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The morals of money-lending*

World Guide
During the prophet Muhammad's lifetime, criticism of usury became established. This stance was reinforced by his teachings in the Qur'an, around 600 AD. The original term for usury was riba, which literally means 'excess or addition' and referred just to interest on loans

The practice of
usury -lending money and accumulating interest on the loan- can be traced back 4,000 years. But it has always been despised, condemned, restricted or banned by moral, ethical, legal or religious entities.

The oldest references to usury are found in religious manuscripts of India, dating back to 2000-1400 BC where the 'usurer' is associated with any interest lender. In the Hindu Sutra (700-100 BC) as well as in the Buddhist Jatakas (600-400 BC) there are many references to the payment of interest, along with expressions of disdain for the practice.

Vasishtha, a prominent lawmaker of the era, drafted a law that banned the high caste Brahmans and Kshatryas from being usurers or
money-lenders. In the second century AD, the term usury becomes relative, meaning that interest above the legal rate could not be charged; that would be a usurious loan. But usury in some form or other has continued to the present day, and although in principle it is condemned, the term 'usury' refers only to exorbitant interest, ie well above socially accepted rates. The practice operates in most parts of the world.

Usury in Western philosophy

Many of the early Western philosophers including Plato, Aristotle, Cato, Cicero, Seneca and Plutarch were critics of usury. In the legal reforms (Lex Genucia) of the Roman Republic (340 BC), usury and interest were banned. However, in the final period of the Republic, the practice was common. Under Julius Caesar, a limit of 12 per cent was imposed due to the great number of debtors, and under Justinian it was set at a mean between 4 per cent and 8 per cent.

Islam's view

During the prophet Muhammad's lifetime, criticism of usury became established. This stance was reinforced by his teachings in the Qur'an, around 600 AD. The original term for usury was riba, which literally means 'excess or addition' and referred just to interest on loans. For this reason, Muslim economists Choudhury and Malik maintain that, in the times of the Caliph Omar, the ban on interest was a principle established and integrated into the economic system of Islam. But that interpretation of usury was not universally applied nor universally accepted in the Muslim world. For instance, a school of Muslim thought that arose in the 18th century, led by Sir Sayyed, still maintains a distinction between usury -loans for consumption- and interest, which refers to loans for commercial investment. In modern times there has been a gradual development of financial institutions that do not charge interest, for example in Iran, Pakistan and Saudi Arabia, the Dar-al-Mal-al-Islami in Geneva and Muslim banks in the United States.

'The dust of interest'

Judaism's criticisms of usury are rooted in several passages of the Old Testament in which charging interest is scorned, discouraged and prohibited. The Hebrew word for interest is neshekh, which means 'bite' (though in Leviticus tarbit and marbit are also used), and it is believed to refer to the charging of often exorbitant interest (from the debtor's perspective).

In the Hebrew books of Exodus and Leviticus the ban is thought to be applied exclusively to loans to the
poor and the sick, while in Deuteronomy, it extends to all loans, excluding trade with foreigners. The word 'foreigner' is interpreted in general as 'enemy' and, armed with this text, Jews employed usury as a weapon, as other people's needs could be transformed into submission.

Beyond these biblical roots, there are several Talmudic extensions of the bans on interest, known as avak ribbit -literally 'the dust of interest', which is applied for example to certain types of sales, rent or work contracts. It is distinguished from the rubbit kezuzah, interest adjusted over a quantity or a rate agreed between the lender and borrower. The legal difference is that the latter, if the
debtor pays the lender, is recoverable from the lender, while the former, once paid, is not recoverable, though it is recognized that a contract sullied by the dust of interest may not be fulfilled.

In spite of the ban, this rule does not appear to have been observed in biblical times. In addition to the various references in the Old Testament to lenders who are rigidly exacting high interest rates, it can be seen in the Elephantine Papyrus
(dating to the reign of Tuthmosis III) that among the Jews of Egypt in the 5th century BC it was the norm for interest to be charged for loans. This suggests that the violation of the ban was not seen as a criminal offense with a penal sanction, but as a moral transgression.

This can also be partially explained
by the change in economic conditions, beginning in the Amoraim period in Babylonia (200-500 AD), when the prohibition against interest was agreed when usury became incompatible with the community's economic needs.

At the same time, a standard way of legalizing interest was established, known as hetter iska. This referred to the permission to create partnerships, which has become so common that today all transactions with interest are made openly according to Jewish law, simply adding to the corresponding note or contract the words al-pi hetter iskah.

Usury on the Cross

The prohibition of usury was adopted as a major campaign by the earliest Christian Church, following on from Jesus' expulsion of the money-lenders from the temple.
The decrees of the Hebrew Bible were revived and a new reference to usury in the New Testament was added. Based on the authority of those texts, the Catholic Church of the 4th century AD banned the clergy from charging interest, a rule that was later extended in the 5th century to the laity.
In the 8th century, under Charlemagne, usury was declared a criminal offense. The anti-usury movement gathered force in the late Middle Ages and reached its peak in 1311 when Pope Clement V totally banned the practice and declared null and void all secular law defending it.

In spite of subsequent papal and legislative bans, loopholes in the law and contradictions in the Church's arguments began to appear. Soon, on the rising tide of commerce, the pro-usury movement began to grow. The rise of Protestantism and its pro-capitalist slant strongly influenced change. However while both Luther and Calvin expressed reservations about the practice of usury, neither condemned it outright.

Calvin, for example, cited seven situations in which interest was 'sinful'. These were largely ignored however and his position interpreted as a general sanctioning of charging interest. As a result of these influences, around 1620, according to the theologian Ruston, 'usury passed from being an offense against public morality, which a Christian government was expected to suppress, to being a matter of private conscience, and a new generation of Christian moralists redefined usury as excessive interest'.

Nevertheless, the ancient criticisms continue to pervade the Church's modern thinking, as suggested by the viewpoint of the Church of Scotland
(1988) when it released a 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 imposed is just or excessive' said the report.

In the same vein, it is interesting to contrast the clear moral mandate expressed through Pope Leo XIII's Rerum Novarum
(634-644 AD) about 'ravenous usury' as 'a demon condemned by the Church but practized in a deceitful way by avaricious men,' with Pope John Paul II's encyclical Solicitude Rei Socialis (1987) which omits any explicit mention of usury, except for a vague reference to recognizing the Third World debt crisis.

This 'demon' governs current
global relations, condemning most of the world population to living under the sign of debt: i.e., each person born in Latin America owes already $1,600 in foreign debt; each individual being conceived in Sub-Saharan Africa carries the burden of a $336 debt, for something that its ancestors have long ago paid-off. In 1980 the Southern countries' debt amounted to $567 billion; since then, they have paid $3,450 billion in interests and write-offs, six times the original amount. In spite of this, that debt had quadrupled by the year 2000, reaching $2,070 billion.

*Published in The World Guide





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