I am sure all of us must have heard of the term ‘usury’ at some point of time but not many of us may know what exactly it means, or how it is different from the more famous expression ‘interest’.
In fact, this argument was used on me by some of my banking friends when I was contemplating switching sides to Islamic banking way back in 2001. They had said that what is forbidden in Quran is usury – as stated in Chapter 3, Verse 130, Surah Al Imran (the family of Imran) (quoted in the following) – and that interest applied by modern-day conventional banking does not fit to what the verse says:
“O you who believe! Do not devour usury, making it double and redouble, and be careful of (your duty to) God, that you may be successful.”
At the time, they further argued that modern banks charge interest on a per annum basis on the lending which, in most cases, does not exceed the lower double-digit figure, ie 10-15% and that too on a reducing balance basis which cannot multiply the principal amount loaned in to double and redouble.
They thought they got me through the argument and that I will abandon taking the jump but my deeper research told a different story that there is no distinction between usury and interest and that the holy books did not discriminate between them. The verses from the Holy Bible and Holy Quran quoted in the following provided a unanimous conclusion, helping me to start my career in Islamic finance:
• Holy Bible, Ezekiel 18:13: “[Who] lends at usury, and takes profit [on lending]; shall he then live? He shall not live. He has done all these atrocities; he shall surely die; his blood shall be upon himself.”
• Holy Quran 04:161: “And their taking usury though indeed they were forbidden from it, and their devouring the property of people falsely, and We have prepared for the unbelievers from among them a painful chastisement.”
In the biblical quotation, ‘die’ refers to being in hell which perfectly resonates with the Quranic quotation of ‘painful chastisement’ While exploring this point, I also discovered that God Almighty has used one term throughout the Quran to define monetary increase on the amount lent by a person to another, irrespective of its extent, which is ‘Riba’. If God Almighty wanted to forbid usury (in the context of making double and redouble) and allow interest, we would have discovered two different terms so as to be able to discriminate between them.
Let me explain it from a different angle. Arabic is such a morphologically rich language that there are several words or terms to define a certain object or something at different stages. For example, the horse is called ‘Mahr’ when it is a pony, ‘Hisan or ‘Khail’ when it is a grown-up male horse and ‘Faras’ for an adult female horse. In addition, there are many other terms for various species of horses.
Keeping the aforementioned Arabic language approach in mind, it is easy to deduce that had it been the intention of God Almighty to differentiate between usury and interest, we would have found in the Quran a separate word to define interest being ‘allowable’ low monetary gain and Riba for the ‘forbidden’ excessive interest on the money lent by the lender to the borrower. We know very well that this is not the case in the Quran. As such, any kind of excess over a principal amount of debt, no matter how miniscule, is Riba and is forbidden.
Furthermore, if usury only represented ‘excessive’ interest, then who will decide an interest rate to be excessive? If the borrower has accepted a certain interest rate, no matter how high it may be, it is still an agreed rate and hence cannot be considered excessive by any means. Legally speaking, the excessive interest would be if the lender charges something over and above the agreed rate, no matter how high it may be.
Let us try to understand the aforementioned Quranic verse from another perspective. It is known practice that if someone leaves a term deposit amount in a bank untouched for some years with an instruction to keep rolling it over with interest, it will become double and may also redouble. In fact, some banks and insurance companies do promote the money doubling schemes. This proves that the reference appearing in the holy books is for both – the interest as well usury.
Usury and interest are thus one and the same thing with no boundary based on the lows or the highs of the rate. Therefore, the argument put forward by my associates did not hold water.
The views and opinions expressed in this article are those of the author and do not necessarily reflect the opinions of the Dubai Islamic Economy Development Centre, nor the official policy or position of the government of the UAE or any of its entities. The purpose of this article is not to hurt any religious sentiments either consciously or even unwittingly.
In next week’s issue: The discussion on usury and interest continues since it is extremely important to understand this point at this early stage which will help us comprehend the modus operandi of Islamic finance and its products.
Sohail Zubairi is the projects advisor with the Dubai Islamic Economy Development Centre. He can be contacted at [email protected].