Comparatives of Interest

Many people of the world base their lives around chasing money, not thinking twice about the method they use to make money. But what does Islam say about making money with no effort, i.e. interest.

Ever thought about how big companies make millions in a matter of days? Interest is a lethal weapon in the financial industry. Companies can use this to devastating effect against people. It all starts from a small investment or loan from the bank and before you know it, it reaches sums which become mind-blowing. This article will attempt to familiarise the reader with the history of interest, current use of interest, what the Qur’an teaches regarding interest and what some other holy scriptures say about it.

Money of interest is money paid regularly at a particular rate for the use of money lent, or for delaying the repayment of a debt. The higher the amount of money borrowed from the bank, the more interest will have to be paid on top of that amount when repaying the amount. Interest differs from profit, in the sense that interest is received by a lender, whereas profit is received by the owner of an asset, investment or enterprise. (Interest may be part or the whole of the profit on an investment, but the two concepts are distinct from each other from an accounting perspective). Compound interest is slightly different in the sense that its rate increases much faster than simple interest. Simple interest has a fixed rate at which it increases but compound interest is interest on top of prior interest. The total amount of debt grows exponentially.

The History

The concept of involving interest in trade became common in 5000BC in the Middle East. The argument at the time was that interest was needed because of the urbanisation in these countries and the society’s developing economically. It was initially used for and with things like olives, dates and even animals. You might lend out an animal and use the law of interest when receiving it back. The Jews called this Usury and they prohibited this. The Book of Ezekiel classifies the charging of interest among the worst sins, denouncing it as an abomination and metaphorically portraying usurers as people who have shed the borrower’s blood. Among the Mesopotamians, Hittites, Phoenicians and Egyptians however, interest was legal and often fixed by the state.

Interest is also forbidden in Islam. Due to this, in the latter part of the 20th century, there has been a rise in interest-free Islamic banking and finance. Some of the countries involved in this movement are Iran, Sudan and Pakistan and their aim is to eradicate interest from the financial system. They aim to do this by having interest free lenders who share the risk of a profit loss sharing scheme. This is Islamic because not only is making money out of money with no efforts forbidden, predetermined loan repayment (such as interest) is also forbidden.

Islamic Views

Interest is mentioned seven times in the Holy Qur’an.

In the Holy Qur’an it states regarding interest:

وَأَخْذِهِمُ الرِّبَا وَقَدْ نُهُوا عَنْهُ وَأَكْلِهِمْ أَمْوَالَ النَّاسِ بِالْبَاطِلِ وَأَعْتَدْنَا لِلْكَافِرِينَ مِنْهُمْ عَذَابًا أَلِيمًا

“And because of their taking interest, although they had been forbidden it, and because of their devouring people’s wealth wrongfully. And We have prepared for those of them who disbelieve a painful punishment.”

The Holy Qur’an (4:162)

Here Allah is clearly announcing, to all, that interest is forbidden. It has been equalled to devouring people’s wealth. The term ‘devouring’ means to eat (food or prey) hungrily or quickly. It gives you the image of an animal that has been deprived of food for days and will eat anything it can lay its hands on. An addiction can also be sensed here. Once the animal finds its prey or the person charging interest finds its victim, it is as though they wouldn’t be able to stop. It would want more and more and its thirst would never be quenched. This lack of control on one’s body and desires is one of the reasons why charging and taking interest is ‘forbidden’ in Islam. Taking interest in Islam is such a grave sin that the one who takes interest from other people is considered to be disbelieving as shown in the verse quoted above. Not only this, there is a painful punishment planned by Allah for him.

Furthermore, in the Holy Qur’an it states:

الَّذِينَ يَأْكُلُونَ الرِّبَا لَا يَقُومُونَ إِلَّا كَمَا يَقُومُ الَّذِي يَتَخَبَّطُهُ الشَّيْطَانُ مِنَ الْمَسِّ ذَلِكَ بِأَنَّهُمْ قَالُوا إِنَّمَا الْبَيْعُ مِثْلُ الرِّبَا وَأَحَلَّ اللَّهُ الْبَيْعَ وَحَرَّمَ الرِّبَا

“Those who devour interest do not rise except as rises one whom Satan has smitten with insanity. That is because they say: ‘Trade also is like interest;’ whereas Allah has made trade lawful and made interest unlawful…”

The Holy Qur’an (2:276)

From this verse of the Holy Qur’an, we can again see that the words associated with interest are to the point and also quite harsh. Terms like ‘devour’, ‘smitten’ and ‘insanity’ are pretty clear in stating what Allah declares about someone who takes interest.

This strong language is to make a person understand, to what extent interest is despised in Islam.

Allah compares the people who take interest to Satan in this case.

Satan in Islam is known as Iblis. When Allah told the angels to bow for Adam asabbreviation for "Peace be upon him", Iblis rejected this command of Allah. He had the arrogance in him that he is made of fire and Adam asabbreviation for "Peace be upon him" is made of clay therefore he is superior to Adam asabbreviation for "Peace be upon him". He became an enemy of Allah and mankind and separated himself from the believers. All these negative qualities are assigned to someone who involves himself in the usage of interest. If we wish to avoid these negativities, we have to avoid taking and using interest.

The second part of the quote mentioned above is where Allah mentions the difference between trade and interest. The disbelievers here are questioning Allah by stating that they are both one and the same so why has Allah made trade lawful and interest unlawful? We can get the answer to this by using the definition of trade. Trade is the action of buying and selling goods and services or exchanging (something) for something else, typically as a commercial transaction. This means that in trade, you are exchanging something for something else.

Both parties can make a profit or a loss. Usually one piece of item is handed to the other and ownerships change. In interest however, one side is constantly taking advantage and the rights of the other party are affected. Interest requires no effort and your money will just increase rapidly. Islam says that these differences are the reason that trade is allowed and interest is not. The causes and effects of interest take a person away from righteousness and this is what Islam tries to prevent.


In the Holy Qur’an, it further states that on the topic of interest

وَمَا آتَيْتُمْ مِنْ رِبًا لِيَرْبُوَ فِي أَمْوَالِ النَّاسِ فَلَا يَرْبُو عِنْدَ اللَّهِ وَمَا آتَيْتُمْ مِنْ زَكَاةٍ تُرِيدُونَ وَجْهَ اللَّهِ فَأُولَئِكَ هُمُ الْمُضْعِفُونَ

“Whatever you pay as interest that it may increase the wealth of the people, it does not increase in the sight of Allah; but whatever you give in Zakat seeking the favour of Allah — it is these who will increase their wealth manifold.”

The Holy Qur’an (30:40)

This verse is highlighting the difference between Zakat and interest. Whereas by means of Zakat, Islam seeks to improve the state of the poor, at the same time safeguarding their dignity and self-respect. The institute of interest not only degrades the economic condition of the poor, it tends to increase the rich people in their wealth whilst depriving the poor from wealth to an even greater extent. This verse particularly prohibits the taking of interest on money loaned to banks or companies.

In Tafseer-e-Saghir, Hazrat Musleh Maud raabbreviation for "May Allah be pleased with him/her/them" mentions the point that there are two types of interest. One refers to the business done with the poor involving interest. This is forbidden. The verse is referring to the interest which is taken during business with the rich. In this you would put money in a specific business and put interest on that in order to increase your wealth. Some people think that interest taken from company owners and banks is not forbidden however, Hazrat Musleh Maud raabbreviation for "May Allah be pleased with him/her/them" states that this verse makes it crystal clear that both these types of interest are forbidden and prohibited by Allah. Allah knew that a time would come where people would try to make interest lawful thus Allah revealed this verse to the Holy Prophet saabbreviation for "Peace be upon him" to remove any sort of doubts that may occur in the minds of His believers regarding the usage of interest.

Apart from these, interest is mentioned in the Holy Qur’an in chapter 2 verse 277, chapter 2 verse 279 and chapter 3 verse 131. In all these places, the general theme is that interest is unlawful in Islam and Allah mentions various different examples of why this is and gives the believers different scenarios in which they may have doubts regarding interest and whether it is lawful or not. Islam is a religion that does not allow any concerns to be left in the minds of its followers. Every matter, however deep it may be, is explained in detail and is clear and easy to understand.

In a Hadith in Sahih Bukhari and Sahih Muslim, it states:

Ibn Masud raabbreviation for "May Allah be pleased with him/her/them" said “the consumer of interest, its overseer, its witness, if they know, the tattooist and the seeker of the tattooist of goodness, the delay of giving the charity, the Arab apostate after migration, were cursed on the tongue of the Messenger of Allah saabbreviation for "Peace be upon him".”

In this Hadith the Holy Prophetsa has highlighted all the sinners which can be possibly involved in an act where interest is used. It shows that the sinners are not just the people involved directly to the crime. A huge chain of offenders can be traced back to the crime.

In The Bible

Prophet Moses asabbreviation for "Peace be upon him" advises in Exodus that:

“If you lend money to any of my people who are poor, do not … require him to pay interest.”

This shows us that, like Islam and the Qur’an, interest is also frowned upon in the Bible. The quote mentioned above gives an impression that taking interest is like cancelling out a good deed.

On the one hand you do someone a favour by fulfilling their needs and giving them money and on the other hand, you not only place a rate at which you want it back, you will end up taking more money than you have initially lent out and this may leave him completely poor but you will claim that this is none of your concerns. The effect of taking interest is only negative thus the Bible also tries to stop its followers from using and taking interest. There are many references to interest in the Bible.

Furthermore, in Luke, it states regarding interest that:

“And if you lend money only to those who can repay you, why should you get credit? Even sinners will lend to other sinners for a full return. But love your enemies, and do good, and lend, expecting nothing in return, and your reward will be great, and you will be sons of the Most High, for He is kind to the ungrateful and the evil.”

From this statement mentioned in the New Testament, we can get a glimpse of the perspective Christianity holds with regards to the topic of interest.

Knowing Christianity to be a peace-teaching religion, there is no surprise that Christianity does not promote lending money with the sole intention of making a profit out of it. Christianity goes one step further than most other religions by teaching that you should not expect anything at all when lending someone money.

Most religions teach that demanding extra, or more than you have given, can be considered crime-worthy however Christianity teaches that expecting anything back is equating yourself to sinners.

The Insight Of Ahmadiyyat

The Promised Messiah asabbreviation for "Peace be upon him" has also spoken on the topic interest. Huzoor asabbreviation for "Peace be upon him" has written that according to Islam, taking interest from people of your own nation is equally forbidden to taking interest from people of other religions.

We should act according to Allah Almighty’s Command of forgiving someone who owes you money or at least giving him enough time so that he can have enough money to repay you. Taking interest on owed money is completely out of the question.

Someone asked the Promised Messiah asabbreviation for "Peace be upon him" that if the only option left is to take interest and nothing else can be done then does this make the taking of interest legitimate?

The Promised Messiah asabbreviation for "Peace be upon him" replied that this does not make it legitimate or allowed. The command for not taking interest is given to the believers and if someone is a true believer, they would put their faith in Allah and be dependent on Him to provide the solution to his problem. The Promised Messiah asabbreviation for "Peace be upon him" is stating that we cannot be true believers if we cannot put our trust in Allah and pray salvation from a particular problem. Allah does test His believers; the true believers are those who show patience and are steadfast.

The Promised Messiah asabbreviation for "Peace be upon him" has however mentioned that one type of interest which is allowed in Islam is when you lend someone money and there is no condition on how much he has to return and the one receiving the money chooses to repay more that the acquired amount out of his own will.

This situation is allowed in Islam and cannot be considered sin. All other types and form of lending and borrowing money through interest are forbidden in Islam. Dealing with interest is the same as fornication or stealing etc.

Hazrat Musleh Maud raabbreviation for "May Allah be pleased with him/her/them" states:

“According to the Islamic definition, certain transactions, which are generally not considered to fall within its purview, nevertheless fall within its domain and are therefore prohibited. Islam defines interest as any transaction where the profit is guaranteed.”

This quotation shows us that Islam has a very clear and broader view on what interest is. No matter what the circumstance may be, any sort of guaranteed profit where no level of risk is involved, is considered interest and therefore prohibited in Islam.

Hazrat Musleh Maud raabbreviation for "May Allah be pleased with him/her/them" calls interest “most important cause of economic and financial catastrophes in the world.” With interest in society, mankind cannot move forward. Huzoor raabbreviation for "May Allah be pleased with him/her/them" elaborates on this point by giving an example. If we were to remove the taking of interest from our society, then fairness in business could be established. The rich would not be able make insane amounts of money from their minute initial capital and would thus have to include more partners into their business which would result in more job opportunities for the poor.

The alternative to this is that they would not expand their business and not be an obstruction to other, growing businesses. Both these scenarios establish the betterment of society and are a clear way of showing us the problems with interest and why it is forbidden in Islam.

Current Use

The use of interest has increased overtime. It is used in almost everything that involves money. An example of this is customer loans. If you wish to purchase an item (for instance a laptop) and it costs £2000. If you want to pay the amount in monthly instalments, then there may be a fixed rate of simple interest on the item. This would mean that in total you will pay more than £2000 for the laptop but you would not have to pay such a huge sum in one go. Despite paying more overall than the original price, some customers feel that they have an advantage with this type of interest because they can get the item without having to save up and give away such a huge sum at once.

Another place where interest is heavily used is in banks. If you deposit money in a bank, a fixed interest rate gets applied on it. If the money remains in the bank over a long period of time, the money would continue to increase because of the interest rate on it. It is a moral and ethical point as to how you wish to spend that money which you have made no effort in earning.

The Future

The Holy Qur’an has also alluded towards the future of interest. It states:

يَمْحَقُ اللَّهُ الرِّبَا وَيُرْبِي الصَّدَقَاتِ وَاللَّهُ لَا يُحِبُّ كُلَّ كَفَّارٍ أَثِيمٍ

“Allah will abolish interest and will cause charity to increase.”

The Holy Qur’an (2:277)

We know that there will be a time when all negativity in the world would be finished and everyone will eventually go to heaven after serving their punishment in hell. In other words, Allah will eventually abolish all sin from the world. The fact that interest will also be abolished clearly shows how big of a sin it actually is. In exchange for this, people will be inclined towards giving charity without expecting a big profit in return. Those who can take heed from this teaching will, themselves, abandon this sin and make sacrifices in the way of Allah in order to achieve His Mercy and Grace.

Interest has become the right hand of many in the world. It is used so frequently now that people do not even consider whether it is ethical or not. It may have advantages; however, as we have seen that it usually leaves the customer at a disadvantage. In one sense, it is unnecessary and not needed. If something is worth an amount, why charge more for it? Is it because of your greed?

At the end of the day, borrowing money from someone is simply taking money from your future in advance. This, added to interest on that money equates to a dangerous outcome for your future.

May Allah enable us to act according to the Holy Qur’an and never let any vice get between our faiths. Ameen.

Disclaimer

This article was originally published in the Annual Printed Edition of Majallatul Jamia

Aleem Zia

Aleem Zia

Student Jamia Ahmadiyya UK

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