Why is interest evil?

Allah Forbade Interest

Allah says in the Qur’an:

Translation: Those who devour usury will not stand except as stand one whom the Evil one by his touch Hath driven to madness.
That is because they say: “Trade is like usury,” but Allah hath permitted trade and forbidden usury. [Surah Baqarah, 2:275]

A few verses later, Allah says:

Translation: O you who believe! Observe your duty to Allah, and give up what remains (due to you) from usury, if you are really believers.
And if you do not, then take notice of war from Allah and His Messenger. But if you repent, you shall have your capital (without interest).
Deal not unjustly (by asking more than your capital), and you shall not be dealt with unjustly (by receiving less than your capital). [Surah Baqarah, 2:278-279]

Unfair and Unjust

Abdullah, who takes a $10,000 loan and then he goes out of business. He now has to pay interest on his loan even though he has lost all the funds.
In 5 years he might still be suffering and paying back the loans. At 7% interest, he will end up paying $20,000 in total if he still has the loans in 10 years.

A more fair deal would be that the business person who makes a deal that he will lend brother Ahmed $10,000 loan and he will be a partial owner of the business.If Ahmed makes a huge profit, the business person will also get 25% of it, which will be much more than the measly 7% he could have got as interest,
and Allah will bless it as well, whereas Allah has cursed the one who takes interest and pays it.

World-Scale Corruption

The international monetary fund (IMF) and World Bank, which gives interest loans to countries – for example Bangladesh might receive an interest loan,and the interest will be so much that they will never be able to pay back the loan.In fact, they may eventually forgive the interest on the loan, or they may not. If they do not, the country sometimes has to sell “cash crops”(goods which cannot be used by the country itself, but can only be sold for money, such as coffee for example – say rather than rice, which can be eaten by the local population)in order to simply maintain the loan. When I say maintain, I mean to keep it at the same amount, and just pay the interest.

Family Corruption

Families where the father loses his job and resort to riba, may end up maxing out their credit cards, and may end up paying hundreds of dollars in interest every month.This is equivalent to burning that cash, because, literally, it is wasted. Why do you think the banks are so rich, anyway? Because suckers like me and you fall for the itand upon us as well is the anger of Allah! This large loans at a 18% interest rate become very difficult to pay back. In fact, at the credit card rate, you will end up paying double the amount
if you paid the minimum balance and paid it all in 4 years. An example of this is if you bought a laptop for $2000, and you paid off your full credit card in 4 years, you will have spent $4000 on this laptop.

Alternatives

Place your trust in Allah, and ask him to help you find a way out.

If you have student loans, get rid of the entire amount before you graduate, by asking around for interest free loans from your friends and family members(you can do the same thing even if you’re working). Even if you feel bad/embarrassed to ask for money, remember that the interest you took is extremely sinful
and that its better for you to ask so that you can get out of it.

Is Riba Interest?

Often, riba will be translated as usury, no interest. Some times people will claim that interest is halal, but only in excessive amounts does it become usury.This is only their vain desires. Bring your proof if you are truthful.

The Prophet (peace and blessings of Allah be upon him) said, “The gold for the gold, the silver for the silver, wheat for wheat, barley for barley,date for date, salt for salt, similar for the like, and hand in hand. So whoever adds or seeks to add, then he has used riba. The recipient and the giver of the transaction are the same.” (Reported by Muslim, #1584)

Once Bilal (رضالله عنه) brought Barni (i.e. a kind of dates) to the Prophet (صلي الله عليه وسلم) and the Prophet (صلي الله عليه وسلم) asked him,”From where have you brought these?” Bilal (رضالله عنه) replied, “I had some inferior type of dates and exchanged two Sas of it for one Sa of Barni dates in order to give it to the Prophet; to eat.” Thereupon the Prophet (صلي الله عليه وسلم) said, “Beware! Beware! This is definitely Riba (usury)! This is definitely Riba(Usury)! Don’t do so, but if you want to buy (a superior kind of dates) sell the inferior dates for money and then buy the superior kind of dates with that money.”

(The facts about Usury: Why Islam is Against Lending Money at Interest)

Moral: Acceptance of Usury discourages people from doing good to one another and lend out of good will. A society which encourages interest on lending will require needy people to pay back more than he borrowed, which quite often is a source of huge burden.

Social: If interest is allowed, the rich (who are most likely to be lender) will exploit the poor (borrower).
As a result, the rich becomes richer and the poor becomes poorer. This generates envy and hatred among the poor toward the rich, resulting in social disorders, conflicts and at times breeds revolutions & movements.

To understand these economic, moral and social effects we Indians don’t have to look further than Vidarbha and the plight of farmers there which in recent time has received much publicity for unfortunate circumstances. And Vidarbha is a part of much larger problem area.

Between 2001 and 2006, over 14000 farmers have committed suicide in various regions including Vidarbha and Telangana. In almost each of these suicide cases the only recurring reason is debt-trap.

Jaideep Hardikar in his report Loan after Loan notes:

A farming family holding 27 acres in Vidarbha has become a marginal landholder in a span of few years,
and a vicious cycle of usurious debt robbed their lands and hopes. There are hundreds of others in the lurch similarly.

These farmers who very often had to borrow from money-lenders at 60-120% interest, to sow seed, and toil every day from sunrise to sunset and if-and-only-if the harvest is good or saved from natural torments will they be able to pay out the interest and some principal. But seldom it happens as willed and for years after years they are still trying to come out of debt. And for many the only way out of these miseries was through death. Suicide is not an easy route as some would think. It is an end for those who see all hopes vanished. It is also thus no surprise that Vidarhba and Telangana are demanding separate States.

Thus, in a society which permits interest, the strong benefit from the suffering of the weak, resulting in conflicts, social-disorders, and revolutions.

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