minded view, one based on ignorance of the facts of how lending works.
If you want to build and prosper, you can find investors willing to put money into your project or business. Lending money is not the only way to prosperity, as evident by how we had an entire empire (the Islamic Empire) that prospered and was at the forefront of many fields, yet did not deal with interest.
People simply want the easy way out, and lending with interest is the easy way out in this case. It's intellectually lazy, and has caused destruction time and time again throughout history. But people turn a blind eye because of the relative few who stand to benefit greatly from interest, at the expense of everyone else.
How do you feel about the government being able to print money at will and devalue the dollars or euros you worked hard for? You can thank interest for that.
> but it's a little odd to see this comment on a forum hosted...
Why? They're not lending money, they're investing, two very different things.
If banks were insulated from the consequences of their lending, wouldn't you expect them to loan to risky startups?
Not entirely. VC exists for things where debt doesn't work. You can use debt to fund some things, eg. real estate, because a failed business still has a valuable asset to sell.
If a vc funded tech company goes under, the only thing to sell is source code, which is not nearly as fungible.
> creditors bearing the risk of default. The person giving away the money is always bearing the risk, that doesn't go away. VC will bear the risk still.
This is just one reason why lending money with interest is immoral. Read up about Islam's position on this issue if you want to learn more. It's quite eye opening, and sad that we have to live in a world that is based on fundamentally evil and corrupt financial practices.
If my company borrows money, then goes bankrupt, the lenders cannot come after my personal assets unless I've personally guaranteed the loan, or broken certain rules about mixing personal and business accounts (allowing the creditors to "pierce the corporate veil"). In personal bankruptcy, my primary residence and vehicle are protected up to a certain value, along with retirement accounts.
It certainly doesn't seem like a pleasant process, but at a theoretical level the rules generally seem fair to me. One huge problem is that people don't know the rules, a situation which I suspect lenders and debt collectors are happy to encourage. There certainly are a lot of corrupt financial practices, but I think lending money can be done fairly (at least in theory). I find other perspectives on the matter very interesting. I'll be sure to read some more about Islamic finance!
Be careful about what you read. As I mentioned in several comments here, most so called present day "Islamic finance" isn't actually Islamic. Don't let labels trick you.
So unless the commenter thought sukuk was illegitimate (I haven't seen them state this, maybe they have), wouldn't it be reasonable assume they consider sukuk acceptable?
Perhaps obviously, I'm only vaguely aware of Islamic finance, so I may be missing something basic.
*EDIT*:
I've just seen the comments where they appear to be condemning sukuk, or at least common implementations.
But it seems like their point is that they think it's simply slapping a different label on lending, which I'm inclined to agree with (especially if there are repurchase agreements and guaranteed returns).
It's well known that many Arab governments today have been installed by the Western colonialists. It's established history. We're still living the effects of post WWII colonization and Sykes-Picot. Of course, there is blame on us too, but to deny external influence is also ignorant.
Lending is absolutely critical to our economy. But that's not what we're talking about; what we're talking about is lending with interest. And right now, we're in a discussion here about the Fed hitting 0% or near-0% interest rates. Its absolutely a valid train of thought to consider.
I don't have the knowledge or skills to comment on why it may be invalid or valid, but I do believe that its a worthy point of discussion.
This gets us into trouble when life happens. Prices increase because of available credit so most people have to play the game, then something big happens. It can make the whole system collapse unless you bail out people who made bad bets. That pisses off the people who didn't overextend themselves for good reason.
Debt can be great, but it makes the system brittle and incentivizes weird instances of bailing out people who fucked up, not because they deserve to be bailed, but because the system will collapse otherwise. Let's not pretend its benefits don't come with drawbacks, like what's discussed in OP, or what happened in 2008.
It saddens me that we don't learn from past wisdom, and that greed drives the world. We see people vouch for clean energy, what we also need is clean finance and economics.