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Purpose of Prohibiting Interest in Islam

12 December, 2022
Q As-salamu `alaykum. I understand that interest (riba) is forbidden (haram), but practically debt is cheaper than equity and interest cost attracts tax benefit. Also interest cost is not added to calculate a price of product which is based on variable cost. I believe that Allah made this haram for some great reason not just like pricing issues. Please, clarify me. Thanks.

Answer

Wa `alaykum as-Salamu wa Rahmatullahi wa Barakatuh.

In the Name of Allah, Most Gracious, Most Merciful.

All praise and thanks are due to Allah, and peace and blessings be upon His Messenger.

In his response to your question, Prof. Dr. Monzer Kahf, Professor of Islamic Finance and Economics at Qatar Faculty of Islamic Studies, states:

The prohibition of interest and Islamic finance affects the whole economic system, its performance, historical development and crises.

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I suggest that you should exert some effort by reading some of the writings on the issue; you may find some of my books on Amazon and on the web for pay or for free.

For a small point, remember that the tax system is built to privilege interest structure. Is this a normal practice of human being while interest contracts themselves do not produce added value as they only transfer wealth while any added value that may be created comes as a soon result of the borrowers’ decisions and actions not from the contract itself? Please, think of it from outside the boss!

Allah Almighty knows best.