Between God and money: The morality of interest

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Between God and money: The morality of interest

Three of the world’s major monotheistic religions all hold similar positions on interest and how it is situated within their understandings of morality. How do each of these religions cope with the issue of making interest moral?

This article was written in preparation for our round table on interest and morality.

Three of the world’s major religions – the monotheist traditions of Judaism, Christianity, and Islam – all hold similar positions on interest and how it is situated within their understandings of morality. All three religions traditionally reject the idea of interest, defining it in eminently moral terms: the exploitation of people’s need for money for profit or personal benefit. A key priority for these religions has been to protect their own faith communities from this exploitation, even if not the communities of other faiths. With the advent of modern economic systems, however, these religions have struggled to maintain this morally-defined position, even for their own faith communities. While medieval monotheists did allow for an attenuated existence of interest, particularly in Judaism and Christianity, modern understandings of interest have diversified significantly. New positions accepting interest have emerged, either as a result of practical concessions to its undeniable prevalence or as genuine efforts to reform economic thought in their respective traditions.

Interest and morality in Judaism

The Jewish view of interest
The Hebrew Bible (the old testament of the Christian Bibles) holds a negative position towards interest. In the book of Exodus it is stated: “If you lend money to any of my people who are in need, do not charge interest as a money lender would.[1] Similarly, in the book of Leviticus it is written: “Do not take interest or any profit from them, but fear your God, so that they may continue to live among you. You must not lend them money at interest or sell them food at a profit.”[2]

In the Book of Ezekiel, the charging of interest is described as one of the most terrible sins and as an outrage. It is stated, he who “takes advance or accrued interest; shall he then live? He shall not. He has done all these abominable things; he shall surely die; his blood shall be upon himself.”[3] The Talmud – the Rabbinic Jewish text that is the primary source of Jewish religious law – based on the Ezekiel text and the Hebrew Bible, prohibits lending money with interest. According to the Jewish law, loans should be given as a form of charity, not for personal profit.

Nevertheless, it is important to underline that the halakha (the Jewish law) prohibition to lend money with interest applies only to other Jews and it allows charging interest to non-Jews. The English journalist and popular historian Paul Johnson suggests that this is because the Hebrew Bible approach towards lending is that of philanthropy and charity inside the Jewish community that strived to survive collectively. Therefore, interest could be charged to non-Jews, as Jews were not obliged to be charitable towards other communities.[4]

Yet, several Rabbis throughout the centuries – and among them the Jewish commentator Rabbi Isaac Abarbanel – argued that the prohibition of charging interest should apply to non-Jews such as Christians or Muslims as well. This is because these Abrahamic religions share with Judaism the faith in monotheism and similar ethical values.[5] Moreover, the medieval Rabbi David Kimchi (also known as the Radak) argues that a non-Jew who is kind and respects Jews should be treated with the same respect when given a loan.[6]

Interest in modern Judaism today
Today, especially as a result of the institution of the State of Israel in which most of the population is Jewish, Jews struggle to find creative solutions in order to allow charging interest. In fact, receiving mortgages or other kinds of loans from banks is essential for the survival and wealth of the state and its citizens. As a consequence, today, banks in Israel and other parts of the world are allowed – according to the Jewish law – to lend money even to Jews. The Jewish law in fact came up with a document formula called in Hebrew ‘heter iska’, which converts loans into business-type investments, thereby avoiding the interest-loan prohibition. Israeli banks allow their clients to choose to sign this document for all types of loans, thereby eluding the Jewish ban on interest. Besides, in the US, Israel, and around the world, there are hundreds of ‘free-loan-societies’ among religious Jewish communities that provide interest-free loans (usually of smaller size than mortgages, though).[7] [8] An example of these organisations is the International Association of Hebrew Free Loans (IAHFL), an umbrella organisation for Hebrew Free Loan societies and organisations that offer interest-free loans to Jews.[9]

Interest and morality in Christianity

Christian scriptures on charging interest
The question of charging interest first arises in the Old Testament (known as the Hebrew Bible in Judaism). As summarised above, there is a clear prohibition in Exodus 22.25 (Hebrew v.25) against charging interest to a poor member of the community. Deuteronomy 23.20-21 (Heb. vv.19-20) specifically narrows the prohibition as not extending to foreigners but does expand the forms of interest from “interest of money” to include things non-pecuniary in nature: “interest of food and interest in the form of anything you might charge as interest.”

In the New Testament, the subject of interest appears rarely. Whether that is because the Old Testament is straightforward and needed little reiterating, or because interest as a financial function was beginning to change, is open for debate. The main passage where lending and interest coincide is Luke 6.34-35. “And if you lend from what you hope to receive, what kind of grace is it to you? Even sinners lend to sinners to get back the equivalent sum. Rather love your enemies and do good and lend expecting to get nothing back. Then your reward will be abundant, and you will be sons of the Most High, because He is kind to the ungenerous and wicked.”[10] This short section possibly implies a society in which sinners offer loans without interest, but with an expectation of repayment. In this way, at least within the conceptual schema of the New Testament, there seems to be the assumption of an interest-free society but in which Christ calls his followers to go beyond merely loans to generosity. This can be seen as intensification of the Jewish halakha understanding of loans as a form of charity.

Interest in Church History
The Christian position regarding interest for the majority of its history remained fairly consistent. The Church Fathers (early Christian leaders during the first four to five centuries of Christianity) categorically opposed interest, decrying it as a severe sin. First, they held that it violated the Old Testament laws and passages outlined above. Second, they understood it to transgress the Christian ethic of love.[11] [12] While interest was commonly practiced in the ancient world, the Fathers continually and courageously denounce it as oppressive to the poor and (apologetically alluding to Aristotle) contrary to the created order of animate beings’ reproduction.[13]

The Middle Ages largely carry forward this understanding of interest as the sin of usury, supplementing it with a focus on interest as a form of robbery and thus even more strongly prohibited. Thus, usurers were subject to being not just socially ostracised but excommunicated from the sacraments.[14] [15] [16] [17] Nevertheless, there were loopholes that were occasionally exploited within European medieval society. Namely, while Christians could not charge other Christians interest, it was not prohibited that Jews charge interest, even if the practice was not celebrated.[18] [19] [20] However, certain non-Jewish ethnic groups (e.g. the Lombards and Visigoths) were also enfolded into the category of ‘Jew’ and allowed to charge interest.[21] Other workarounds included: renaming the interest to ‘discretionary payments’, setting a repayment date that would be intentionally missed so a fee could be assessed, or borrowers making ‘gifts’ to the lender.[22]

Interest in modern Christianity        
By the beginning of the Reformation and on into the modern era, Christian attitudes towards interest turned. Reformer John Calvin interpreted that the prohibitions of the Old Testament were embedded within a particular economic system, but that modern economies operated differently. In them, a loan with interest could benefit both the borrower and lender, rendering the prohibition somewhat non-applicable.[23] [24] Yet, the reformers strongly limited the interest rates allowed.[25] [26] Eventually, Catholicism followed suit.[27]

Thus, modern Christian attitudes towards interest consider that the nature of trade and commerce has developed in such a way as to make interest, not necessarily bad. Much of this is embedded in a distinction between personal and business loans. Where the former seem to exploit the poor, the latter can produce opportunities where people can escape poverty or at least make a living for themselves .[28] [29] However, some Christians are asking whether the economic systems of the West are becoming overly reliant on interest as a mechanism and if the prevalence and expanding commercial operations of interest even have become usurious once again and led to the oppression of the poor.[30] [31]

Interest and morality in Islam

The Islamic view of interest and its rationale
Under the category of ‘riba’, the Quran defines ‘interest’ as money earned out of money, most normally in the form of excess money taken on an existing amount of money. Islamic law, most conventionally in the form of per-modern law ‘fiqh’, is consistent with the Quran’s understanding of ‘riba’. The most conventional form of ‘interest’ that Islam deals with is when a person lends money to someone and then demands profit on it. While this at first glance may not appear to be significantly different from rent, Muslim scholars argue that there is a stark difference between the two: “rented out items can be used while keeping them intact.”[32] Money, it is argued in Islam, cannot be used in this way; “it is in fact used up and after spending it, it is needed to be produced again.”[33] Under the Quranic principle of akl al-amwāl al-bātil (devouring wealth through unfair means), if an amount over the original amount is demanded, it constitutes oppression: a contravention of our moral obligations towards each other. The Quran accordingly explicitly forbids interest,while justifying its law-giving on the prohibition of interest by claiming that the difference between interest and rent is subtle, and that human intellect can fail to recognise this difference.[34]

The contemporary challenges of and solutions to interest
While consensus in Islam on the moral status of interest has remained largely consistent across pre-modern and modern times, both Islamic thought and Muslim practice have faced significant difficulty in maintaining the consistent application of the Quranic prohibition of interest. Specifically, the appearance of interest-based banks in Muslim communities has led to challenges in the clear application of Islam’s law on interest. Leading scholars in India, Egypt, and Syria have contended that modern banking does not charge interest at all, since a bank only receives a portion from the profit of a commercial venture it had financed on the basis of a loan. Other scholars have defended participation in modern banking with the claim that with interest so prevalent, it is unavoidable and those who pay it are not doing something sinful. “The issue of interest is mentioned in more than one instance in the Quran. Not at one place has the Quran condemned those who pay interest. In fact, it calls them oppressed and asks the lender to give them time if they are facing financial constraints.”[35] Then there are other scholars who fully deny any legitimacy or participation in modern banking, basing their argument not on the Quran but on a prophetic narrative which curses “the person who consumes interest and makes others consume it.”[36] These debates, focused on the permissibility or otherwise of interest-based banking, intensified from the 1940s in the context of the emergence of the Islamic neo-revivalist movements across the globe, such as the Jama’at e Islami in South Asia and Muslim Brotherhood in Egypt. The debate, however, remains unresolved. An alternative that has emerged to modern banking is interest-free or ‘Islamic’ banking, which relies upon the utilisation of rent rather than interest. A key paradigm of Islamic banking is profit-and-loss sharing, “where borrowers share profits and losses with the banks, which in turn share profits and losses with depositors.”[37] While this approach seems morally more palatable, in practice however, it “is not very different from conventional banking.”[38] Even the activities of Islamic banks eventually rely on a larger modern banking system that is based on interest. Muslims, therefore, remain unable to develop full Islamic law that deals with interest in a way that is consistent with not only the Quran but that is able to navigate the complexities of modern banking.

Is interest here to stay in religion?

Modern attitudes of the three monotheist traditions of Judaism, Christianity, and Islam towards interest have undergone significant transitions, particularly since the emergence of modern economic systems. While their foundational sources have largely denied the use of interest on moral terms, all three religions have eventually developed new positions not immediately identifiable in these sources. Judaism’s conversion of loans into business investments, Christianity’s acceptance of interest as means to help the poor, and Islam’s distinction between charging and paying interest, all represent the transition towards a wider acceptance of interest. But this acceptance has been an uneasy one. Jewish communities have developed ‘free-loan societies’, while Muslim countries have introduced ‘interest-free’ banking. Christians are highlighting the over-reliance on interest as a basic method of economic life. Notwithstanding this uneasiness, no clear resolutions between interest and morality have emerged. The reason for this perhaps lies in the fact that the challenge interest presents is not simply a moral one: it is eminently practical in nature. Criticisms of contemporary religious solutions to interest reveal that it has become a force of nature in modern life, one that cannot be dealt with and excluded from life simply on the basis of principles. All three religions face the challenge of not only needing to overcome any evolving moral justifications of interest but also the prevalence of interest in the modern world.

What do religions do when they can no longer offer moral guidance on issues that they have no influence over? One can arguably take lead from Islam, which says that when we no longer have moral control over something, we should take two moral actions. Firstly, that such a state is one of oppression, and we must seek to change the world they live within to remove or reduce oppression; so to stop interest, we must pursue and advocate for reform (islah).[39] But until this first action of reform does not take fruition, we must continue to individually make moral choices at every twist and turn of our economic life to avoid interest as much as possible.[40] This is the second action. Together, these two actions place us in a position where the moral work that lies ahead of us is not only difficult but is essentially relying on our individual moral agency on an issue that was once considered a collective one.

Ghila Amati, R. Anthony Buck, and Muhammad Faisal Khalil

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[1] Exodus 22-24 NLT – Protection of Property

[2] Leviticus 25:36-37 – Do not take interest or any profit from

[3] Ezekiel 18:13

[4] Johnson, Paul (1987). A history of the Jews. New York: Harper & Row. pp. 172-173. ISBN 0-06-091533-1. OCLC 15282826.

[5]  Interest-Free Loans in Judaism

[6] Interest-Free Loans in Judaism

[7] Hebrew Free Loan Society (HFLS) | Interest-free Loans for Those In Need

[8] Tag: Hebrew Free Loan Association

[9] International Association of Jewish Free Loans: IAJFL

[10] Translation of the author, based on the NA28 critical text of the New Testament.

[11] Hennie Stander, “Economics in the Church Fathers”, The Oxford Handbook of Christianity and Economics, ed. Paul Oslington (Oxford: Oxford University Press, 2014), pp.37-18 (10.1093/oxfordhb/9780199729715.013.002).

[12] Robert P. Maloney “Teaching of the Fathers on Usury: An Historical Study on the Development of Christian Thinking.” Vigiliae Christianae 27, no. 4 (December 1973): 241–65, esp. 242.

[13] Susan R. Holman, The Hungry are Dying: Beggars and Bishops in Roman Cappadocia (Oxford: Oxford University Press, 2001), esp. ch.3 “Penury and Divine Gift: The Poor as Fiscal Body”, pp.99-134 (DOI:10.1093/0195139127.003.0004).

[14] Charles R. Geisst, Beggar Thy Neighbor (Philadelphia: University of Pennsylvania Press, 2013), pp.25-57.

[15] Ian Harper and Lachlan Smirl, “Usury”, The Oxford Handbook of Christianity and Economics, ed. Paul Oslington (Oxford: Oxford University Press, 2014), pp. 565-79, esp. p.566-67 (DOI: 10.1093/oxfordhb/9780199729715.013.030).

[16] Odd Langholm, “Voluntary Exchange and Coercion in Scholastic Economics”, The Oxford Handbook of Christianity and Economics, ed. Paul Oslington (Oxford: Oxford University Press, 2014), pp. 44-54 (DOI: 10.1093/oxfordhb/9780199729715.013.003).

[17] Aaron Kirschenbaum, “Jewish and Christian Theories of Usury in the Middle Ages”, The Jewish Quarterly Review, New Series 75, no. 3 (1985): 270-89.

[18] Jerry Z. Muller, Capitalism and the Jews, (Princeton: Princeton University Press, 2010), pp.16-18 (Ebook).

[19] Geisst, Beggar Thy Neighbor, 27-28.

[20] Kirschenbaum, “Jewish and Christian Theories of Usury”, 288-89.

[21] Geisst, Beggar Thy Neighbor, 29-31.

[22] Geisst, Beggar Thy Neighbor, 32-33.

[23] Harper and Smirl, “Usury”, 566-67.

[24] Kirschenbaum, “Jewish and Christian Theories of Usury”, 287-89.

[25] Muller, Capitalism and the Jews, 18.

[26] Geisst, Beggar Thy Neighbor, 97-136.

[27] Muller, Capitalism and the Jews, 18.

[28] Kirschenbaum, “Jewish and Christian Theories of Usury”, 287-89.

[29] Harper and Smirl, “Usury”, 576.

[30] Paul S. Williams, “Christianity and the Global Economic Order”, The Oxford Handbook of Christianity and Economics, ed. Paul Oslington (Oxford: Oxford University Press, 2014), pp. 401-16 (DOI: 10.1093/oxfordhb/9780199729715.013.021).

[31] Harper and Smirl, “Usury”, 576.

[32] Ghamidi, Javed Ahmad (2006) ‘On the Question of Interest.’ Monthly Renaissance (September 2006) 

[33] Ghamidi, Javed Ahmad (2006) ‘On the Question of Interest.’ Monthly Renaissance (September 2006) 

[34] Relevant references: Qur’an (3:130, 4:161, 30:39, 2:275-2:280).

[35] Ghamidi, Javed Ahmad (2006) ‘On the Question of Interest.’ Monthly Renaissance (September 2006)

[36] Sahih Muslim 1598

[37] Islamic banking: Interest-free or interest-based?

[38] Islamic banking: Interest-free or interest-based?

[39] Ghamidi, Javed Ahmad (2006) ‘On the Question of Interest.’ Monthly Renaissance (September 2006)

[40] Eaton, Gai (2005) Islam and the Destiny of Man. Lahore: Suhail Academy. p.115