Introduction

Interest is the main difference between Islamic banking otherwise known as interest –free of ethical financing and conventional banking.

As contained in the major sources of Islamic legislation – Quran and traditions of the Prophet Mohammed – the charging of interest on transactions is totally outlawed as contained in a verse of the Quran.

The verse found in Surah Baqarah verse 275 states: “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.”

It continues: “Those who after receiving direction from their Lord, desist, shall be pardoned for the past; their case is for Allah (to judge); but those who repeat (The offence) are companions of the Fire: They will abide therein (for ever).”

But finance analysts are quick to point out that the instance of interest-free transactions is deeply rooted in the Abrahamic religions – be it Islam, Judaism or Christianity.

Top Christian thinkers have also spoken about the abhorrence of usury, a case in point being St. Thomas Aquinas who wrote in his Summa Theologica:

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... (Summa Theologica, II-II, question 78, article one)

Biblical texts denouncing interest / usury

The Islamic Finance Research Institute, Ghana, IFRIG, lists a number of Bible verses emphasizing the prohibition of interest.

Luke 6 verse 35: But love your enemies, do good, and lend, hoping for nothing in return; and your reward will be great, and you will be sons of the Most High.

In Ezekiel 18 verse 8: He does not lend to them at interest or take a profit from them. He withholds his hand from doing wrong and judges fairly between two parties.

Ezekiel 18 verse 13 continues: He lends at interest and takes a profit. Will such a man live? He will not! Because he has done all these detestable things, he is to be put to death; his blood will be on his own head.

Exodus 22 verse 25 reads: If you loan money to my people, to the poor among you, don’t be like a creditor to them and don’t impose interest on them.

Deuteronomy 23 verse 19 says: Do not charge a fellow Israelite interest, whether on money or food or anything else that may earn interest. You may charge a foreigner interest, but not a fellow Israelite, so that the LORD your God may bless you in everything you put your hand to in the land you are entering to possess.

Leviticus 25 verses 36 – 37 reads: Do not take interest or any profit from them, but fear your God, so that they may continue to live among you.

Remember, do not charge interest on money you lend him or make a profit on food you sell him.

Psalm 15 verse 5 says: Those who lend money without charging interest, and who cannot be bribed to lie about the innocent. Such people will stand firm forever.

Proverbs 22 verse 7 says: The wealthy rule over the poor, and anyone who borrows is a slave to the lender.

Whiles 28 verse 8 adds: He that by usury and unjust gain increaseth his substance, he shall gather it for him that will pity the poor.

Islamic finance – the values and ethical perspective

Islamic finance is about conducting business in a fair and transparent manner.

The strong ethical and moral dimensions of doing business and selecting business activities to be financed, plays an important role in promoting socially desirable investments and better individual or corporate behaviour.

Speculative transactions are sources of instability and by nature is misallocation of capital. Islamic finance principles prohibit carrying out such activities, but rather place its focus in deployment of capital to the real economy to promote socio economic justice.

Although Islamic finance is based on Shari'a principles, Islamic finance is not restricted to Muslims only, but it is absolutely available to non-Muslims as well.

Whiles championing the overall empowerment of the Ghanaian population to alleviate poverty, it also aims to create massive wealth in a financial environment characterized by integrity, fairness, transparency, responsibility and flexibility.