Quora Answer: Does Islam See Moneylending as Wrong or Only Asking for Interest?

بِسۡمِ ٱللهِ ٱلرَّحۡمَـٰنِ ٱلرَّحِيمِ

The following is my answer to a Quora question: “Does Islam see moneylending as wrong or only taking interest on loans?  What is the rationale behind it? 

Islam does not proscribe lending.  If lending were made haram, it would burden the people because they would have no options when there is a liquidity problem.  If the Qur’an and ahadits speak of the virtues of forgiving debts, it implies that lending is perfectly acceptable. 

As for lending with interest, I do not hold the view that all interest is necessarily haram.  Interest is not riba’, usury.  There is interest on lending because there is an opportunity cost that has to be factored into the loan.  Also, for lending institutions, there is the cost of the infrastructure to administer the loan, and that is factored into the loan.  Interest becomes riba’ when there is the element of zhulm, oppression.  In this case, it means interest that is obscenely excessive to the extent that the debtor can never hope to clear the interest, let alone the principal loaned.  This is predatory lending, and it is haram.


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