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Wrong argument against Interest

Reader comment on item: Islamic Economics: What Does It Mean?

Submitted by Prashant (United States), Jan 29, 2012 at 01:05

Dear Dr Pipes:

Islamic Finance considers charging interest wrong. You quote Timur Kurans view that all profit sharing techniques supported by Islamic economics contain thinly disguised charging of interest. Even if that is true it is not the right argument against the Islamic point of view on interest. The truth of the matter is that anyone who opposes giving and taking of interest has not thought on the issue deeply enough. Giving and taking interest on loaned money is both ethical and moral. In fact, not paying interest will be immoral.

As should be well understood, Interest is just the rent that a person charges when he gives his money to someone else to use. Just as it is immoral to accept charity from someone when you are yourself capable and able bodies, it should be immoral to accept money without paying interest.

In fact, interest is more ethical than profit sharing. If I enter into a profit sharing plan with a creditor, I force the creditor to bear some of my risk. If I choose to become an alcoholic, my creditor also suffers. On the other hand, if I am willing to pay him a fixed interest, I promise to bear more responsibility and free the creditor from bearing the risk of my incompetence or laziness. Everyone who participates in the free capital markets around the world knows that stocks and bonds respectively represent profit sharing and interest bearing situations and both are legitimate, ethical and moral.

Branding interest as immoral is just ignorance.


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