Islam's Response to Contemporary Issues — Page 182
182 islam’s response to contemporary issues The point which emerges from all this is a very important lesson for policy makers all over the world. Interest as a tool for controlling national economy meddles with the very concept of a free market economy. No economy run on the philosophy of interest-related capital can genuinely be declared to be free when its government has all the power to raise or lower interest rates. The Islamic economic system provides no such measure of exploitation to the government. Other Evils of Interest Perhaps it will not be out of place to mention a few other aspects of interest. The inter-bank interest rate is only paid on wholesale deposits and not on savings account to the average depositor. Despite the compounding effect of interest, the return obtained on a small deposit is far below the true purchasing power of money. Although short-term rates fluctuate, in the long run, interest earned on deposits is below the inflation rate. On the other hand, a similar principal sum invested in some business venture has potential for growth in real terms. In an interest-motivated society, owners of capital are always ready to lend money without investigating the ability of the borrower to repay. On the borrower side, there are few who seriously consider their repayment ability. Little do they know that borrowing from the loan- sharks, the likes of Shylock and prestigious finance houses and banks, is tantamount to borrowing from their own future earnings. It encourages the habit of living beyond one’s resources. It results in over-spending and an increasing inability to repay and honour one’s