Modern banking and finance can be a little daunting for many of us.
However, this does not lessen the importance for a Muslim not in that arena to fully understand and appreciate not only what Islam says about banking but to also apply faith to the ever changing financial environment.
One key area that is underestimated in size and consequence is the use of riba (usury or interest). Most Muslims are familiar with the stance that interest is prohibited, but does that mean in practice too?.
Interest has become so common, that it is now the backbone of practically all financial activity. It affects everyone in some shape or form, be it directly or indirectly. It affects the ways in which you withdraw cash at an ATM machine to the bigger things like purchasing a property or taking out a student loan. In real time, it has most certainly played a role in the financial farce that is facing Greece today.
Because the use of interest has become ‘normal’, sadly it has also become common practice amongst Muslims. Taking part in riba has been clearly prohibited in the Quran and the Prophet Muhammad also warned of its severity from a faith and a moral perspective.
Interest serves as a tool where in the wealthy can concentrate their wealth at the expense of a few. For the world’s poorest, interest based lending can be a living death.
The sheer immorality of such lending has led scholars to compare interest to cancerous cell - one which spreads and spirals out of control.
Islam is built on a free-market system, which interest based lending clearly abuses. Interest rates are used to regulate spending and therefore, inflation.
We see that when the Bank of England puts up its base rate, the interest rates for people who pay mortgages also rise. The reality is that the borrower is forced to pay half or more of the cost of the property on interest charges.
In essence using interest rates to control inflation is like ‘robin-hood’ in reverse.
The over-reliance of interest has been widely criticised and has proven to be damaging not only for those in a commercial pool but sadly for those folks who simply want to buy a home or educate themselves.
The 1st Ethical Charitable Trust has analysed the way in which interest based transactions occur and affect our society today. You can download a free guide from our website www.1stethical.com