Is Riba Sustainable ?

Sami Al-Suwailem

DOI: 10.55780/Re24079 16 Dec, 2024

Riba, or usury, has existed for millennia and will likely persist for many more. Does that make it “sustainable”? Is the persistence of a certain behavior or phenomenon sufficient to consider it sustainable?

Mere persistence cannot imply sustainability. Poverty, disease, and wars persist throughout history. But that does not make them sustainable. There must be a rational way to identify sustainability.

We can formulate the criterion for sustainability from the Golden Rule: Love for your brother what you love for yourself of goodness. The Rule can be applied to identify sustainability across time and space. Let us examine these in turn.

If an action satisfies the Golden Rule, this means that, at any moment in time, it is in the interest of all members of the community to adopt that action. The action is sustained when adopted by all members. This is sustainability across space, i.e., across the community at any given moment in time.

How about sustainability across time?

We need to apply the rule to the generations of the community to see if an action is sustainable. If the future generation would be happy if the current generation takes a specific action, then that action satisfies the Golden Rule, and thus, it becomes sustainable across time.

Persistence and sustainability are often confused in discussions about enduring practices or phenomena.

While persistence refers to the continued existence of something over time, sustainability implies the ability of an action or behavior to endure without causing harm to the environment, society, or the economy in the long term. In short, sustainability implies universalizability, not persistence.

Suppose instead that all members decided to use their savings to engage in fair trade and useful production. The economy would naturally thrive.

This shows that Riba, or lending at interest, is subject to the Fallacy of Composition. The fallacy arises from the belief that what might work for some would work for all. But this is not always true. A certain action might be useful to some, but if adopted by all, they all will suffer. This is exactly the case with Riba. And so, Riba fails to satisfy the Golden Rule across space.

Fair trade, in contrast, does satisfy the Golden Rule. Hence, in principle, trade is sustainable across space, but Riba is not.

This shows that Riba is not sustainable, neither across space nor across time. The fact that Riba has been around for millennia does not prove that it is sustainable. Wars, depressions, instability, and poverty have all been around for millennia as well. They are very likely associated with the uncontrolled growth of debt. The persistence of these ills does not result from their sustainability. It is exactly the opposite: They persist because they benefit the few at the expense of the community.

Islamic finance, to the extent that it is fully integrated with trade and production, can be sustainable. The moment Islamic finance seeks instead to emulate interest-based lending, it would be prone to the same ills of Riba.

To summarize: Sustainability requires universalizability. An action or behavior is sustainable if it is in the interest of the community to be universal across space and across time. Persistence, on the other hand, may or may not be associated with sustainability.

Based on the remarks the author presented to the “Second Strategic Meeting on Sustainable Innovation and Maqasid Al-Shariah in Islamic Finance,” organized by the General Council of Islamic Banks and Financial Institutions (CIBAFI), held on 27 November 2024, in Jeddah, Saudi Arabia.