Author Topic: Islamic finance as a solution to the Usury Problem?  (Read 410 times)

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Offline Alpha60

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Islamic finance as a solution to the Usury Problem?
« on: June 20, 2018, 07:16:56 PM »
Bearing in mind a rose by any other name would smell, in the case of Islam, rather less unpleasant, and that every rose has its thorns, and in the case of things Islamic the Orthodox experience has historically involved prehensile venemous horns as if someone had genetically hybridized a rose with a scorpion, I found myself considering this:

We have, of late, been discussing heavily and with merit Patristic prohibitions on usury.  Modern economies however depend heavily on financial systems that rely on exchange rate mechanisms, and these financial systems, despite their propensity to occasionally malfunction severely, also appear directly responsible for great growth, and the existence of them in the West but not in COMECON may well have played a substantial part in the collapse or marginalization of communism.   The Islamic countries, using what is probably much casuistry, have implemented systems of financial transactions to avoid violating the vigorously enforced ban on usury in their religion, which amounts to a ban on interest rates, while still providing financial services that are almost on a par with basic Western financial products.

Could something based on these systems therefore prove a viable alternative to an usury-based model in a hypothetical Orthodox state, or do these systems of Islamic finance merely legal fictions designed to dissimulate the actual practice of usury by exploiting loopholes in Sharia law?   I am inclined to suspect the latter, but the question seemed worth asking.

Council of Nicea:
Εθη ἀρχαῖα κρατείτω. 
Mores antiqui obtineant.
The ancient ways shall prevail.

The sentiment of Nicea in Greek and Latin, translated into English.

Offline Volnutt

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Re: Islamic finance as a solution to the Usury Problem?
« Reply #1 on: June 20, 2018, 11:26:38 PM »
Being more or less innumerate, I don't have much to contribute. But good on you for actually trying to suggest a solution.
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Offline Samn!

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Re: Islamic finance as a solution to the Usury Problem?
« Reply #2 on: June 21, 2018, 04:19:42 AM »
There are basically two ways that 'Islamic finance' goes about simulating interest. One is basically requiring that a loan/deposit amount to an equity stake and thus share in profits or loss. The other is that when an individual or business takes out a loan, they pay the lender a premium on the cost of what they're taking out the loan to buy. So if you buy a house valued at 100,000$, you agree to pay the bank, who holds ownership of the house until paid in full, like a mortgage, say 125,000$.  The wiki on this system is reasonably detailed:

Both these methods in theory avoid the evils of compound interest, which is clearly usurious in a classical Christian framework.