WI: Islam allows usury

zhropkick

Banned
I was listening to an English-language reading of the Quran out of curiosity and it very plainly tells you that usury isn't allowed. As far as I'm aware, the Islamic Caliphates phased out interest in the territories they conquered, and the Islamic world only really began allowing interest again in the 19th century as a reaction to European dominance of the world making it inconvenient to ban usury for much longer. If Islam hadn't prohibited usury in the first place for whatever reason, how would the development of the Islamic world and the world in general have changed?
 
I was listening to an English-language reading of the Quran out of curiosity and it very plainly tells you that usury isn't allowed. As far as I'm aware, the Islamic Caliphates phased out interest in the territories they conquered, and the Islamic world only really began allowing interest again in the 19th century as a reaction to European dominance of the world making it inconvenient to ban usury for much longer. If Islam hadn't prohibited usury in the first place for whatever reason, how would the development of the Islamic world and the world in general have changed?
I mean similar laws exist in Christianity and Judaism, didn't stop anyone.
 

zhropkick

Banned
I mean similar laws exist in Christianity and Judaism, didn't stop anyone.
Jews, who have spent the last two thousand years as a diaspora people, have always been allowed to charge non-Jews (the majority of people around them as a diaspora) interest, and although total bans happened especially under the Catholic church, Christianity has seldom been as restrictive on money-lending as Islam has been. In practice, Islam has been the most anti-usury of the Abrahamic religions by far.
 
In practice, it doesn't mean that much. Islamic financial institutions just get very creative with their fee structure.
 
@zhropkick

While the quranic prescriptions against usury were possibly more binding than what existed in Christian Europe (mostly because this ban was entierely part of the Quran and let little room to straighforward neglect), the ban wasn't systematically tied to financial assets.
According to Benedict Khoeler, it was more targeted against agricultural and land capitation, rather than the markets themselves.
It did had an important impact on how lending and exchanges were made, but not that a rupture with talmudic prescriptions on unequal exchanges.

But it didn't really hindered financial development in medieval Arabo-Islamic world which can be argued being one of the birthplace of medieval capitalism, from a mercantile basis which didn't really got rid or prevented credit and rate interests (altough it was arguably more easy from what I understand, in areas relatively far from state authority).

In fact, I'm unsure a semi-free usury (as was existing in Europe, as in an usury limited and tempered by social-cultural context, and more set on a financial-clientelist build-up) would have been that of a net benefit for the development of Arabo-Islamic world giving the risks of land-owning centralisation at the expense of the Arabo-Islamic state, facing an even bigger landowning elite. This is of course, IMO, a worst-case scenario but a distinct possibility.

On the other hand, you could have the solidification of its urban middle and upper-middle classes, possibly at the expense of bureaucratised states which emerged earlier in Arabo-Islamic world than in Europe, being the main difference with European bureaucratised states appearing out of the previous existence of an urban upper-middle class, rather than an imperial network.

Now, probably @John7755 يوحنا could answer better (or correct me) on this.

As for Jews, they played a much lesser role into financial build-up by the time medieval capitalism firmly rooted itself in Europe : they did played one (especially before the XIIth), but as financial development went trough a dynamic growth, not nly they faced the rivality of virtually anyone able to form a financial clientele trough semi-free usury, but often ended up being mere figurename for respectable Christians.
 
I was listening to an English-language reading of the Quran out of curiosity and it very plainly tells you that usury isn't allowed. As far as I'm aware, the Islamic Caliphates phased out interest in the territories they conquered, and the Islamic world only really began allowing interest again in the 19th century as a reaction to European dominance of the world making it inconvenient to ban usury for much longer. If Islam hadn't prohibited usury in the first place for whatever reason, how would the development of the Islamic world and the world in general have changed?

Christianity also doesn't allow usury.
 

elkarlo

Banned
But what about lending, seems to be oddly strict abiut it. To the point where they're are Muslim bonds. Thibk you guys are underestimating how strict Islam is on the idea of interest in general
 
The ruling is quite clear, as you say, the Ribaa or usury is totally prohibited. According to the scholars of the past, allowing usury or claiming that it is permissible, is one of the nullifications of Islam. Thus, this is a matter of extreme importance.

The ruling more concisely upon Ribaa is further very sound and consistent through time, the rulings from the Umayyad period pair with what we have today and were similarly applied. That is, the concept of loans, is allowed, however, those which accrue increased value over time through various financial manipulation schemes, are among those to be rejected and made forbidden for Muslim. These are of course, usury, which is Ribaa, which is banned totally. A loan, which is taken, must have a fixed rate that does not increase in value and in my opinion, must come with a stipulation that you may pay it off prior to the final payment month. As, a Muslim receives a reward for paying debts early instead of lingering on payments as this is testing his Creator.

Equally so, many other styles of loans or purchases are equally forbidden to the Muslim. For instance, the idea of a credit card, is not forbidden, but highly disliked and to be avoided as it is commanded by Allah to posses those items with which you exchange. Thus, in my own opinion, even the concept of loans derived via banks and not family members, is disliked and to be avoided for financial safety and religious piety. Hence, the religious and defensive Muslim should save the incomes with which you earn and defer gratification in purchases or commitments so as to later purchases these items without loans and have a clear heart for His/Her Creator. If you cannot do this, then the object you needed excessive loans for, is not worth it.
 
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Could be - but what does that mean in practice?

In practice, there is and always has been a large and vital banking industry in Islamic lands, run by and for Muslims (in most places in Dar al-Islam, there was also a significant Jewish banking presence as well).

The most straight-forward approach was that instead of a standard loan, Islamic banks would purchase an item outright and then sell it to the loan-taker with an appropriately sized charge for the service, and then the lendee would pay this price in full over the course of several months or years or whatever (this is basically interest with fixed payments and interest, but with a different name). It was also common to do something that more closely matches modern stock purchases or venture capital, where the bank would provide the funds in exchange for a part ownership of the venture and any profits taken from it. For things like checking accounts, usually a small fee is charged simply for the service of watching and protecting the funds.

There's several specific methods and subtleties, but those three categories characterize the majority of Islamic banking.

Note that in practice, Islamic banking isn't too different from other banking until quite recently, where most Islamic scholars agree that most derivatives are forbidden (things like futures and options are generally considered to fall under the category of gambling, which is forbidden).
 
"A loan, which is taken, must have a fixed rate that does not increase in value and in my opinion, must come with a stipulation that you may pay it off prior to the final payment month. As, a Muslim receives a reward for paying debts early instead of lingering on payments as this is testing his Creator."

Well, that is good.
 
This is interesting: https://medium.com/incerto/why-each-one-should-eat-his-own-turtles-revised-8a4be2f11e61

"If only one party in a transaction has certainty all the way through, it is a violation of Sharia. But if there is a weak form of asymmetry, say someone has inside information which gives an edge in the markets, there is no gharar as there remains enough uncertainty for both parties, given that the price is in the future and only God knows the future."

This seems to allow many elements of modern capitalism. Nassim Taleb is a pretty successful option trader, he'd know.
 
Does that mean fractional-reserve banking is similarly forbidden and an observant banker ought to keep 100% reserves?

Yes, it is not permissible for the bank to use other’s property without actually owning it. Further, a Muslim should take this practice and scheme into mind. According to my opinion and much of Islamic literature and opinions, this sort of banking is embezzlement and fraud upon the people and should be rejected. Personally, most banks that do not simply hold reserves and such, are to be simply avoided and it would be preferable other means of protecting money gained than to place items in the care of those who sin using your clean earnings.

As part of this financial scheme, the concept of the purchases of items that the seller does not actually own (such as banks), this too is prohibited by necessity. One in order to sell an item or to buy it, must have either position of or the buyer must investigate into the status of the item, that the seller actually owns the item. If the seller does not own the item, but is receiving your money to then buy it from another to then grant it to you, the item would become forbidden to you and for you to buy it anyway, is a sin toward Allah and you should seek forgiveness.
 
Does that mean fractional-reserve banking is similarly forbidden and an observant banker ought to keep 100% reserves?

It depends who you ask (unsurprisingly). Many Muslim countries have fiat currency backed by a central bank with a fractional reserve in the standard modern model - including the Islamic Republic of Iran. Also Malaysia, Indonesia, and Pakistan, to name a few.

On the other hand, Saudi Arabia has full reserves for the riyal, which is pegged to the dollar. Between the peg and the large gold and foreign currency reserves, the argument could be made that the riyal isn't a fiat currency (though this seems questionable to me, since the US dollar is, and so it feels to me like anything pegged to it should also be).
 
It depends who you ask (unsurprisingly). Many Muslim countries have fiat currency backed by a central bank with a fractional reserve in the standard modern model - including the Islamic Republic of Iran. Also Malaysia, Indonesia, and Pakistan, to name a few.

On the other hand, Saudi Arabia has full reserves for the riyal, which is pegged to the dollar. Between the peg and the large gold and foreign currency reserves, the argument could be made that the riyal isn't a fiat currency (though this seems questionable to me, since the US dollar is, and so it feels to me like anything pegged to it should also be).

Simply because a country (state entities; the ulema of these lands reject income taxation or sales tax or confiscation of private property or military conscription) that claims to be Islamic practices actions that are against the fiqh, do not mean that there is an Islamic opinion in favor of these. For instance, many countries perform income taxation despite the very clear cut ruling regarding the lack of permissiblity in this area by essentially all Islamic scholars of today and of the past. Others further, confiscate property by terms such as immenent domain or similar titles, which are equally rejected by the fiqh.
 

Md139115

Banned
It always struck me that Jesus had a bit of a habit of making things needlessly complicated for those of us who (try to) follow, what with the parables and mysticism and the never quite nailing down his relationship to the Father enough to satisfy theologians and the insistence that we need to somehow eat him to achieve salvation... I’m going off on a tangent, sorry. But there’s exactly three things that he devoted an extraordinary amount of time to making as crystal clear as possible: 1. Be merciful and generous. 2. Don’t charge interest on loans. And 3. Don’t divorce.

And those three are the ones everyone breaks. It’s almost as though he knew what was going to happen.
 
It always struck me that Jesus had a bit of a habit of making things needlessly complicated for those of us who (try to) follow, what with the parables and mysticism and the never quite nailing down his relationship to the Father enough to satisfy theologians and the insistence that we need to somehow eat him to achieve salvation... I’m going off on a tangent, sorry. But there’s exactly three things that he devoted an extraordinary amount of time to making as crystal clear as possible: 1. Be merciful and generous. 2. Don’t charge interest on loans. And 3. Don’t divorce.

And those three are the ones everyone breaks. It’s almost as though he knew what was going to happen.

It is and it isn't true, I'd argue that most of the **** they have in the bible was written in the 4th century by a consensus of bishops and as had so many revision and additions by the catholic church since so of course its vague and contradictory since the bible is an effective Wikipedia page edited and reedited over 1700+ years. Groups of bishops convene every so often to decide what's "canon" to the franchise (conveniently embracing some books and dismissing others) and what isn't with the result that a few things like hell, the supremacy of the bishop of Rome, indulgences, the veneration of saints, the egregious accumulation of wealth, and so on that was never Jesus' original message. As far as I'm concerned the bible is about as far from Jesus as you can get, better off just taking the basics of his message and running with your own version instead of some organization peddling their corruption of his message.

My interpretation of Jesus' bent on usury was that it was meant to condemn debt-slavery, something that's still relevant today and goes along with his message about forgiveness and mercy.
 
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