JEDDAH, 11 October 2004 — For full two thousands years, the nature of interest (banks’ loans & deposits) had been discussed and theorized on, before anyone investigated the ultimate score of winners and losers in the business of borrowing and lending credits (monies).
The unique character of loan interest is that it has source and spring, not in productive labor, but, as it were in some generous mother-wealth.
Aristotle had always argued against “interest/usury” in his writings about the barrenness of money, “So then, as money breeds no money, it is contrary to nature to take anything beyond the sum lent, and it may with more propriety be said that it is taken from industry than from money, for money certainly does not breed”, as Aristotle has related. “.....the reason is that money brings forth no fruit from itself, nor gives birth to anything. On this account it is inadmissible and unfair to take anything over and above the lent sum for the use of the same, since this is not so much taken from money, which brings forth no fruit, as from the industry of another.”
Given that our society is in its early stages of social and economic development (when compared with the developed countries), bank’s credit has little place in the betterment of our society. Today, in Saudi Arabia, almost all banks’ loans are for consumption and are, as a rule, loans to people in distress or in need. Having mortgaged their salaries for the next 1, 3, or 7 years, consumers are fulfilling their thirst to spend today at the expense of their future. Gone are the days, when it used to be a “social taboo” to borrow money: “Men makes capital out of their own efforts, through hard and productive work”.
History of money has defined “Usury” as the making of certain (fixed) gain out of money itself, and not from the natural use of it. For money was intended to be used in exchange, but not to increase at interest. And this term, “Usury” which means the birth of money from money, is applied to the breeding of money, because offspring resembles the parent. In all cultures, this was the most “unnatural mode of making money”. In today’s financial environment, bankers have structured various breeding methods (Islamic banking), more efficient, but one that achieve the same goal as the money merchants or the conventional bankers: The earning of “interest”. Different means for one common end. In the eyes of consumers (borrowers), some of those breeding methods are obvious and easy to understand. On the other hand, others are more complicated for the average saver/borrower to understand (murabaha, musharaka, mudaraba, taysseer, amanah, etc..) In the end, consumers end up paying interests (also called commissions, fees) and the lender goes laughing all the way back to his bank.
There are certain things the “Use” of which consists in the consumption of certain articles (food, clothes) themselves. For that. The “Use” of these articles (by consumers) must not be separated from the “goods” themselves, and if the “Use” is transferred to any goods or services, it must be transferred with it. Now, it would evidently be unjust if a man sells one loaf of bread, and yet deprive the buyer from the use of this loaf. In doing, he would either sell the same loaf of bread twice, or he would sell something which did not exist. Exactly in the same way it is unjust for a man to lend things of this sort at interest. Here also, he asks two prices for one article, he asks for replacement of a similar article and he asks a price for the use of the article, which we call “interest” or “Usury”. Now as the use of money lies in its consumption or in its spending, it is inadmissible in itself, in the same grounds to ask a price for the use of money. Interest (“Usury”) becomes a price extorted for a thing that does not really exist, the “separate” and independent “use” of various consumers’ articles.
The goods lent pass over into the property of the debtor. Therefore the use of the goods for which the lender is paid interest is the use of another person’s goods, and from that the lender cannot draw a profit without injustice. For the banker who makes a profit out of a thing belonging to another person enriches himself at the hurt of the consumer.
Therefore, he who gets interest (as a price) from that money (credit), whether it be pieces of money or anything else, gets it from a thing which does not belong to him and it is accordingly all the same as if he were to steal it.
In modern finance theory, money has “time” value (today’s one dollar is worth more than one dollar in one year time), which has become the weapon of bankers to justify their earnings of interest. But “time” is a common good that belongs to no one in particular, but given equally to all human beings by the creator the Almighty. When banks charge a price for time (duration of a loan), as though it were a good received from them exclusively, but time belongs just as much to borrowers as well.
The reality that a consumer must be aware of, that being the borrower of certain amount of monies from a bank, he has mortgaged his future by indirectly working for that bank in paying the price (interest) of his loan, in other language, the consumer has turned himself into a “Slave”.
(Abdelmenem Jamil Addas ([email protected]) is a professor of financial markets, at the College of Business Administration. He is based in Jeddah.)
