Religious Pluralism, yet a Homogenous Stance on Interest Rate: The Case of Judaism, Christianity, and Islam
Despite the conventional consensus that interest rates are efficient mechanism of allocating loanable funds and the most influential monetary policy instrument in modern economies, the three major monotheistic religions, Judaism, Christianity, and Islam, prohibit the use of interest and consider charging interest as an act of exploitation and extortion. Several passages and verses in the Torah, the Bible, and the Quran make their position on interest clear and definitive, from the Bible's dictum, "Do not charge your brother interest" to the Quran's exhortation "give up what remains of your demand for usury." This paper reviews those passages and verses, provides different scholars' perspectives on these verses, and relates them to the current financial system. The paper also presents several recent events that support the religious position by showing the negative impact of interest on countries, societies, and individuals. These events have, in fact, inspired many economists and financial institutions to seek alternatives to the current system. (original abstract)
- The Bible, King James version.
- The Bible, Standard English version.
- Archer, W. & Smith, B. (2013). Residential mortgage defaults: the roles of house price volatility, euphoria, and the borrower's put option, The Journal of Real Estate Finance and Economics, 46 (2), 355- 378.
- Birnie, A. (1958). The History and Ethics of Interest. London, UK: William Hodge & Co.
- Bleher, S. (2009). The Fact about Usury: Why Islam is against lending money at interest (Unpublished article). Retrieved from http://www.mustaqim.co.uk/usury.
- Calvin, J. (1991). Calvin's Ecclesiastical Advice (M. Beaty and B. Farley, Trans.). Louisville, KY: Westminster John Knox Press.
- Guariglia, A, & Poncet, S. (2008). Could financial distortions be no impediment to economic growth after all? Evidence from china. Journal of Comparative Economics, 36 (4), 633-657.
- Hertz, N. (2009). The Debt Threat: The Story of the Third World Debt, New York, NY: HarperCollins Inc.
- Konow, J. (2012). Adam Smith and the Modern Science of Ethics. Economics and Philosophy, 28 (3), 333-362.
- LaCour-Little, M., Calhoun, C. A., & Yu, W. (2011). What role did Piggyback lending play in housing bubble and mortgage collapse? Journal of Housing Economics, 20 (2), 81-100.
- Perkins, J. (2004). Confessions of an Economic Hit Man. San Francisco, CA: Berrett-Koehler Inc.
- Sanders, A. (2008). The subprime crisis and its role in the financial crisis. Journal of Housing Economics, 17 (4), 254-261.
- Sauer, J. (2003). Christian Faith, Economy, and Economics: What Do Christian Ethics Contribute to Understanding Economics. Faith and Economics, 42, 17-25.
- Shahjahan, M. (2000). Debt and the Quest for Rich America: The Economic Tale of Small and Mid- Sized US Cities. Beltsville, MD: Writers' Inc. International.
- Stiglitz, J., & Weiss, A. (1981). Credit Rationing in Markets with Imperfect Information, The American Economic Review, 71 (3), 393-410.
- Usmani, M. (2005). Why Islam has Prohibited Interest, First Ethical, Bolton, UK: Chorley House.
- Visser, W., & Mcintosh, L. (1998). A Short Review of the Historical Critique of Usury. Accounting, Business, and Financial History, 8 (2), 175-189.
- Zarabozo, J. (2007). What is Islam? Riyadh: Ministy of Islamic Affairs, Saudi Arabia.