6 - Historical view on usury ("riba")

Is Usury (“riba”) and Bank Interest synonymous? Usury is banned among the biggest religions of the world? Can we live in a world without interest? Is there a distinction to be drawn between the term “usury” and “interest” or are they just one and the same thing? What alternatives to interest and usury are opened to the Muslims ….? Let’s look at some historical views on usury.

Usury during Ancient Greek

• Usury existed at all levels of Babylonian Society. Interest rates then varied from 200-500% per annum. If debtor was unable to repay his loan within the time prescribed, the lender has the right to become the master or partial owner of his debtor and family. Debtor will be obliged to work (under bondage) for the lender until debt fully paid off. Usury or “interest” was roundly condemned by ancient Greek philosophers such as Plato and Aristotle. According to them, usury splits society into two distinct classes of wealthy lenders and the poor borrowers.
• During 451-450 BC, Law of the Twelve Tables was established, fixing the rate of interest at about 12 per cent. The 12 per cent rate remained in force until the code of Justinian (AD 533) according to which, the rate of interest had to be agreed upon in consonance with the status of the borrower. According to Roman Law interest was considered as compensation to the lender in the event that the borrower, failed to repay his debt by the agreed due date.

Usury in Hinduism and Buddhism

• Oldest Indian manuscripts against usury found in the Vedic texts of Ancient India (2000-1400 BC) in which the “usurer” (kusidin) is mentioned several times and interpreted as any lender at interest. More frequent and detailed references to usury found in the later Sutra texts (700-100 BC), as well as the Buddhist Jatakas (600-400 BC).
• Sentiments of contempt for usury found:- Vasishtha, a well known Hindu law-maker of that time, made a special law which forbade the higher castes of Brahmanas (priests) and Kshatriyas (warriors) from being usurers or lenders at interest. Also, in the Jatakas, usury is referred to in a demeaning manner: “hypocritical ascetics are accused of practising it”. By the second century AD, however, usury had become a more relative term, as is implied in the Laws of Manu of that time. “Stipulated interest beyond the legal rate being against (the law), cannot be recovered: they call that a usurious way (of lending)” (Jain, 1929: 3-10). This dilution of the concept of usury seems to have continued through the remaining course of Indian history so that today, while it is still condemned in principle, usury refers only to interest charged above the prevailing socially accepted range and is no longer prohibited or controlled in any significant way.
  

Usury in Judaism

• The Law of Moses “Thou shall not give him the money upon Usury nor lend for increase (Lev.25:37). According to the Old Testament, the distress experienced by an individual that forced him to borrow money was a term of Judgment on his past sins. In addition; if a man borrowed money and subsequently failed to repay the debt, he would be considered a wicked man. However, the Old Testament usually sympathized with the poor and the rich were expected to hold their more unfortunate neighbours with benevolent loans (al-Qhad Hassan).
• Criticism of usury in Judaism has its roots in several Biblical passages in which the taking of interest is either forbidden, discouraged or scorned. The Hebrew word for interest is neshekh, literally meaning "a bite" and is believed to refer to the exaction of interest from the point of view of the debtor. In the associated Exodus and Leviticus texts, the word almost certainly applies only to lending to the poor and destitute, while in Deuteronomy, the prohibition is extended to include all money lending, excluding only business dealings with foreigners. In the Leviticus text, the words tarbit or marbit are also used to refer to the recovery of interest by the creditor.
• The Old Testament taught that the charging of interest between Israelites was unlawful. In contrast however, interest was permitted if the transaction involved an Israelite and a foreigner (Ex-JEDT-23). The basic assumption for this distinction between the Jew and the non-Jew was that the Jewish borrower was poor and it was therefore an obligation on his Jewish brother to provide him with an interest free (benevolent) loan. In addition, it also forbids the Jew from being involved in any usurious transaction between Jews in the capacity of witness, agent, mediator or surety. As result of the interpretation, the Jews persisted in charging high interest in their dealings with non-Jews e.g. story of the Merchant of Venice.
  

Usury in New Testament

• Luke 35 ‘But love ye enemies, and do good, and lend hoping for nothing again; and your reward shall be great and ye shall be the children of the Highest for he is kind unto the unthankful and to the evil.” Exodus 22:25 “If thou lend money to any of my people that is poor by thee, thou shalt not be to him as a usurer, neither shalt thou lay upon him usury” Psalm 15 “ He that putteth not out his money to usury, nor taketh reward against the innocent. He that doeth these things shall never be moved”.
• In 1179, a canon of the Third Lateran Council ordained that “Manifest usurers shall not be admitted communion, nor if they die in their sin, receive Christian burial.”From this it is apparent that usury per se and usury under any circumstances were considered as a violation of justice. With passing of time, however, Popes and Council had to deal with new practices (adopted practices introduced by Jews e.g. banking system).
• The position on Usury has remained pervasive through to present-day thinking in the Church, as the indicative views of the Church of Scotland (1988) suggest when it declares in its study report on the ethics of investment and banking: “We accept that the practice of charging interest for business and personal loans is not, in itself, incompatible with Christian ethics. What is more difficult to determine is whether the interest rate charged is fair or excessive.”

Pre-Islamic Arabia

It was customary for one to borrow from another at usurious (high) rates of interest. If the lender did not receive his principal and interest by the agreed due date, he would increase the amount of the debt and the rate of interest payable on it.

Usury in Islam

• When Islam was revealed, among its teachings was the prohibition of usury.
• It was reported that the Prophet Mohammad (PBUH) cursed i) those who took and (ii) paid usury and (iii) those who were witnesses and (iv) writers of usurious contracts. It was also reported that the Prophet said that all of the four types of people mentioned were equal in their sin due to their involvement in usury. Issue on usury, had exhaustively discussed by Muslim Jurists. They had arrived at the view that “Usury occurs when there is surplus on a debt you pay”. In other words, if a borrower repays even one Ringgit more than the principal, this one Ringgit is considered as usury. It should be pointed out that, in Islam not every “surplus” in transaction is prohibited. Surplus which arises from buying and selling is considered legitimate and lawful.
• Important verses of the Quran (muslim holy book) THAT RESULTED in the development of Islamic Banking is noted in article 2- Prohibition of Usury ("Riba") in Islam.

For more details about usury in Christianity and Judaism, please view : http://www.lariba.com/default.htm

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