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West London Islamic Centre & Jamia Masjid

Islamic Guide

Why Does Islam Prohibit Usury?

The Facts about Usury

At times of economic hardship, when the credit bubble bursts, when every good idea fails, just because "the money can not be found", when a decline in services is explained with the need "to reduce the deficit", when business can't afford new investment because of the "high cost of borrowing" or the low consumer confidence, when resulting job-cuts mean people can't pay their mortgages or maintain a decent living standard, many small savers think that high interest rates mean that they get the best out of their savings. The truth is, they pay more than they get.

Lower Interest=Lower Deficit

According to most governments the only ways to control the deficit are to raise taxes or to cut government spending. However, considering that the deficit continues to grow simply because of the exorbitant amounts of compound interest added to the original debt, one of the most effective ways to reduce the deficit would be to reduce interest rates. Lower interest rates = lower deficit. In fact, at zero interest, the debt would not grow at all, and the large amounts of money spent in servicing the debt could be used to pay it off.

Now we consider what the Qur'an has to say on the subject of usury, that is, lending money at interest:

“That which ye lay out for increase through the property of (other) people, will have no increase with God: But that which ye lay out for charity, seeking the countenance of God  (will increase): it is these who will get a recompense multiplied”. [Al-Qur'an 30:39]

“That they took riba (usury), through they were forbidden and that they devoured men’s substance wrongfully – We have prepared for those among men who reject faith a grievous punishment.” [Al-Qur'an 4:161] 

“O ye who believe! Devour not usury doubled and multiplied; but fear Allah, that ye may (really) prosper.” [Al-Qur'an 3:140]

“Those who devour usury will not stand except as stands one whom the evil one by his touch hath driven to madness.  That is because they say: ‘Trade is like usury.’  But God hath permitted trade and forbidden usury.  Those who after receiving direction from their Lord, desist, shall be pardoned for the past; their case is for God (to judge).  But those who repeat (the offence) are companions of the fire, they will abide therein (forever)” [Al-Qur'an 2:275]

“O you who have attained faith! Remain conscious of God, and give up all outstanding gains from Usury, if you are (truly) believers” [Al-Qur'an 2: 278]

A Much Needed Message

How urgently is this message needed in a world where the "debt crisis" threatens to destabalise the world, where open warfare is increasingly the consequence of the anxiety and suffering that spring from third world debt. Politicians have seldom looked at money-lending at interest as the cause of wide-spread poverty in the midst of plenty because, whilst this practice was once forbidden by Judaism, Christianity and Islam alike, it has become universally accepted in the modern secular world. It has been argued that money is a "producer good" and that the lender should receive a share of the extra wealth that these goods produce.

Yet this is illogical on several points. The only true producer of wealth (i.e. Goods and services) is labour when it is applied to either land or capital. Unlike Land, Money is infinite when not artificially restricted, which it often is. Money is man-made out of nothing and at tiny real cost. This credit creation confers enormous economic power and influence on those usually private institutions who have secured for themselves monopoly rights in this money issue.

Where does all the money come from?

That private banks create money out of nothing is a fact too little known amongst the public. Our national debt stands at almost 400 billion pounds, and that of other industrialised countries is of similar magnitude. Have you ever asked yourself who's that fabulous lender who always seems to have all the money which the government does not have, whom does the nation owe the national debt.

The truth is that when banks create money (as cheque-money or blips on computer screens) they lend what they have not got to reap where they did not sow. Their loans are not backed by any real wealth on their behalf. Nor did they lend out depositors money (or when did the bank last tell you that you cannot take out money from your account because it has been lent to someone else?).

When you give your house or business as guarantee for their money, this money is not backed by gold, silver or tangible wealth. It is an empty promise except for the fact that the government, with the central bank as lender of last resort, is ready to bailout the banks, should a run on their money occur. Bank-created credit is based on the nations capacity to produce and consume in the sense that whilst it is not issued nor backed by the government, the government - being the largest debtor - guarantees a certain return in debt service payments from its revenue.

An increasing part of local and national government taxation today is raised for the purpose of servicing the interest payments on local and national government debt. So whether you personally borrow or not, you pay the interest on the fictitious money. Likewise, when you take a bank loan, you pay at least twice: you give a guarantee of real wealth in case of default, and you pay a penalty (as interest) for accepting money as a loan which costs the lender nothing and did not exist until it was created as a loan to you. Heads you lose, tails you lose again.

Lets us remember what the American Preseident Thomas Jefferson said, 'I believe that banking institutions are more dangerous to our liberties than standing armies. Already they have raised up a money aristocracy that has set the government at defiance. The issuing power (of money) should be taken from the banks, and restored to the people to whom it belongs.' 

Empty Promises

As should be evident by now, to base an economy on interest is a pretty daft way of servicing a nations need to produce, consume and trade. It results in the incessant difficulties of inflation, unemployment, decline of services, trading wars, bail-outs, bigger bonuses and pay-offs to fat cats etc. Using interest rates as a means to control the problems of a nation's economy is futile, as these problems were created by interest in the first place.

Only when a government creates its own money supply free of charge to the nation to facilitate production, consumption and trade, instead of authorising private banks to create the nations money and than holding the nation at ransom by breaking its back under the ensuing interest debt, only when we get back to a system where the usurer is not being rewarded for taking advantage of other's difficulties, will we achieve real prosperity.

There is a better way

Islam, often laughed at for sticking to its principles and not modernising or "moving with the times", has never given in to the demands of the money lenders to change its tough stance on interest. Naturally, Islam has increasingly been attacked by the financial interests behind today's media and politics. Looking at the evidence with an open mind, however, it should not take you long to realise that the Islamic viewpoint does make some sense, and interest doesn't. The following recent article demonstrates this outlook

The writer Sahib Mustaqim Bleher was born in Germany into a Protestant Christian family, and took career in journalism and book publishing. He embraced Islam in 1980, and later moved to Britain.

The Prophet (pbuh) said, 'Allah the Almighty has said: "Whosoever shows enmity to a friend of Mine, I shall be at war with him. My servant does not draw near to Me with anything more loved by Me than the religious duties I have imposed upon him, and My servant continues to draw near to Me with supererogatory works so that I shall love him. When I love him I am his hearing with which he hears, his seeing with which he sees, his hand with which he strikes, and his foot with which he walks. Were he to ask [something] of Me, I would surely give it to him and were he to ask Me for refuge, I would surely grant him it.' [Related in Bukhari]