Both Christians and Muslims theoretically adhere to the principle of avoiding "usury" or "riba." Historically, since the enactment of usury laws, usury has typically been defined as the receipt of "excessive" interest. However, it was originally understood to encompass "any" interest received for a loan. In Islam, "riba" is defined as the increase of a debt or loan until its repayment, and it is considered forbidden or "haram."
What do the Bible and the Quran have to say about Usury and Riba?
Islam The Quran has this to say - Al-Baqarah 2:275 “Those who consume interest will stand ˹on Judgment Day˺ like those driven to madness by Satan’s touch. That is because they say, “Trade is no different than interest.” But Allah has permitted trading and forbidden interest. Whoever refrains—after having received warning from their Lord—may keep their previous gains, and their case is left to Allah. As for those who persist, it is they who will be the residents of the Fire. They will be there forever.”
Christianity While the old testament forbids the charging of interest to fellow Jews, it does allow for interest to be charged to “foreigners” or gentiles. Deuteronomy 23:19: “Unto a stranger thou mayest lend upon usury; but unto thy brother thou shalt not lend upon usury”
The New Testament however, makes no such exception. In Summa Theologiae, the medieval Italian theologian St Thomas Aquinas (1225-1274) states:
“To take usury for money lent is unjust in itself, because this is to sell what does not exist, and this evidently leads to inequality which is contrary to justice”.
The Talent parable in the New Testament Matthew 25:14-30 is often quoted as implying that ‘usury’ is sanctioned by God. However, according to Aquinas, this parable should be interpreted as God gifting spiritual goods, referred to as coins or talents, on the expectation that the receiver shall increase the value (the spiritual wealth) of those gifts through effort. This can therefore be defined as ‘value created’ from an initial gift, as opposed to wealth being created from the act of ‘doing nothing’ or passively earning interest on money.
Moreover, in Matthew 21:12 we see clearly the anger Jesus displays towards the ‘money-changers’ in the temple: “And Jesus entered the temple and drove out all who sold and bought in the temple, and he overturned the tables of the money-changers and the seats of those who sold pigeons.”
So how many people on earth identify as Christians or Muslims?
According to https://findeasy.in:
“As of 2023, Christianity was by far the world’s largest religion, with an estimated 2.38 billion adherents, nearly a third (31.1%) of all 7.66 billion people on Earth. Islam was second, with 1.9 billion adherents, or 24.9% of the global population.”
This means that more than half of the world’s population identifies as either Christian or Muslim.
How many Muslims and Christians have access to the mainstream financial (fiat) system?
According to Unbanked Map 1.7 billion people globally are unbanked. They define an ‘unbanked’ person as: “a person without access to digital financial tools such as retirement savings and investment accounts.“).
The Middle East and Africa where a high density of the population identifies as Muslim have the highest percentage of residents who are unbanked, estimated at 50%.
However, the vast majority of both Christians and Muslims have access, and use, the traditional financial system; a debt-based system where debt is issued by government, interest is paid to the holders of the debt and where service providers make money by charging interest on loans. The system itself is built on a concept of usury and riba, making its use, in the strictest sense, incompatible with Muslim and Christian beliefs.
The Fiat System
"Fiat" is a Latin term that roughly translates to "let it be done." It denotes something established by "decree." Today, the entire world operates under a fiat monetary system, in which the value of money is "guaranteed" by central banks. This guarantee is ultimately enforced through coercion by the government under which the central bank operates. This "money" is not backed by tangible assets or commodities, as the world has long since abandoned the Gold Standard. Consequently, its value is "decreed" by the ruling class, rather than possessing inherent value like a commodity such as gold.
Since fiat currency is decreed, there are no limits to its issuance. Governments and commercial banks continuously "create" new money. This influx of new money into the system debases the value of money already in circulation, effectively decreasing purchasing power and the value of savings.
Governments create money by issuing debt (selling bonds) and paying interest, meaning that riba and usury are built into the money creation process from the outset.
Citizens are compelled to pay taxes in "fiat" money under the threat of imprisonment or asset seizure, making it impossible to "opt-out" of this system. Attempting to pay taxes with non-monetary assets, like cows, would not be feasible. Try it, and see what happens.
In conclusion, the fiat system prevents both Christians and Muslims from living in accordance with their religious beliefs.
Why and how have Riba and Usury become ‘acceptable’ in modern society?
Christianity Martin Luther and John Calvin asserted that usury could be acceptable if it was not excessive. Henry VIII relaxed laws against usury through the “Act Against Usury” in 1545. In 1830, Pope Pius VIII lifted the Catholic Church's ban on usury, and by 1917, the Vatican allowed organisations affiliated with the Church to make interest-bearing investments. These events contributed to the growing acceptance of usury. As the world transitioned away from the Gold Standard after WW1, this debt-based monetary system became firmly established in countries worldwide.
Islam Riba, or "interest", remains prohibited under Islamic law. However, Islamic Finance circumvents some of these restrictions through the utilisation of various contracts. For example, contracts permitting a bank to acquire an asset and subsequently sell it to a client at a profit, rather than offering interest-bearing loans. Some Islamic scholars express disagreement with these workarounds. More detail on how these regulations have been implemented in the UK by the FCA here.
Is interest necessary, and how does it function in practice?
When an organisation or individual lacks sufficient funds to undertake an activity, they may seek a loan.
The lender, unable to use the loaned money for the loan's duration and facing the risk of non-repayment, requires compensation for providing the loan.
The lender can now earn passive income through the loan, or in other words, derive a store of value without creating any value themselves, outsourcing this task to the borrower.
If the loan is secured by an asset, the lender benefits from the interest without risking the loss of capital.
In this manner, the lender enjoys a stream of income without assuming the risk of producing value.
Banks do not lend out stored cash; instead, they create money through a digital ledger entry and receive interest for lending out this newly created money.
Since the money did not exist before the loan, banks do not take on risk in the traditional sense, as they are not lending out their store of value.
The borrower typically must provide collateral, such as property in the case of a mortgage. If the borrower fails to repay the interest and the loan, they also lose the asset used as collateral.
Arguably, this system incentivises lenders to provide loans to risky borrowers, as they will receive some interest and eventually the entire asset against which the created money has been secured.
The primary issue here is that the lender can profit from lending without creating value and does not share in the downside risk. Furthermore, if the lender can simply create the money lent, this exacerbates the problem and removes value generation from the monetary system entirely.
What is the alternative?
There is a saying in Bitcoin: "Fix the Money, Fix the World." In a world operating on a Bitcoin Standard, where money cannot be created out of thin air, we would expect deflation rather than inflation due to efficiencies created by technology (for an in-depth analysis, see Jeff Booth's book, "The Price of Tomorrow").
As the cost of living decreases, the value of the energy you have created through your effort should increase, allowing you to purchase more goods and services in the future compared to today. This diminishes the need for loans, as waiting long enough enables you to eventually buy what you desire.
The prohibition of Riba or Usury does not hinder investments. If you want to create value through a project requiring capital, you can receive investment and provide sweat equity or invest capital with other parties in a project, expecting it to be profitable. All parties can share in the profits and assume some risk if the project fails.
This is not usury but rather value creation that generates profits.
Furthermore, if more Bitcoin cannot be "printed," any lending that does occur must be based on a finite supply of Bitcoin. This means that money cannot be created for the purpose of earning interest by an individual, institution, or government. While this does not eliminate usury, it prevents lending from inflating beyond the supply of the underlying store of value.
In conclusion, the fiat monetary system conflicts with the beliefs of Christians and Muslims, who together make up over half of the world's population. The current fiat system, which is debt-based and relies on interest, inherently contradicts these religious teachings. Bitcoin offers a potential alternative, as it operates on a finite supply and does not allow money to be created out of thin air for the purpose of earning interest. This could lead to a shift towards deflation, where the cost of living decreases, and individuals may rely less on loans. The prohibition of riba and usury does not impede investments, allowing for value creation and shared profits without the issues that come with traditional interest-bearing loans. With Bitcoin, it is possible to envision a financial system that aligns with the beliefs of Christians and Muslims while fostering equitable growth and value creation.