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History of Usury Prohibition

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A Short Review of the Historical Critique of Usury

 

Wayne A.M. Visser and Alastair McIntosh

^{Centre for Human Ecology}

^{The following text is now also available in PDF of the original - click here} 

^{First published in Accounting, Business & Financial History, 8:2, Routledge, London, July 1998, pp. 175-189.}

 

 

^Abstract

Usury - lending at interest or excessive interest - has, according to known records, been practiced in various parts of the world for at least four thousand years.  During this time, there is substantial evidence of intense criticisism by various traditions, institutions and social reformers on moral, ethical, religious and legal grounds.  The rationale employed by these wide-ranging critics have included arguments about work ethic, social justice, economic instability, ecological destruction and inter-generational equity.  While the contemporary relevance of these largely historical debates are not analysed in detail, the authors contend that their significance is greater than ever before in the context of the modern interest-based global economy.

 

Keywords: usury, interest, debt, discounting, Islamic banking

 

 

INTRODUCTION

 

The concept of “usury” has a long historical life, throughout most of which it has been understood to refer to the practice of charging financial interest in excess of the principle amount of a loan, although in some instances and more especially in more recent times, it has been interpreted as interest above the legal or socially acceptable rate[i].  Accepting this broad definition for the moment, the practice of usury can be traced back approximately four thousand years (Jain, 1929), and during its subsequent history it has been repeatedly condemned, prohibited, scorned and restricted, mainly on moral, ethical, religious and legal grounds.  Among its most visible and vocal critics have been the religious institutions of Hinduism, Buddhism, Judaism, Islam and Christianity.  To this list may be added ancient Western philosophers and politicians, as well as various modern socio-economic reformers.  It is the objective of this paper to outline briefly the history of this critique of usury, to examine reasons for its repeated denouncement and, finally, to intuitively assess the relevance of these arguments to today’s predominantly interest-based global economy.  The scope will not extend to a full exploration of some of the proposed modern alternatives to usury, except to describe the growing practice of Islamic banking as an example.

 

HISTORY OF THE CRITIQUE OF USURY

 

Usury in Hinduism and Buddhism

 

Among the oldest known references to usury are to be found in ancient Indian religious manuscripts and Jain (1929) provides an excellent summary of these in his work on Indigenous Banking in India.  The earliest such record derives from the Vedic texts of Ancient India (2,000-1,400 BC) in which the “usurer” (kusidin) is mentioned several times and interpreted as any lender at interest.  More frequent and detailed references to interest payment are to be found in the later Sutra texts (700-100 BC), as well as the Buddhist Jatakas (600-400 BC).  It is during this latter period that the first sentiments of contempt for usury are exressed.  For example, Vasishtha, a well known Hindu law-maker of that time, made a special law which forbade the higher castes of Brahmanas (priests) and Kshatriyas (warriors) from being usurers or lenders at interest.  Also, in the Jatakas, usury is referred to in a demeaning manner: “hypocritical ascetics are accused of practising it”. 

 

By the second century AD, however, usury had become a more relative term, as is implied in the Laws of Manu of that time:  “Stipulated interest beyond the legal rate being against (the law), cannot be recovered:  they call that a usurious way (of lending)” (Jain, 1929: 3-10).  This dilution of the concept of usury seems to have continued through the remaining course of Indian history so that today, while it is still condemned in principle, usury refers only to interest charged above the prevailing socially accepted range and is no longer prohibited or controlled in any significant way.

 

Usury in Ancient Western Political Philosophy

 

Among the Ancient Western philosophers who condemned usury can be named Plato, Aristotle, the two Catos, Cicero, Seneca and Plutarch (Birnie, 1958).  Evidence that these sentiments found their concurrent manifestation in the civil law of that period can be seen, for example, from the Lex Genucia reforms in Republican Rome (340 BC) which outlawed interest altogether.  Nevertheless, in practice, ways of evading such legislation were found and by the last period of the Republic, usury was once again rife.  It was the Democratic party in Rome who rededicated themselves to the cause of those suffering the burden of debt, and under the banner of Julius Caesar, a ceiling on interest rates of 12% was set, and later under Justinian, lowered even further to between 4% and 8% (Birnie, 1958).  Clearly, this left fertile ground for the assault on usury which the Church would mount following its Christianisation of the Roman Empire.

 

Usury in Islam

 

The criticism of usury in Islam was well established during the Prophet Mohammed's life and reinforced by various of his teachings in the Holy Quran[ii] dating back to around 600 AD.  The original word used for usury in this text was riba which literally means “excess or addition”.  This was accepted to refer directly to interest on loans so that, according to Islamic economists Choudhury and Malik (1992), by the time of Caliph Ulmar, the prohibition of interest was a well established working principle integrated into the Islamic economic system.  It is not true that this interpretation of usury has been universally accepted or applied in the Islamic world.  Indeed, a school of Islamic thought which emerged in the 19th Century, led by Sir Sayyed, still argues for a interpretative differentiation between usury, which it is claimed refers to consumptional lending, and interest which they say refers to lending for commercial investment (Ahmed, 1958).  Nevertheless, there does seem to be evidence in modern times for what Choudhury and Malik describe as “a gradual evolution of the institutions of interest-free financial enterprises across the world” (1992: 104).  They cite, for instance, the current existence of financial institutions in Iran, Pakistan and Saudi Arabia, the Dar-al-Mal-al-Islami in Geneva and Islamic trust companies in North America.  This growing practice of Islamic banking will be discussed more fully in a later section as a modern application of usury prohibition.

 

Usury in Judaism

 

Criticism of usury in Judaism has its roots in several Biblical passages in which the taking of interest is either forbidden, discouraged or scorned[iii].  The Hebrew word for interest is neshekh, literally meaning "a bite" and is believed to refer to the exaction of interest from the point of view of the debtor.  In the associated Exodus and Leviticus texts, the word almost certainly applies only to lending to the poor and destitute, while in Deuteronomy, the prohibition is extended to include all moneylending, excluding only business dealings with foreigners.  In the levitical text, the words tarbit or marbit are also used to refer to the recovery of interest by the creditor.

 

In addition to these biblical roots are various talmudic extensions of the prohibitions of interest, known as avak ribbit, literally "the dust of interest" which apply, for example, to certain types of sales, rent and work contracts.  This is distinguished from rubbit kezuzah, interest proper in an amount or at a rate agreed upon between lender and borrower.  The difference in law is that the latter, if it has been paid by the borrower to the the lender, is recoverable from the lender, while the former, once paid, is not recoverable, although a contract tainted by the dust of interest will not be enforced.  (The Jewish Encyclopedia, 1912).

 

Despite the prohibition on taking interest, there is considerable evidence to suggest that this rule was not widely observed in biblical times.  In addition to several references in the Old Testament to creditors being exacting and implacable in their extraction of interest[iv], from the Elephantine papyri it appears that among the Jews in Egypt in the fifth century B.C.E. it was a matter of course that interest would be charged on loans (Encyclodpedia Judaica, 1971).  This charitable nature of the prohibition on interest suggests that its violation was not regarded as a criminal offense with penal sanctions attatched, but rather as a moral transgression.

 

The phenomenon of evasion can also be partly explained by changing economic conditions, beginning in the amoraic period in Bayolonia when interest prohibition was held to no longer be compatible with the eocnomic needs of the community.  In time, a standard form of legalization of interest was established, known as hetter iskah, meaning the permission to form a partnership, which has become so accepted that nowadays all interest transactions are freely carried out in accordance with Jewish law, by simply adding to the note or contract concerned the words al-pi hetter iskah. (Encyclodpedia Judaica, 1971).

 

Usury in Christianity

 

Despite its Judaic roots, the critique of usury was most ferverently taken up as a cause by the institutions of the Christian Church where the debate prevailed with great intensity for well over a thousand years[v].  The Old Testament decrees were resurrected and a New Testament reference to usury added to fuel the case[vi]. Building on the authority of these texts, the Roman Catholic Church had by the fourth century AD prohibited the taking of interest by the clergy; a rule which they extended in the fifth century to the laity.  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 zenith in 1311 when Pope Clement V made the ban on usury absolute and declared all secular legislation in its favour, null and void (Birnie, 1952).

 

Increasingly thereafter, and despite numerous subsequent prohibitions by Popes and civil legislators, loopholes in the law and contradictions in the Church's arguments were found and along with the growing tide of commercialisation, the pro-usury counter-movement began to grow.  The rise of Protestantism and its pro-capitalism influence is also associated with this change (McGrath, 1990), but it should be noted that both Luther and Calvin expressed some reservations about the practice of usury despite their belief that it could not be universally condemned.  Calvin, for instance, enumerated seven crucial instances in which interest remained “sinful”, but these have been generally ignored and his stance taken as a wholesale sanctioning of interest  (Birnie, 1952).  As a result of all these influences, sometime around 1620, according to theologian Ruston, “usury passed from being an offence against public morality which a Christian government was expected to suppress to being a matter of private conscience [and] a new generation of Christian moralists redefined usury as excessive interest” (1993: 173-4).

 

This position has remained pervasive through to present-day thinking in the Church, as the indicative views of the Church of Scotland (1988) suggest when it declares in its study report on the ethics of investment and banking:  “We accept that the practice of charging interest for business and personal loans is not, in itself, incompatible with Christian ethics.  What is more difficult to determine is whether the interest rate charged is fair or excessive.”  Similarly, it is illustrative that, in contrast to the clear moral injunction against usury still expressed by the Church in Pope Leo XIII's 1891 Rerum Novarum as “voracious usury ... an evil condemned frequently by the Church but nevertheless still practised in deceptive ways by avaricious men”, Pope John Paul II's 1989 Sollicitude Rei Socialis lacks any explicit mention of usury except the vaguest implication by way of acknowledging the Third World Debt crisis.

 

Usury in Modern Reformist Thinking

 

Some may be surprised to discover that Adam Smith, despite his image as the “Father of the Free-market Capitalism” and his general advocacy of laissez-fair economics, came out strongly in support of controlling usury (Jadlow, 1977; Levy, 1987).  While he opposed a complete prohibition of interest, he was in favour of the imposition of an interest rate ceiling.  This, he felt, would ensure that low-risk borrowers who were likely to undertake socially beneficial investments were not deprived of funds as a result of “the greater part of the money which was to be lent [being] lent to prodigals and projectors [investors in risky, speculative ventures], who alone would be willing to give [an unregulated] high interest rate” (Smith, 1937: 339). 

 

The great twentieth century economist John Maynard Keynes held a similar position believing  that “the disquisitions of the schoolmen [on usury] were directed towards elucidation of a formula which should allow the schedule of the marginal efficiency to be high, whilst using rule and custom and the moral law to keep down the rate of interest, so that a wise Government is concerned to curb it by statute and custom and even by invoking the sanctions of the Moral Law” (1936: 351-3).

 

Another less well known anti-usury economic reformist was Silvio Gesell (1904), yet  Keynes wrote that the world could learn more from him than from Marx.  Gesell, as a successful nineteenth century merchant in Germany and Argentina, condemned interest on the basis that his sales were more often related to the ‘price’ of money (i.e. interest) than people's needs or the quality of his products.  His proposal of making money a public service subject to a use fee led to widespread experimentation in Austria, France, Germany, Spain Switzerland, and the United States under the banner of the so-called “stamp script movement”, but these initiatives were all squashed when their success began to threaten the national banking monopolies (Kennedy, 1995).  Margrit Kennedy (1995), a German professor at the University of Hannover, is one of the most vocal contemporary critics of interest who builds on Gesell’s ideas, believing that “interest ... acts like cancer in our social structure”.  She takes up the cause for “interest and inflation-free money” by suggesting a modification of banking practice to incorporate a circulation fee on money, acting somewhat like a negative interest rate mechanism.

 

Finally, another school of modern interest critics have their roots in the complementary work of several socio-economic reformists of the early twentieth century, namely Douglas (1924), Fisher (1935), Simons (1948) and Soddy (1926).  Their chief common premise was that it is completely wrong and unacceptable for commercial banks to hold a monopoly on the money or credit creation process.  For banks to then charge interest (including to government) on money which they had in the first place created out of nothing, having suffered no opportunity cost or sacrifice, amounted to nothing less than immoral and fraudulent practice.  Various alternative systems are proposed by the original authors and carried forward by their modern-day torch-bearers, for example, the Social Credit Secretariat and the Committee on Monetary and Economic Reform.

 

RATIONALE FOR THE CRITIQUE OF USURY

 

Throughout the history of the criticism of usury, various reasons and rationale have been forwarded in support of this position.  While some are unique to particular traditions or individuals, many tread on common ground which this section will briefly attempt to synthesise.

 

Usury as Unearned Income

 

The Church's simplest and perhaps earliest objection to usury was on the basis that it constituted unearned income, an idea which stemmed from its general doctrine of Just Price.  The Lateran Council of 1515 clearly expressed such a view of the Church:  “This is the proper interpretation of usury when gain is sought to be acquired from the use of a thing, not in itself fruitful (such as a flock or a field) without labour, expense or risk on the part of the lender.”  Birnie reinforces this point by noting that “to live without labour was denounced as unnatural, and so Dante put usurers in the same circle of hell as the inhabitants of Sodom and other practisers of unnatural vice” (1952: 4).

 

This is also the rationale Ahmad uses to explain why in Islam God[vii] “permits trade yet forbids usury”:  “The difference is that profits are the result of  initiative, enterprise and efficiency.  They result after a definite value-creating process.  Not so with interest”;  also “interest is fixed, profit fluctuates.  In the case of interest you know your return and can be sure of it.  In the case of profit you have to work to ensure it” (1958: 25).  Perhaps Aristotle had similar sentiments in mind when he argued that “a piece of money cannot beget another”.

 

There is an important psycho-political dimension to this argument.  Keynes’ biographer, Skidelsky, intriguingly comments that “Keynes’s sense that, at some level too deep to be captured by mathematics, ‘love of money’ as an end, not a means, is at the root of the world’s economic problem” (1992: 454).  Hence, at a fundamental level of analysis, the so-called evils of usury must be understood as being connected with money being a social psychological construct legitimised by the power dynamics of a given political economy which may or may not be democratically and consciously legitimatised.  An illustration of this understanding can be seen in the Christian tradition where Jesus is asked whether taxes should be paid to Caesar.  Before uttering the famous words, “Render unto Caesar what is Caesar’s,” he tellingly first asks to be shown a coin and inquires, “Whose image and superscription hath it? (Luke 20:24)”.  In other words, “What power structure legitimises this currency?”  Jesus’s response therefore said much more than merely “pay your taxes.”  It invited questioning of the very psycho-spiritual power dynamics that constitute the deep roots of human relationship in economy, and which have always caused matters of political economy to be central to prophetic witness.

 

Usury is what marks the distinction between money being simply a socially contracted abstract mechanism to lubricate between supply and demand, and money as an end in itself.  As an end in itself, as a social commodity legitimised through usury to tax other economic activity, the honest process of living by the sweat of one’s brow is short-circuited.  The true dignity and full reward of ordinary labour is compromised.  Money thus becomes self-perpetuating power in itself rather than just a mediating agent of power.  And it is the relentlessness of compound interest in the face of adversity that sets the potential cruelty of usury apart from equity-based return on investment. Resonant with Skidelsky’s comment about Keynes, one can see how it is the love of money as an end in itself, not the use of money itself, that is said to be the root of all evil (1 Timothy 6).  It was in recognition of the the need to have corrective feedback mechanisms that Islam not only injuncts usury, but also imposes Zakat or wealth tax. And more radical still, the Old Testament proposes a complete economic readjustment through the “Jubilee” process every fifty years (Leviticus 25), though there is no evidence that such wholescale redistribution of wealth in all forms was ever actually carried out.  Perhaps it is a prophetic vision whose time has yet to come.

 

Usury as Double Billing

 

A slightly more obscure rationale was employed by the Church later in the Middle Ages in order to strengthen its anti-usury doctrine.  Drawing on some of the concepts of Civil Law, it argued that money was a consumable good (fungible), for which the ownership passed from lender to borrower in the course of  the loan transaction (mutuum), with the fair price of ‘sale’ therefore being the exact amount of the money advanced.  Hence to ask for more in the form of interest was illegal and immoral, “like selling a loaf of bread and then charging in addition for the use of it” (Birnie, 1952: 6).  Or, as Aquinas intimated in his Summa Theologiae, it would be to sell the same thing twice (Ruston, 1993).

 

Usury as Exploitation of the Needy

 

The condemnation of usury in the form of charging for loans to the poor and destitute is a recurring theme in several traditions.  This is clearly the contextual meaning of the Judaic biblical passages in Exodus and Leviticus (Encyclopedia Judaica, 1971) and Ruston suggests that “the original target of the medieval usury laws was the medieval equivalent of  the ‘loan shark’ [but that] the medieval theory was unsatisfactory because it could not distinguish the helpful  loan from the oppressive” (1993: 173).  Sir Sayyed’s school in Islam similarly interprets riba as “the primitive form of money-lending when money was advanced for consumptional purposes” (Ahmed, 1958: 21).  In the Indian tradition, this understanding of usury can be also found, as is evident from this twentieth century quote:  “It is Usury - the rankest, most extortionate, most merciless Usury - which eats the marrow out of the bones of the raiyat [cultivators] and condemns him to a life of penury and slavery" (Jain, 1929: 110-111).

 

Ruston (1993) claims usury as exploitation of  the needy still exists in modern times.  He cites as an example the findings of a 1992 Policy Studies Institute report which concludes that the poor pay more in absolute terms for their money, while seeking credit only for absolute necessities rather than to finance the acquisition of luxury goods which they cannot afford.  This is borne out by a recent study by the National  Consumer Council (1995) on financial services and low income consumers; as one respondent put it: “It's like being caught, gotcha, and then they [the banks/lenders] start winding you in”.  Hence, the poor have to sweat doubly so that the rich might live on interest. 

 

A parallel modern argument relates to the devastating social impact of the so-called “Third World debt crisis”, a situation which even Pope John Paul II (1989) acknowledges in his Sollicitude Rei Socialis when he states:  “Capital needed by the debtor nations to improve their standard of living now has to be used for interest payments on their debts”.  This critical modern manifestation of usury is dealt with in more depth and detail in the comprehensive works of Susan George,  A Fate Worst Than Debt (1988) and The Debt Boomerang (1992), among numerous others.  For now, it is only worth pointing out to critics of the Islamic interest-free banking system that if sovereign debt during the 1970’s had been advanced on an equity investment basis, debtor countries would not have been caught on the rack of compounding interest at rates established by non-domestic macroeconomic factors.  Servicing costs could not have burgeoned whilst at the same time most commodity prices paid to debtor nations collapsed.  Return on capital and perhaps capital repayment itself, being commensurate with a nation’s economic wellbeing, would have fluctuated in accordance with ability to pay.  The debtor nations would therefore have enjoyed fiscal security akin to that of a low geared company. Of course, the fact that much sovereign debt comprised recycled dollars from oil producing Moslem countries is an irony, and a disgrace, that should escape notice no more than eyes should be averted to the hypocricy of usury-promoting countries such as Britain and the United States whose leaders often proclaim Christian values.  Be that as it may, by applying the Islamic approach, a lot of human misery could have been avoided.  Applying the same principle, this could be the case for the countless individuals and enterprises caught in the trap of impoverishment through non-sovereign debt.

 

Usury as a Mechanism of Inequitable Redistribution of Wealth

 

The observation that usury acts as a mechanism by which 'the rich get richer and the poor get poorer' is common to several traditions.  Islam rejects financial interest on the basis that it contradicts the Principle of Distributive Equity which its political economy strives to enshrine:  “Interest in any amount acts in transferring wealth from the assetless section of the population” (Choudhury and Malik, 1992: 51).  Coming from a totally different perspective as a self declared ‘individualist’, Birnie reaches a similar conclusion:  “Interest, by making capital a quasi-monopoly, effectually prevents the establishment of a true competitive system” (1958: 1).  Kennedy (1992) provides some excellent empirical evidence of this phenomenon which relates to Germany in 1982.  She shows that, while the poorest 2.5 million households paid out (net) DM 1.8 billion in interest, the richest 2.5 million households received (net) DM 34.2 billion.  She even goes on to suggest that this covert redistributive mechanism technically works against the constitutional rights of the individual in most countries given that money is a government service to which the public should have equal access.

 

The psychological effect of this on the relatively poor can be seen to be magnified when merely quantitative evaluation of transfers from poor to rich  is superceded by consideration of the qualitative cost of such a wealth transfer.  For the relatively rich, the utility gain provided by usury is marginal to the already substantial utility of the principal sum.  The principle of the diminishing marginal utility of wealth therefore applies to each incremental unit of wealth procured by interest earnings.  The poor, however, experience the converse of this.  For them, the loss in utility incurred by having to pay interest is qualitatively much greater than the gain to the rich.  Each unit of interest paid incurs increasing marginal utility loss.  Permitting usury to operate in an economy therefore reduces overall utility in the economy.  This must count as one of the strongest arguments against usury.  Any justification of it as an efficient economic instrument would have to first demonstrate that it functions to increase total utility.  In the absence of such demonstration, it can justifiably be condemned as a tool of tyranny.

 

Usury as an Agent of Economic Instability

 

Gesell’s (1904) main objection to interest is that it is an endemic factor in the instability of interest-based economies, i.e. the cycles of boom and bust, recession and recovery.  Similarly, Ahmad, arguing from an Islamic perspective, claims “the greatest problem in the capitalist economy is that of the crises [and] interest plays a peculiar part in bringing about the crises” (1958: 36).  Even Keynes, the campaigner for interest-based monetary policy, admits the fact that “the rate of interest is not self-adjusting at the level best suited to the social advantage but constantly tends to rise too high” (1936: 350).  Kennedy (1995) is bolder, suggesting that the compounded growth of interest may in fact cause inflation.  She shows, for instance, how in Germany, while government income, Gross National Product and the salaries and wages of the average income earner rose by about 400% between 1968 and 1989, the interest payments of the government rose by 1,360% which she claims implies an inflationary effect.

 

Usury as Discounting the Future

 

The last reason cited for condemning usury relates to the concept and practice of discounting future values.  Because compound interest results in an appreciation in invested monetary capital, it is presumed rational for people to prefer having a specified amount of currency now than the same amount some time in the future.  This simple and rarely questioned logic has several disastrous implications.  For instance, Pearce and Turner (1990) note that discounting affects the rate at which we use up natural resources - the higher the discount rate (derived partly from the interest rate), the faster the resources are likely to be depleted.  Daly and Cobb (1990) take this observation to its logical conclusion and show that discounting can lead to the “economically rational” extinction of a species, simply if the prevailing interest rate happens to be greater than the reproduction rate of the exploited species.  Another consequence of the discounting principle, argued by Kula, is that “in evaluating long term investment projects, particularly those in which the benefits and costs are separated from each other with a long time interval, the net present value rules guide the decision maker to maximise the utility of present generations at the expense of future ones” (1981: 899).

 

In this context it is fitting to observe that a key feature that distinguishes financial economy from nature’s economy is that the one operates on a compound interest basis, whereas the other is based on simple interest.  Money deposited in the bank may yield 10% plus interest on the compounded sum next year, but in nature, if you leave this year’s crop of apples on the tree, you are unlikely to pick a compoundedly heavier crop next year!  Accordingly, usury permits a disjunction between financial and ecological economy.  The result is either the progressive destruction of nature, or in the absence of redistributive social justice, an inbuilt necessity for periodic financial crashes throughout history.  The point is well made by the illustration that if Judas Iscariot had invested his thirty pieces of silver at just a few percentage points compound, repayable in silver as of today, the amount of silver required would be equivalent to the weight of the Earth.

 

The implicit ethics, or dearth thereof, of discounting can be used to illustrate clearly why usury corrupts the natural world as well as social relations.  For instance, consider the impact of net present value discounted cash flow methodolgy in appraising the trade-off between natural and human made capital which, over the fullness of time, can usually be justified only if the utility of future generations is discounted (McIntosh, 1996).  This violates intergenerational equity - a key principle of sustainable development recognised by both the 1987 Brundtland Commission and the 1992 Rio Earth Summit of the United Nations.  It also violates an age old percept of right livelihood which flies in the face of the presumption of time value of money on which interest rates are based: that is, it violates the presumption of many traditional land users that the land should be handed on to the next generation in at least as good heart as it was inherited from the forebears.  Discounting, as the counterpoint of usury, can be thus exposed as rueful device employed to justify theft of the children’s future.  Exploration of the theoretical basis and practical illustrations of this argument perhaps provides much scope for future micro and macroeconomic research in ecological economics.

 http://en.wikipedia.org/wiki/Usury
Usury (pron.: /ˈjuːʒəri/^[1][2]) is the practice of making unethical or immoral monetary loans. Depending on the local laws or social mores, a loan may be considered usurious because of excessive or abusive interest rates. According to some jurisdictions and customs, simply charging any interest at all can be considered usury.^[3][4][5] Other terms used for usury or usurers include loan shark, as well as Shylock which is sometimes used with an antisemitic connotation.
The term may be used in a moral sense — condemning taking advantage of others' misfortunes — or in a legal sense where interest rates may be regulated by law. Historically, some cultures (e.g. Christianity in much of Medieval Europe, Islam in many parts of the world today) have regarded charging any interest for loans as sinful and most still do today.
Some of the earliest known condemnations of usury come from the Vedic texts of India. Similar condemnations are found in religious texts from Buddhism, Judaism, Christianity, and Islam (the term is riba in Arabic and ribbit in Hebrew).^[6] At times many nations from ancient China to ancient Greece to ancient Rome have outlawed loans with any interest. Though the Roman Empire eventually allowed loans with carefully restricted interest rates, in medieval Europe, the Christian church banned the charging of interest at any rate (as well as charging a fee for the use of money, such as at a bureau de change).
The pivotal change in the English-speaking world seems to have come with the permission to charge interest on lent money^[7]: particularly the 1545 act "An Act Against Usurie" (37 H.viii 9) of King Henry VIII of England (see book references).

Contents 1 Historical meaning 2 Religious context 2.1 Hebrew Bible 2.2 New Testament 2.3 Qur'an 2.4 Scholastic theology 3 Other contexts 3.1 Usury in literature 3.2 Usury and the law 3.3 Usury and royalties 3.4 Usury and slavery in present day 3.5 Usury statutes in the United States 3.6 Usury statutes in Canada 4 Avoidance mechanisms and interest-free lending 4.1 Islamic banking 4.2 Non-recourse mortgages 4.3 Interest-free banks 4.4 Interest-free micro-lending 5 See also 6 References 7 Further reading 8 External links

Historical meaning

This article's tone or style may not reflect the encyclopedic tone used on Wikipedia. See Wikipedia's guide to writing better articles for suggestions. (March 2010)

Main articles: History of banking and History of pawnbroking

Banking during Roman times was different from modern banking. During the Principate, most banking activities were conducted by private individuals, not by such large banking firms as exist today; almost all moneylenders in the Empire were private individuals because anybody that had any additional capital and wished to lend it out could easily do so.^[8]
The rate of interest on loans varied in the range of 4–12 percent; but when the interest rate was higher, it typically was not 15–16 percent but either 24 percent or 48 percent. The apparent absence of intermediary rates suggests that the Romans may have had difficulty calculating the interest due on anything other than mathematically convenient rates. They quoted them on a monthly basis, as in the loan described here, and the most common rates were multiples of twelve. Monthly rates tended to range from simple fractions to 3–4 percent, perhaps because lenders used Roman numerals.^[9]
Moneylending during this period was largely a matter of private loans advanced to persons short of cash, whether persistently in debt or temporarily until the next harvest. Mostly, it was undertaken by exceedingly rich men who were prepared to take on a high risk if the profit looked good; interest rates were fixed privately and were almost entirely unrestricted by law. Investment was always regarded as a matter of seeking personal profit, often on a large scale. Banking was of the small, back-street variety, run by the urban lower-middle class of petty shop-keepers. By the 3rd century, acute currency problems in the Empire drove them into decline.^[10] The rich who were in a position to take advantage of the situation became the money-lenders when the ever-increasing tax demands in the last declining days of the Empire crippled and eventually destroyed the peasant class by reducing tenant-farmers to serfdom. It was evident that usury meant exploitation of the poor.^[11]
The First Council of Nicaea, in 325, forbade clergy from engaging in usury^[12] (canon 17). At the time, usury was interest of any kind, and the canon merely forbade the clergy to lend money on interest above 1 percent per month (12.7% APR). Later ecumenical councils applied this regulation to the laity.^[12][13]
Lateran III decreed that persons who accepted interest on loans could receive neither the sacraments nor Christian burial.^[14] Pope Clement V made the belief in the right to usury a heresy in 1311, and abolished all secular legislation which allowed it.^[15] Pope Sixtus V condemned the practice of charging interest as "detestable to God and man, damned by the sacred canons and contrary to Christian charity."^[15]
Theological historian John Noonan argues that "the doctrine [of usury] was enunciated by popes, expressed by three ecumenical councils, proclaimed by bishops, and taught unanimously by theologians."^[13]
Certain negative historical renditions of usury carry with them social connotations of perceived "unjust" or "discriminatory" lending practices. The historian Paul Johnson, comments:

Most early religious systems in the ancient Near East, and the secular codes arising from them, did not forbid usury. These societies regarded inanimate matter as alive, like plants, animals and people, and capable of reproducing itself. Hence if you lent 'food money', or monetary tokens of any kind, it was legitimate to charge interest.^[16] Food money in the shape of olives, dates, seeds or animals was lent out as early as c. 5000 BC, if not earlier. ...Among the Mesopotamians, Hittites, Phoenicians and Egyptians, interest was legal and often fixed by the state. But the Hebrew took a different view of the matter.^[17]

The Hebrew Bible regulates interest taking. Interest can be charged to strangers but not between Hebrew.

Deuteronomy 23:19 Thou shalt not lend upon interest to thy brother: interest of money, interest of victuals, interest of any thing that is lent upon interest. Deuteronomy 23:20 Unto a foreigner thou mayest lend upon interest; but unto thy brother thou shalt not lend upon interest; that the LORD thy God may bless thee in all that thou puttest thy hand unto, in the land whither thou goest in to possess it.^[18]

Israelites were forbidden to charge interest on loans made to other Israelites, but allowed to charge interest on transactions with non-Israelites, as the latter were often amongst the Israelites for the purpose of business anyway, but in general, it was seen as advantageous to avoid getting into debt at all to avoid being bound to someone else. Debt was to be avoided and not used to finance consumption, but only when in need. However, the laws against usury were among the many which the prophets condemn the people for breaking.^[19]
Johnson contends that the Torah treats lending as philanthropy in a poor community whose aim was collective survival, but which is not obliged to be charitable towards outsiders.

A great deal of Jewish legal scholarship in the Dark and the Middle Ages was devoted to making business dealings fair, honest and efficient.^[20]

Usury (in the original sense of any interest) was at times denounced by a number of religious leaders and philosophers in the ancient world, including Plato, Aristotle, Cato, Cicero, Seneca,^[21] Aquinas,^[22] Muhammad,^[23] Jesus,^[24] Moses,^[25] Philo^{[citation needed]} and Gautama Buddha.^[26] For example, Cato in his De Re Rustica said:

"And what do you think of usury?" — "What do you think of murder?"

Interest of any kind is forbidden in Islam. As such, specialized codes of banking have developed to cater to investors wishing to obey Qur'anic law. (See Islamic banking)
As the Jews were ostracized from most professions by local rulers, the church and the guilds, they were pushed into marginal occupations considered socially inferior, such as tax and rent collecting and moneylending. Natural tensions between creditors and debtors were added to social, political, religious, and economic strains.^[27]

...financial oppression of Jews tended to occur in areas where they were most disliked, and if Jews reacted by concentrating on moneylending to non-Jews, the unpopularity — and so, of course, the pressure — would increase. Thus the Jews became an element in a vicious circle. The Christians, on the basis of the Biblical rulings, condemned interest-taking absolutely, and from 1179 those who practiced it were excommunicated. Catholic autocrats frequently imposed the harshest financial burdens on the Jews. The Jews reacted by engaging in the one business where Christian laws actually discriminated in their favor, and became identified with the hated trade of moneylending.^[28]

In England, the departing Crusaders were joined by crowds of debtors in the massacres of Jews at London and York in 1189–1190. In 1275, Edward I of England passed the Statute of Jewry which made usury illegal and linked it to blasphemy, in order to seize the assets of the violators. Scores of English Jews were arrested, 300 were hanged and their property went to the Crown. In 1290, all Jews were expelled from England, and allowed to take only what they could carry; the rest of their property became the Crown's. The usury was cited as the official reason for the Edict of Expulsion. However, not all Jews were expelled: it was easy to convert to Christianity and thereby avoid expulsion. Many other crowned heads of Europe expelled the Jews, although again conversion to Christianity meant that you were no longer considered a Jew (see the articles on marranos or crypto-Judaism).
The growth of the Lombard bankers and pawnbrokers, who moved from city to city was along the pilgrim routes.

Die Wucherfrage is the title of a Lutheran Church - Missouri Synod work against usury from 1869. Usury is condemned in 19th century Missouri Synod doctrinal statements.^[29]

In the 16th century, short-term interest rates dropped dramatically (from around 20–30% p.a. to around 9–10% p.a.). This was caused by refined commercial techniques, increased capital availability, the Reformation, and other reasons. The lower rates weakened religious scruples about lending at interest, although the debate did not cease altogether.
The papal prohibition on usury meant that it was a sin to charge interest on a money loan. As set forth by Thomas Aquinas, the natural essence of money was as a measure of value or intermediary in exchange. The increase of money through usury violated this essence and according to the same Thomistic analysis, a just transaction was one characterized by an equality of exchange, one where each side received exactly his due. Interest on a loan, in excess of the principal, would violate the balance of an exchange between debtor and creditor and was therefore unjust.
Some have suggested that the development of double entry bookkeeping would provide a powerful argument in favor of the legitimacy and integrity of usury but this is an obvious non-sequitur. Business has always been accepted as a right and proper activity^[30] by all cultures, including those that reject usury.

Religious context

Hebrew Bible

From Jewish Publication Society 1917 Tanakh.^[31] Christian verses in parentheses.

Exodus 22:24 (25) — If thou lend money to any of My people, even to the poor with thee, thou shalt not be to him as a creditor; neither shall ye lay upon him interest.

Leviticus 25:36 — Take thou no interest of him or increase; but fear thy God; that thy brother may live with thee.

Leviticus 25:37 — Thou shalt not give him thy money upon interest, nor give him thy victuals for increase.

Deuteronomy 23:20 (19) — Thou shalt not lend upon interest to thy brother: interest of money, interest of victuals, interest of any thing that is lent upon interest.

Deuteronomy 23:21 (20) — Unto a foreigner thou mayest lend upon interest; but unto thy brother thou shalt not lend upon interest; that the LORD thy God may bless thee in all that thou puttest thy hand unto, in the land whither thou goest in to possess it.

Ezekiel 18:17 — that hath withdrawn his hand from the poor, that hath not received interest nor increase, hath executed Mine ordinances, hath walked in My statutes; he shall not die for the iniquity of his father, he shall surely live.

Psalm 15:5 — He that putteth not out his money on interest, nor taketh a bribe against the innocent. He that doeth these things shall never be moved.

New Testament

This article may be confusing or unclear to readers. Please help us clarify the article; suggestions may be found on the talk page. (March 2011)

Christ drives the Usurers out of the Temple, a woodcut by Lucas Cranach the Elder in Passionary of Christ and Antichrist.^[32]

The New Testament contains references to usury, notably in the Parable of the talents:

"Thou oughtest therefore to have put my money to the exchangers, and then at my coming I should have received mine own with usury."

—Matthew 25:27

"Well then, you should have put my money on deposit with the bankers, so that when I returned I would have received it back with interest.."

—Matthew 25:27

"…Out of thine own mouth will I judge thee, thou wicked servant. Thou knewest that I was an austere man, taking up that I laid not down, and reaping that I did not sow. Wherefore then gavest not thou my money into the bank, that at my coming I might have required mine own with usury?"

—Luke 19:22-23

Qur'an

Main articles: Riba and Islamic banking

The following quotations are English translations from the Qur'an:

Those who charge usury are in the same position as those controlled by the devil's influence. This is because they claim that usury is the same as commerce. However, God permits commerce, and prohibits usury. Thus, whoever heeds this commandment from his Lord, and refrains from usury, he may keep his past earnings, and his judgment rests with God. As for those who persist in usury, they incur Hell, wherein they abide forever (Al-Baqarah 2:275)

God condemns usury, and blesses charities. God dislikes every disbeliever, guilty. Those who believe and do good works and establish worship and pay the poor-due, their reward is with their Lord and there shall no fear come upon them neither shall they grieve. O you who believe, you shall observe God and refrain from all kinds of usury, if you are believers. If you do not, then expect a war from God and His messenger. But if you repent, you may keep your capitals, without inflicting injustice, or incurring injustice. If the debtor is unable to pay, wait for a better time. If you give up the loan as a charity, it would be better for you, if you only knew. (Al-Baqarah 2:276-280)

O you who believe, you shall not take usury, compounded over and over. Observe God, that you may succeed. (Al-'Imran 3:130)

And for practicing usury, which was forbidden, and for consuming the people's money illicitly. We have prepared for the disbelievers among them painful retribution. (Al-Nisa 4:161)

The usury that is practiced to increase some people's wealth, does not gain anything at God. But if people give to charity, seeking God's pleasure, these are the ones who receive their reward many fold. (Ar-Rum 30:39)

http://ribh.wordpress.com/chariaa/usury-in-the-bible/

The prohibition of « usury » in the Bible

It is a common misconception among non-believers that the world of God and the world of money do not intersect. Actually most religions handled economic issues. The Bible has over 1,000 verses that discuss money and provide financial advice.

The prohibition against usury (compound interest) is not confined to the Qur’an, but is also found in the Bible. The Bible is very explicit in its disapproval of usury. The book of Ezekiel, for instance, compares usurious lending to extortion and murder for hire, and threatens major hellfire for those who practice it.

Jesus expelling the money changers from the Temple

The following are taken from the King James version of the Bible :

25  » If you lend money to any of My people who are poor among you, you shall not be like a moneylender to him; you shall not charge him interest.

26 « If you ever take your neighbor’s garment as a pledge, you shall return it to him before the sun goes down.

27 « For that is his only covering, it is his garment for his skin. What will he sleep in? And it will be that when he cries to Me, I will hear, for I am gracious. (Exodus 22:25-27)

36 ‘Take no usury or interest from him; but fear your God, that your brother may live with you.

37 ‘You shall not lend him your money for usury, nor lend him your food at a profit. (Leviticus 25:36-37)

19  » You shall not charge interest to your brother — interest on money or food or anything that is lent out at interest.
(Deuteronomy 23:20)

10 Woe is me, my mother, That you have borne me, A man of strife and a man of contention to the whole earth! I have neither lent for interest, Nor have men lent to me for interest. Every one of them curses me. (Jeremiah 15:10)

7 If he has not oppressed anyone, But has restored to the debtor his pledge; Has robbed no one by violence, But has given his bread to the hungry And covered the naked with clothing;

8 If he has not exacted usury Nor taken any increase, But has withdrawn his hand from iniquity And executed true judgment between man and man;

9 If he has walked in My statutes And kept My judgments faithfully — He is just; He shall surely live! » Says the Lord GOD. (Ezekiel 18:7-9)

13 If he has exacted usury Or taken increase — Shall he then live? He shall not live! If he has done any of these abominations, He shall surely die; His blood shall be upon him. (Ezekiel 18:13)

17 Who has withdrawn his hand from the poor And not received usury or increase, But has executed My judgments And walked in My statutes — He shall not die for the iniquity of his father; He shall surely live! (Ezekiel 18:17)

12 « In you they take bribes to shed blood; you take usury and increase; you have made profit from your neighbors by extortion, and have forgotten Me, » says the Lord GOD. (Ezekiel 22:12)

Source : WhatReallyHappened – WRH

« L’islam aide, en ce moment, la tradition chrétienne à renaître et à reprendre son rôle vital contre la déshumanisation de l’homme occidental. »
Maria Poumier

Spécialiste de l’histoire et de la littérature latino-américaine et traductrice, Maria Poumier a été maître de conférences à l’université de La Havane puis à l’Université de Paris VIII.  Ses thèmes de recherche s’articulent autour de sujets comme Cuba, l’Amérique Latine, l’histoire et la littérature des XIXe-XXe siècles. Elle est traductrice de nombreux ouvrages.

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