Religious Pluralism, Yet a Homogenous Stance on Interest Rate: The Case of Judaism, Christianity, and Islam

Despite the conventional consensus that interest rates are efficient mechanism of allocating loanable funds and the most influential monetary policy instrument in modern economies, the three major monotheistic religions, Judaism, Christianity, and Islam, prohibit the use of interest and consider charging interest as an act of exploitation and extortion. Several passages and verses in the Torah, the Bible, and the Quran make their position on interest clear and definitive, from the Bible’s dictum, “Do not charge your brother interest” to the Quran’s exhortation “give up what remains of your demand for usury.” This paper reviews those passages and verses, provides different scholars’ perspectives on these verses, and relates them to the current financial system. The paper also presents several recent events that support the religious position by showing the negative impact of interest on countries, societies, and individuals. These events have, in fact, inspired many economists and financial institutions to seek alternatives to the current system.


Introduction
In the modern economy, interest is known to be the price of money and is determined by the market forces of supply and demand. Interest serves many functions.
It determines the propensity of people to consume or save and the feasibility of different investment opportunities. Interest has also become the major monetary policy instrument in almost every country in the world. In fact, it has been completely institutionalized in modern economies and accepted as the most efficient mechanism for allocating loanable funds and a vital tool for stabilizing the economy. Due to excessive interest charges by several financial intuitions, however, interest continues to be a concern in many modern societies. Different laws abolishing usury have been passed in various countries, such as the United States; however, American usury laws are largely ineffective.
On the other hand, certain Islamic countries have usury laws that are both effective and intact. Interest in such countries has been abandoned for other 'Islamic' investment modes. multiple places in the Torah, the New Testament of the Bible and the Quran, but it is also treated thoroughly throughout these books.
Thus, the aim of this paper is threefold. First, it attempts to collect, explain, and relate all the verses and passages in the holy books of Judaism, Christianity, and Islam that mention usury or interest. Second, it provides recent examples of the impact of interest on the welfare of individuals as well as societies, most notably indebted developing countries. Third, it briefly renders several alternatives for the interestbased finances. Konow (2012) argues that one of the most dramatic developments in economics over the past few decades has been economists' rapidly increasing willingness to extend their models of human motivation beyond the traditional assumption of narrow self-interest to incorporate moral, ethical and religious values, as well as other social preferences. This paper is interested in the moral and religious dimensions of charging interest, known in the three major religions as usury. Usury is thus defined as any increase in the capital of the lender that occurs solely due to advancing a loan without providing any other service; that is, a loan with the condition that the borrower will return to the lender more than the quantity borrowed solely for the use of the money for a certain period of time. In today's terms, earning interest on a loan would be considered as usury. The religions' position on usury, interest, or debt servicing stands in stark contrast to the current existing structure. Almost all financial institutions engaged in lending money charge interest on their loans, as it is conventionally believed that interest is the price of credit as well as the time period over which the borrower will pay back the loan.

Religions' Stance on Interest (Usury)
The convention in many current financial systems is for debt holders to be saddled with interest rates exceeding 50% on credit card debt in some European countries, and upwards of 25% in the US.
Judaism, Christianity and Islam have a very clear stance on the practice of charging interest on financial capital. They all speak against interest and usury in their religious books. Evidence can be found in the holy books of the Talmud (the Oral Torah), the Torah   (the five books of Moses, the entire Jewish bible or the   Old Testament), the New Testament of the Bible, and the Quran. Interest is mentioned multiple times and in several contexts in all of the holy books. These contexts vary, from setting the rules of borrowing and lending to the description of both positive and negative consequences of the practice of usury.
Reading the texts in different religious holy books, one might immediately be taken by how unlawful practicing interest is considered in the three religions, and also by how stringent the warnings are against any involvement in interest. The above verse offers a perspective of how to lend money. Jesus advices his followers not to expect any return from lending money. In fact, this could be interpreted as either not to take any increase on the principal, meaning not to accept or ask for interest, or even to refuse to take back the principal itself.
Verses 14 through 28 in Matthew (25) in the New Testament, which is known as "The Parable of the Bags of Gold", also touch the concept of interest. In fact, the word usury is literally mentioned in Matthew (25:27) in the King James Version, although it is translated as interest in the Standard English version.
"Thou oughtest therefore to have put my money to the exchangers, and then at my coming I should have received mine own with usury [interest]. " Zarabozo (2007) reports the Geneva Study Bible comment on Matthew (25:14-28). It states that usury or loaning money for interest is strictly forbidden by the Bible, even at a rate as low as one per cent. It continues, focusing on the story in Matthew 25, that the servant mentioned in the parable had already told two lies. The first occurred when he said that his master was an austere or harsh man, while the Lord is merciful and gracious. He also called his master a thief because he reaped what he did not sow. The master replied to his servant in Matthew (25:27), when he asks sarcastically, why you did not add insult to injury and loan the money out at interest so that you could also call your master a "usurer"? One can easily conclude from "The Parable of the Bags of Gold" that charging interest (practicing usury) is among the most serious sins in Christianity; no matter the amount, all interest is unlawful.
Based on the teachings of the Bible, Visser and Mc-Intosh (1998) report [based on Birnie (1958)] that by the fourth century AD, the Roman Catholic Church had prohibited the taking of interest by the clergy, a rule that they extended to the laity in the fifth century. In the eighth century under Charlemagne, they pressed further and declared usury to be a general criminal offence. This anti-usury movement continued to gain momentum during the early Middle Ages and perhaps reached its peak in 1311 when Pope Clement V made the ban on usury absolute and declared all secular legislation in its favor null and void. Many people of that era, however, most notably businessmen who needed to finance their businesses, found this law to be very awkward and created a pragmatic solution to the issue (Sauer, 2003).
Currently, Christian Questions, a popular U.S.
Christian talk radio program that aims to provoke dis- There is clear resemblance between the above verse in the Quran and the passages in Jeremiah (15:10) and Al-Nisaa' (4:161). All of these verses warn the usurer against such practices. The text in Jeremiah reads: "Woe is me, my mother,

the debtor his pledge --------------------He is just; He shall surely live!"
It is evident that these religions not only prohibit the charging of interest but also encourage the usurers to return all the interest that they had charged earlier because of its status as unlawful profit. Prophet Mu- The text provides clear instructions to lenders of any commodity, such as clothing or money: charging interest to borrowers of the same faith is forbidden.
Similarly, in Islam, usury is not to be regarded solely as the practice of taking interest on a loan; other types of usury are also considered. The first is riba al-fadl, the usury of surplus, which involves an exchange of unequal qualities or quantities of the same commodity simultaneously; the second is riba al-nasia, the usury of waiting, which involves the non-simultaneous exchange of equal qualities and quantities of the same commodity and thus does not involve a surplus, but only a difference in the timing of exchange.
Hence, an exchange in which less than 100 grams of gold is received now in return for 100 grams of gold to be received tomorrow can be described as riba al-nasia unlawful not only to receive interest but also to pay it.
Both parties share the sin of the transaction of interest. However, there is an extremely important distinction between paying interest and receiving it. This lies in the unlawful wealth that is only acquired by the one who receives interest, as in the Prophet Muhammed's quote: "One whose flesh has grown out of unlawful food, the fire is more suitable for him. " In fact, the one who pays the interest is not left with unlawful wealth as a consequence of it. Therefore, we cannot say that the one who pays interest is sinning on the same terms as the lender, simply because the Prophet Muhammed's teachings on paying or receiving interest may refer to the cumulative sins that come from consuming unlawful wealth, which only apply to those who consume (earn) interest, not to those who pay it.

Flaws in Interest-Based Finances
The basis behind the unlawfulness of interest in religion stems from the role and function of money in society. While today, money is treated as a commodity, Islam, for instance, treats money as only a medium of exchange and store of value because money cannot perform any function unless it is exchanged for any real asset. That is, money has no intrinsic value or utility. As a result, not only is charging interest on a loan unlawful in Islam but also any exchange of any other commodity for unequal quantity on a deferred payment basis if the commodities are the same.

Bleher (2009) presents an important idea where he
argues that while the practice of charging interest is forbidden by Judaism, Christianity and Islam alike, it has become universally accepted in the modern secular world. Thus, he disagrees with the current belief that money is a "producer good" and that the lender should receive a share of the extra wealth that these goods produce. He argues that the only true producer of wealth (i.e., goods and services) is labor when it is applied to either land or capital. Unlike land, money is infinite when it is not artificially restricted, as it often is. Money is man-made from nothing at a miniscule real cost. The has caused many farmers to pawn their farms and, in certain cases, to lose these farms due to high (compounded) interest payments. He claims that 15% of the annual income of middle class households goes to interest payments, and states that the average size of these families' debts during the four year period from 1990 to 1993 was $32,500, which is equivalent to almost 100% of these families annual income.
On the other hand, access to investment loans has been made very easy--not for those with the most feasible projects, but for those with the most collateral, who by definition are the wealthiest in society.
By giving the rich cheap and easy access to money, the interest rate mechanism has a tendency to favor the rich and discriminate against the poor. In this regard, interest-based banking inhibits economic growth by failing to finance the most feasible business ideas that, if supported, would have resulted in higher economic growth.
Furthermore, interest can also be a source of market imperfections. This occurs when lenders limit the supply of additional credit to borrowers who demand funds, even if the latter are willing to pay higher interest rates. In this case the price mechanism, which is interest rates, fails to bring equilibrium to the market.
In this regard, Stiglitz and Weiss (1981) developed a model to show that the borrower would be willing to obtain the funds at a higher interest rate than that charged by the lender, but that the lender would not be willing to lend the extra funds because the higher rate would imply lower expected profits. This is equilibrium rationing, as there is excess demand for credit at the equilibrium rate of interest due to adverse selection, the situation in which the lender is faced with borrowers whose projects imply different levels (or types) of risk, and the type of each borrower is unbeknownst to the lender. The main intuition behind this result is that safe borrowers would not be willing to tolerate a high interest rate because with a low probability of default, they will end up paying back more to the lender. Risky types will accept a higher rate because they have a lower chance of a successful project (and typically a higher return if successful), and thus a lower chance of repayment.
The impact of interest rates and debt on countries, especially developing countries, is more devastating and dangerous than for individuals. Although most less developed countries have borrowed from international commercial banks, i.e., the IMF or the World Bank, several studies argue that these loans failed to improve the quality of life in those countries. In fact, in many developing countries, interest payments (debt service) constitute a greater percentage of GDP than education, healthcare, and infrastructure combined (Hertz, 2009). Hertz (2009) argues that much of the debt in developing countries was incurred at a time when commercial banks needed to make loans.
Jesse Jackson, an American civil rights leader, stated that "They no longer use bullets and ropes; they use the World Bank and the IMF". It is a fact that no country has ever paid off a debt to the World Bank or private banks. Usmani (2005) reports that during the period from 1982 to 1990, developing countries paid $1.9 billion in interest and capital to creditor countries. He argues that the loans forwarded to many developing countries are not linked to specific developmental projects and therefore constitute pure interest-bearing debt, secured against what natural resources these countries may have. Populations have suffered as their mineral wealth has been used to service interest-based debt instead of being used to provide essential services. Perkins (2004) notes the power that the lender has over the borrower (developing countries). Lender banks and institutions usually offer advice or dictate conditions for how countries manage their finances and conduct themselves in the international markets. He writes, "They [loans] were intended to create large profits for the contractors, and to make a handful of wealthy and influential families in the receiving countries very happy, while assuring the long run financial dependence and therefore the political loyalty of governments "The larger the loan, the better. " The fact that the debt burden placed on a country would deprive its poorest citizens of health, education, and other social services for decades to come was not taken into consideration. " Moreover, financial distortion, which usually occurs in interest rate finance regimes, is a major impediment to economic growth. Guarigila and Poncet (2008) argue that although indicators measuring the degree of market-driven financing in the economy are positively associated with growth, these effects have been gradually declining over time as countries have become more involved in the global economy.

Alternatives to the Conventional Interest-Based Finance
As mentioned earlier, interest should not be considered as a payment for a factor of production; even if this is true, interest still has several unique characteris-tics that distinguish it from other payments of factors of productions, which eventually lead to many undesirable outcomes. As a result, there have been efforts to establish interest-free financial institutions in order to prevent borrowers from being exploited by lenders. Muslim-majority countries have been the leaders in providing these types of services. These countries The abovementioned argument for zero interest will not lead people to seek to abolish the mechanism through which funds are allocated. In fact, zero-interest financing is based on a joint venture between the borrower and the lender. If the borrower needs to borrow the money for investment (not consumption) reasons and the lender needs to increase his capital through borrowing, then both should share the risk. This joint venture, or 'Musharakah in islam", is a relationship established under contract by the mutual consent of the parties for sharing profits and losses in the joint business. It is an arrangement under which the bank provides funds, at which it time cannot guarantee itself a fixed return. This mechanism is highly beneficial as the bank becomes concerned about the results of its investment. In this regard, lender banks are automatically encouraged to identify and select the ventures with the greatest potential for profit, rather than relying on those that offer the greatest collateral.
This new system of profit sharing rather than inter-Religious Pluralism, yet a Homogenous Stance on Interest Rate: The Case of Judaism, Christianity, and Islam est charging will deprive private banks and financial elites from their extraordinary power, which will render them unable to manipulate the economic cycle, thus avoiding events such as the Great Depression of the 1930s and the 2008 Financial Crisis. Economic power is thus retained by the government, which ensures that all paper currency is fully asset-backed.
In conclusion, profit is more efficient than interest as a mechanism to allocate loanable funds.

Conclusion
This paper investigates the stance of Judaism, Christianity, and Islam on interest. The passages and verses in the Torah, the Bible, and the Quran make evident that the practice of earning interest through advancing loans is strictly prohibited in the three major monotheistic religions. It is believed that this practice exploits, extorts, and takes advantage of the borrower.
In fact, weighing the flaws and disadvantages of charging interest against its benefits and advantages, this paper finds that the flaws outweigh the benefits for several reasons. First, high interest rates depress investment opportunities that have low profits relative to interest charged in the short run, regardless of their importance to society in terms of their output and the number of workers employed. The feasibility of the project is known not to be the primary determinant of being approved for a loan. Second, interest rate finances lead to credit (money) creation, which confers tremendous economic power on financial institutions. This can be witnessed in many countries where people pawn their homes, farms, and other precious belongings, which they may later lose to their lenders. This causes the division of society into two antagonistic classes, which leads to an ominous class struggle, jealousy, a sense of unfairness, and murder. Fourth, interest places a huge burden on many indebted developing countries. Debt service in several countries exceeds spending on basic services, such as education, healthcare, and infrastructure. Furthermore, international financial institutions, such as the World Bank and IMF, have forwarded loans to countries with corrupt regimes that are not linked to any developmental projects, thereby passing off the burden of paying back the loan to the next generation.
As a result, several interest-free financial institutions have started to appear all over the world. Islamic financial institutions have taken the leading role, and have been followed by some Jewish and Christian institutions. However, the free interest concept should not be misunderstood as abolishing the capital allocation mechanism. In fact, the new interest-free system should be based on another mechanism that avoids the flaws of the old system. The paper briefly reviewed "Profit" as the new mechanism to replace interest. Indeed, future research is needed to study other alternatives to the current system in depth.