By Kumar Sajad Ahmad
The Arabic word “ riba” literally means “increase in” or “addition to” anything. Technically, it was applied to that additional sum which the creditor charged from the debtor at a fixed rate on the principal he lent, that is, interest. At the time of the revelation of the Qur’an, interest was charged in several ways. For instance, a person sold something and fixed a time-limit for the payment of its price, and if the buyer failed to pay it within the fixed period, he was allowed more time but had to pay an additional sum. Or, a person lent a sum of money and asked the debtor to pay it back together with an agreed additional sum of money within a fixed period. Or , a rate of interest was fixed for a specific period and if the principal along with the interest was not paid within that period, the rate of interest was enhanced for the extended period, and so on.
The Qur’an likens the money-lender to a madman. Just as a madman loses his senses on account of his disordered intellect, so the money-lender is so mad for money-making that he divorces himself from commonsense. He is so senselessly foolish and impudent that he does not mind how his selfishness and greed are cutting at the very root of human love, brotherhood and fellow-feeling, and destroying the common good of mankind. He does not care at all that he is gaining prosperity at the expense of many. That is how he behaves like a madman in this world. In the next world, he will rise like a madman at the time of Resurrection, for, in the Hereafter a person will rise in the same condition in which he dies here.
They based their vice on a wrong theory and did not see the fundamental difference between profit and interest. They argued like this: When profit on capital is lawful in trade, why should the interest on money invested in loans be unlawful? And the money-lenders are not alone in arguing like this; the bankers of today also put forward similar arguments for charging interest. They argue that a person, who lends a sum of money to another, could himself make profit from it and that the debtor actually does invest it in a profitable business. Why should not the creditor then get a portion of that profit from the debtor for his productive credit? However, what they forget is that there is no business in the whole world where there is a fixed and guaranteed profit without any risk. In trade, commerce, industry, agriculture etc., one has to spend both labour and capital and at the same time one has to face risks, without any guarantee of a fixed profit.
Let us compare the case of the money-lender who lends money at a moderate rate of interest for profitable business with the case of those engaged in other kinds of business. They devote their whole time, labour, talent and invest their own capital, etc., and work day and night so that their business may become profitable by virtue of their own efforts. But even then they are not guaranteed any fixed profit, and have to bear all the risks. On the contrary, the money-lender, who lends only his capital, goes on receiving a fixed amount of profit without any risk whatsoever. By what reasoning and on what principles of logic, justice and economics is it right for him to receive a fixed amount of profit? How can one be justified in lending on a fixed rate of interest to a factory a sum of money today for twenty years, when none can say what rise or fall in price may take place during these twenty years?
The fundamental difference between profit and interest that produces different moral and economic results is this :
(I) The settlement of profit in trade between the buyer and the seller is made on equal terms. The buyer purchases the article he needs and the seller gets profit for the time, labour and brains he employs in providing that article to the buyer. In contrast, in the case of interest, the debtor cannot settle the transaction on equal terms with the creditor because of his weaker position. As far as the money lender is concerned, he gets that fixed sum of interest which he considers his profit. If the debtor spends the borrowed money in fulfilling his personal needs, the time factor definitely does not bring any profit at all. And if he invests that money in trade, commerce, industry, agriculture, etc., then there are equal chances of profit or loss. Thus lending money at interest might bring a guaranteed and fixed profit to one party and loss to the other, or a guaranteed and fixed profit to one party and an uncertain and indefinite profit to the other.
(2) ‘The trader charges his profit, however high it may be, once for all but the money-lender goes on charging interest over and over again and it goes on increasing with the passage of time. The profit which the debtor makes on the money of the creditor, however large it may be, has after all its own limits, but there is no limit to the interest the creditor may charge on his money. He may, as sometimes it actually happens, receive all the earnings of the debtor, nay, may even deprive him of all the means of livelihood or of the articles of his personal use and still might have the same amount of debt against him that was at the time of borrowing.
(3) The transaction in trade comes to an end as soon as the article and its price change hands. After this the buyer is not required to return anything to the seller. As regards the rent of furniture, house, land, etc. the lent thing is not itself spent up but is returned to the owner after the term. But in the case of the principal the debtor has to spend it first and then to reproduce it and return it to the creditor along with its interest. Thus the debtor runs a double risk; he has to reproduce the principal and also to produce its interest.
(4) One engaged in trade, industry, agriculture, etc., earns profit by spending time, labour and intelligence but the money-lender becomes the stronger partner in the earnings of the debtor without any risk or labour on his part simply because he invests the money which is over and above his need. He is a partner only to the extent that he is entitled to a fixed guaranteed interest, irrespective of whether there is any profit at all or how much, or whether there is even a loss.
So it becomes clear that even from the economic point of view, trade helps construct society but interest leads to ruin. As for the moral point of view, interest, by its very nature, creates parsimony, selfishness, cruelty, hard-heartedness, money-worship, etc., and kills the spirit of fellow-feeling and co-operation It is, therefore, ruinous for society both morally and economically. As to the question what should one do with the money for which one has no use, the answer is that one may invest it in commerce, industry, etc. on the basis of partnership and share profits and losses alike.
—(To be continued…)