10 Reasons Behind Prohibition of Riba
- Riba reflects greed and selfishness
- Riba results in trauma and depression
- Riba is disliked and Prohibited in religions
- Riba results in injustice and exploitation
- Riba results in idleness and promotes unearned income
- Riba Corrupts Society
- Riba results in Inflation
- Riba-based market fails
- Riba causes negative economic growth
- Riba widen the gap between rich and poor.
1. Riba reflects greed and selfishness
Taking interest is no doubt, a greedy act. Riba shows tough hardheartedness and selfishness. As a human being, it is our duty to fulfill the need of our brothers by providing him sum and enabling him to pay back the sum without any burden to pay more. Instead of helping, providing money with interest makes the burden even bigger. In Riba, the amount of money is multiplied in wrong way. Riba also weakens spirit of sympathy, mutual help and cooperation and it also decrease the loving nature, brotherhood and unity among the community. It reflects worship of wealth.
2. Riba is burden on borrower and causes depression
In conventional finance, all the risk is born by the borrower instead of profit and loss sharing between both the parties. Debt is burden on the shoulders of borrower. This debt increases due to regular payment of interest.
President Obasanjo of Nigeria said in G8 summit in Okinawa that,
“All that we had borrowed up to 1985 or 1986 was around $5 billion and we have paid about $16 billion yet we are still being told that we owe about $28 billion. That $28 billion came about because of the injustice in the foreign creditors’ interest rates. If you ask me what is the worst thing in the world, I will say it is compound interest.”
No doubt, debt could even cause killing and suicide.
Ms Swaminathan who is Indian father of green revolution said,
“Islamic banking, which propagates zero interest lending, could hold the key to solving farmer’s suicide crises.”
3. Riba is disliked and prohibited by religions.
Riba is considered as bad and prohibited in religions. Beside Quran, in Old Testament of the Bible, it is mentioned,
“Do not ill-treat an alien or oppress him, for you were aliens in Egypt. Do not take advantage of a widow or an orphan… If you lend money to one of my people among you who is needy, do not be like a money lender, charge him no interest.” [Exodus 22:21-25]
“If one of your countrymen becomes poor and is unable to support himself among you, do not take interest of any kind from him but fear your God that your countryman may continue to live among you. You must not lend him money at interest or sell him food at a profit.” [Leviticus, 25:35-37]–
In New Testament of the Bible, it is mentioned,
“Give to the one who asks you, and do not turn away from the one who wants to borrow from you.” [Matthew 5:42]”And if you lend to those from whom you expect repayment, what credit is that to you? Even sinners lend to sinners, expecting to be repaid in full. But love your enemies, do good to them, and lend to them without expecting to get anything back. Then your reward will be great, and you will be children of the Most High, because he is kind to the ungrateful and wicked.” [Luke 6:34-35]
“Do not charge your brother interest, whether on money or food or anything else that may earn interest.” (Deuteronomy 23:19)
4. Riba is a cause of injustice and exploitation
Riba is considered a form of injustice and exploitation. How it is just to earn reward without bearing risk? It is a situation where lender only takes benefit of a borrowers poor economic condition. Some borrowers take loan just to procuring things necessary for his livelihood. Instead of helping and cooperating in his bad time, charging interest on it shows selfishness and greediness only.
5. Riba results in idleness and promotes unearned income
Taking interest brings idleness and promotes unearned income. It also kills the spirit of entrepreneurship because instead of undertaking business projects by using skills, knowledge, people use to lend to earn interest. Such earning which is without risk but regular reward creates a sedimentary life. It prevents people from working to earn money. This is also not good for sound economy which is based on business, commerce and industry.
6. Riba Corrupts Society
Indulging in interest based transaction corrupts society. Allah says in Holy Quran,
So give the relative his right, as well as the needy and the traveler. That is best for those who desire the countenance of Allah, and it is they who will be the successful. And whatever you give for interest to increase within the wealth of people will not increase with Allah. But what you give in zakah, desiring the countenance of Allah – those are the multipliers. Allah is the one who created you, then provided for you, then will cause you to die, and then will give you life. Are there any of your “partners” who does anything of that? Exalted is He and high above what they associate with Him. Corruption has appeared throughout the land and sea by [reason of] what the hands of people have earned so He may let them taste part of [the consequence of] what they have done that perhaps they will return [to righteousness].(Quran 30:38-41)
From the verses, it can be understood that corruption in society results from people’s own (wrong) behavior. Charging interest from borrowers is one of the wrong behavior which corrupts society.
7. Riba results in Inflation
Riba leads to inflation. Inflation means rise in prices of goods and services. Inflation is a devaluation of paper money which is caused by banks issuing loans and hence flooding the market with more money. More money in the market creates more demand which is higher than supply of goods and services. It results in hike in prices which is inflation. It is said that, an Islamic economy is seen not so vulnerable to price fluctuations in comparison with conventional economy. The reason is that, due prohibition of interest, lending as a mode of finance no longer remains popular. In Islamic banking system where the transactions are based on profit and loss sharing, the way of money creation, keeps the supply of money tied to the supply of goods and services.
8. Riba-based market fails
In modern finance, interest rate is equal to a price for a particular investment. In Islamic finance, interest rates are replaced with profit sharing. This would help in making some speculative practices and artificial interest rate manipulation practices obsolete. International transactions also affected by interest rates.
9. Riba results in negative economic growth
Interest has many adverse consequences for the economy. Interest causes an inefficient allocation of countries resources. It can contribute to the instability of the system. In an interest-based system, before granting loan to borrower, conventional banks checks credit worthiness of the borrower. Islamic banks encouraging finance to go to more productive projects. So, instead of financing low-return projects of borrowers with better credit-worthiness, they lend to high-return projects even if the credit-worthiness of the borrower is lower. So, Islamic banking system is more efficient in allocating resources. Also, conventional banks get returns on loans irrespective of the success of the project but in Islamic banks, the return to the bank is linked to the success of the project.
10. Riba widens the gap between rich and poor
The gap between rich and poor section of the society needs to be filled for a prosperous economy but, it can be seen in conventional financing system that the rich are becoming more richer and poor are becoming more poorer.
Corruption has appeared in the land and sea, for that men’s own hands have earned, that He may let them taste some part of that which they have done, that haply they may return. (Quran 30:41)