Today, no one is surprised that a bank will give a loan at 15% per annum. But some 500 years ago, such an interest rate would have been considered not just robbery, but a sin capable of destroying the soul. What happened to this taboo? Why did almost all major world religions ban interest? And most importantly, how did they cope with this ban when life dictated its terms?
From Mesopotamia to the Middle Ages
The first prohibitions on usury appeared not in religious texts, but in legislative codes. In ancient Mesopotamia, Hammurabi’s law limited the interest rate on grain loans to 33.3% and silver loans to 20%. Interest on interest (usury) was punishable. This was a rational restriction in a society where debts easily became slavery.
Later, the prohibitions took on a moral connotation. The Old Testament states: “Thou shalt not take interest from thy brother” (Deuteronomy 23:19). In Judaism, this prohibited exploiting poor members of one’s tribe. Lending money at interest to a “stranger” was permitted. But then this prohibition began to be extended to others. For example, Philo of Alexandria attempted to interpret “brother” more broadly as any Jewish community member.
Interest as a Moral Vice in Christianity
In the New Testament, as we know, the rules are even stricter. Jesus says explicitly: “lend, expecting nothing in return” (Luke 6:35). This is no longer a question of belonging to a people, but a universal ethical principle. However, even here, things are not so simple. In the same Gospel parable (Luke 19:23), the hero reproaches his servant for not taking the money to the bank and earning interest. Something suggests that morality is morality, but money should not lie idle.
The Church in the Middle Ages interpreted everything unambiguously. Interest was considered a sin because you take payment for time, and time belongs to God. Usury was compared to theft. Money, as they said then, should not generate money.
Element of Social Justice in Islam
The Quran’s strictest religious position is that it prohibits ribā (interest) and equates it with moral decay: “They will say: Trade is like growth.
But Allah has permitted trade and forbidden growth” (Sura 2:275). Hadiths compare usury to incest in terms of the level of sin. In pre-Islamic Arab society, interest rates were often doubled or tripled, and such practices became the subject of criticism.
Interestingly, Islam developed a whole parallel financial system where profits are earned not through interest but through equity schemes such as partnerships, leases, and joint ventures. Modern Islamic banks still operate according to this logic.
Aristotle and philosophers
But it wasn’t just religions that opposed usury. Aristotle also thought it was unnatural. He wrote, “Money should not beget money.” In other words, money should be a medium of exchange, not a tool for making money. This idea later had a big impact on Christian thought, especially Scholasticism.
Social Fear of Debt
One must remember how people lived to understand the widespread aversion to interest. A poor harvest, war, or disease can put you in debt. Then, your house, your family, and your freedom are mortgaged. In Mesopotamia, it was possible to fall into debt slavery, not metaphorically but literally. In ancient Rome, children could be sold for debts.
How the Ban Was Circumvented
The ban on interest is, in essence, an attempt to protect the weak. It was not only a moral imperative, but also a tool for stabilization: one person should not be allowed to become poor while another becomes rich at their expense.
When society considers something a sin but cannot do without it, loopholes arise. This is precisely what happened with interest. Despite the prohibitions, trade developed, merchants became bankers, and the economy demanded lending instruments. However, in order not to formally violate the prohibitions, workarounds were found.
Partnership instead of credit
Instead of lending money, people began to enter into investment agreements. The money was supposedly invested in a common cause, and the “interest” was no longer a reward for time, but an honest share of the profits.
- In Judaism, this was formalized as a hetter iska agreement, in which the borrower became a partner.
- In Islam, mudaraba and musharaka schemes were used: one party contributed capital, the other worked, and the profits were shared.
- In the Christian tradition, societas, a Roman form of partnership with risk sharing, was used.
In essence, this was a loan disguised as an investment. However, since profit was not guaranteed, the prohibition was not violated.
Sale with repurchase
One of the most common workarounds is double selling. The seller sells the goods in installments at a higher price and repurchases them immediately at a lower cost. The price difference is essentially the interest.
- In the Islamic tradition, this method is known as ‘īna.
- In Christian Europe, it was called scrocco or mohatara.
From a legal point of view, everything looked legitimate: just two transactions. But everyone understood that this was a veiled loan.
Compensation for losses
In the Catholic tradition, several concepts emerged at once that allowed interest to be justified as fair compensation:
- Damnum emergens is compensation for actual expenses (for example, if the lender loses the opportunity to use their money).
- Lucrum cessans is compensation for lost profits.
- Poena conventionalis is a penalty for late payment.
All these arguments made it possible to charge interest “amicably,” as if not for time, but for fairness. As a result, interest returned to Europe through the back door, first in merchant law, then in banking practice.
The irony is that the church was also involved!
Paradoxically, even the church, which prohibited usury, earned money from loans. How? Through front men, legal constructs, and intermediaries. In the 14th century in Italy, church institutions were already openly involved in financing, calling interest “contributions,” “compensation for risk,” etc.
The ban on interest did not last for two reasons. First, markets became more complex. Merchants traveled between cities, and trade required working capital. Without loans, businesses simply could not grow.
Second, a new philosophy emerged: money has value. If you give your money to someone else, you lose the opportunity to earn it yourself. Therefore, it is logical to ask for compensation. This idea prevailed during the Renaissance and finally triumphed with the advent of capitalism.
Today
In the modern world, interest is the foundation of the entire banking system. Prohibitions have almost disappeared, remaining only in Islamic banking, where ribā-free schemes are still in place. But even there, everything looks like an investment, rent, or trade. They are just different names for the same thing: interest.
Prohibitions on interest were not the whim of fanatics, but a logical way to curb the scourge of debt. However, as society became more stable and the market became a key institution, the logic of the prohibition lost its relevance. Only one thing remained: the moral memory that money can be an instrument of development and a means of destruction.
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