Interest Prohibition And Financial Product Innovation
The authors give a rough sketch of the Judaic, Greek, Islamic and Christian positions in the matter of interest prohibition during the last few millennia and discuss the way in which interest prohibition is dealt with in Islamic finance, the problems with authority-based arguments for interest prohibition, and the prospects of interest prohibition with the advent of electronic money. Many different words in different languages have been used for interest. In particular, usury went from denoting all forms of interest to denoting excessively high interest rates. Preventing or forbidding the occurrence of usury in the latter sense has become standard practice in the Western world. Forbidding the occurrence of usury in the former sense underlies Islamic finance.