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So what is wrong with Interest anyway?

Abstract:

This paper seeks to discuss the role interest has played in the modern financial system. Tracing historical debate pertaining to the legality of interest, the paper highlights how the shift in this debate paved the foundations for much of our modern day financial architecture. As a result, the paper asserts that money today is mainly created as interest bearing debt with a host of associated consequences. Amongst these are a perennial economy of scarcity, endemic debt pressure, constant inflation, an ever present risk of default, and the environmentally irreconcilable paradigm of perpetual growth. With regards to the last point the paper, in keeping with many contemporary ecological commentators asserts that perpetual growth and sustainability are mutually exclusive concepts. The former necessitates an incessant demand to privatize, commoditize, and monetize ever-increasing amounts of the earth’s resources; while the latter requires us to embody a more collaborative, conservative approach towards the resources of the world. By linking these and other seemingly disparate concepts such as the distortion of the dynamics of fair trade, destruction of local markets, displacement of rural populations, famine, global poverty and the eradication of local ecosystems - the paper proposes that any serious reformation of the financial system has to start with reforming what lies at the root of it. Namely, the concept of charging interest. It has been said that money is the root of all evil; this paper asserts that it is not money per say, but a particular construct upon it. A construct that alters the function of money towards a certain dynamic – a dynamic that is best reviewed afresh as we seek to chart a course for change with regards to impending challenges that face us all.

Abstract:

This paper looks at the foundational principles of what passes as mainstream economics today. It contends that economics in keeping with many other forms of knowledge has been influenced by the overall trajectory of post-enlightenment humanistic thought. As a result it contends modern economics has within it certain assumptions and an overall directional paradigm that may be intrinsically opposed to the ethos of Islam; thereby rendering an Islamic Finance bereft of reforming these principles as somewhat of an oxymoron.

"There is no such thing as philosophy-free science; there is only science whose philosophical baggage is taken on board without examination."  -- Daniel Dennett

“So where then are you going?”

[Qu’ran: 81:26]

Abstract:

 This paper seeks to discuss the role interest has played in the modern financial system highlighting the money creation process in particular and the key questions that arise within Islamic Finance as a result. The paper contends that the legalization of interest paved the foundations for much of our modern day financial architecture with the modus operandi of commercial banking being its central element. As a result, the paper asserts that money today is mainly created as interest bearing debt with a host of associated consequences. Amongst these are an artificial economy of scarcity, endemic debt pressure, constant inflation, wealth polarization, an ever present risk of default, and the environmentally irreconcilable paradigm of perpetual growth. Consequentially the interest based modern financial system has seemingly set the world on a path necessitating an incessant demand to privatize, commoditize, and monetize ever-increasing amounts of the earth’s resources causing us to live in an age where finance[1], energy[2], health care[3], and the ecosystem[4]are reportedly headed towards imminent collapse. The question for Islamic Finance practitioners is whether their discipline as currently practiced is actually providing a solution towards tackling these crises – or whether it is instead normalizing the problems within an 'Islamic' framework?

By Imam Wahba Az-Zuḥaylī

Translated by Mahdi Lock

 Linguistically, ḍarūra, as Al-Jurjānī has said in his Taʿrīfāt, is derived from the word ḍarar[1], and it is something that befalls one and cannot be repelled.

Terminologically, it has many approximate meanings, including what has been stated by Al-Jaṣāṣ, Abū Bakr Ar-Rāzī: ‘It is fear of harm or the destruction of oneself or some of one’s limbs as a result of not eating.’[2]

In the Name of Allah, The All Merciful, The Most Merciful

In the Arabic language, the word maqāṣid comes from the word maqṣid or maqṣūd. The maqṣid is the place that it is intended while the maqṣūd is the objective that is intended. In the terminology of Uṣūl Al-Fiqh, the maqāṣid are the objectives and wisdoms that the Lawgiver has laid down for every ruling of the Revealed Law, realising advantages for His slaves in the life of this world and the Hereafter by bringing about that which benefits them and warding off that which harms them.