Detrimental Effects of Ribaaon the Individual and Society
Islam has strictly forbidden ribaa due to the great deal of harm it is bound to inflict on both the individual and society. Such detrimental effects include the following:
- It causes a severe disorder in the distribution of wealth and widens the gulf between the rich and the poor
Because ribaa tends to concentrate wealth in the hands of a few individuals and prevents it from being used for the general good of the community, it causes an inequitable distribution of wealth and resources and divides society into a tiny super-rich minority and a large poor or deprived large majority, a state of affairs which normally gives rise to hatred and crimes in society.
- It encourages wasteful extravagance
The fact that taking out loans from financial institutions that charge interest on such loans has become more readily available than ever before has encouraged many people to become big wasters. Finding a financial institution from which to borrow money to meet all kinds of needs, they tend to spend lavishly on luxury items, only to find themselves burdened by debts which cause them depression, anxiety and stress and which they cannot possibly pay off.
- It dissuades investors from investing in domestic beneficial projects
Lured by the interest gains the usurious system allows investors to derive from their capital, they desist from investing their capital in domestic industrial, agricultural and commercial projects, no matter how beneficial such projects may be to society, as they believe these projects involve some risk and require a great deal of effort.
- It deprives wealth of all blessing and leads to economic crises
All economic crises undergone by financial institutions and individuals alike are, in the main, caused by persistence in engaging in usurious transactions and are some of the reasons why such transactions are deprived of all blessing, as opposed to charitable deeds which are bound to bless wealth and increase it. As the Qur’an states, “Allah deprives usurious gains of all blessing, whereas He blesses charitable deeds with manifold increase.” (Soorat Al-Baqarah, 2: 276)