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APPENDIX
AUsury, Riba and Interest:
A Historical Perspective
A
historical review of the term “usury” brings to light and explains a
consistent pattern of prohibition of interest. Usury was defi ned originally
as “charging a fee for the use of money,” irrespective of the level of inter-
est charged. After moderate - interest loans became an accepted part of the
business world in the Middle and early - Modern Ages, the word “usury”
came to refer to the charging of unreasonable or above - legal rates of inter-
est. According to the Oxford English Dictionary, the term took on this new
meaning somewhere between the sixteenth and seventeenth centuries, a
meaning it has retained to this day.
The practice of lending money on interest can be traced back approxi-
mately four thousand years. Since its earliest incarnations, the practice has
been repeatedly condemned, restricted or prohibited on moral, ethical,
religious, and legal grounds by various traditions, institutions, and social
reformers. The rationale employed by these wide - ranging critics has included
arguments about work ethic, social justice, economic instability, and inter -
generational equity. Among the religious traditions, the explicit and implicit
prohibition of interest is mentioned in Hinduism, Buddhism, Judaism,
Christianity and Islam.
The Greek philosopher Aristotle considered money as a means to facili-
tate exchange and therefore was of the view that a piece of money could not
beget another piece. He rejected the justifi cation for charging interest on this
ground, arguing that money is sterile. In the Vedic Hindu texts of Ancient
India (2000–1400 BC), there are several references to the “usurer” (kusidin)
as any lender at interest. Further references to “interest” can also be found
in the later Sutra texts (700–100 BC), as well as in the Buddhist Jatakas
(600–400 BC). It was during this latter period that the fi rst sentiments of
contempt for usury were expressed. According to Jain (1929), Vasishtha,
a well - known Hindu law - maker of that time, made a special law which
forbade the higher castes of Brahmanas (Hindu priests) and Kshatriyas
(warriors) from being usurers or lenders at interest. In the Jatakas, usury is
An Introduction to Islamic Finance: Theory and Practice, Second Edition
by Zamir Iqbal and Abbas Mirakhor
Copyright © 2011 John Wiley & Sons (Asia) Pte. Ltd.