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Shiavault - a Vault of Shia Islamic Books Islamic Business Ethics 7.3 Your Business B 2) Haram Business and Trade Money Related Issues Riba and Interest One of the principles of Islamic economics is “the relationship between one's efforts and the amassing of wealth, and the importance of participating in the risk of losing one's wealth as well as increasing it in any economic transaction.

That is why riba or interest is forbidden in Islamic Law ...”[^1] Almighty Allah says: “Those who take interest cannot stand [In their dealing with people] except like the one who has been confounded by the touch of the Satan-this is so because they say, that trade is just like interest.[Whereas] Allah has allowed trade and forbidden interest.

So to whomsoever comes the admonition from his Lord and so he desists [from interest], he shall have what has already passed and his affair is in the hands of Allah; but whosoever returns [to it], then they are the inmates of the Fire, they shall abide in it. Allah does not bless interest, and He causes the charitable deeds to grow.

And Allah does not love any ungrateful sinner.” (2:275-276) The main difference between trade and interest is that risk is involved in the former but not in the latter. So any investment in which risk is involved is allowed but wherever the returns are guaranteed for one party but not the other, then the investment is not allowed. Commenting on the present interest based economic system, Bernard Lietaer, a well-known business professor and former banker, says, “…But money wasn't created by God.

We have forgotten that it's a system designed by people. And I believe that this design, which dates from centuries ago, is at the root of most problems in our society... The monetary system is programmed - albeit not deliberately - to cause certain behavior. It promotes competition and short-term thinking; it forces economic growth, and it undervalues care, education and tasks crucial to maintaining a society.

Economics theory teaches us that people compete for markets and raw materials; I think, in reality, people compete for money.”[^2] So how is the money created? Money is created through borrowing from banks and lending institutions. Professor Lietaer illustrates the ill of interest through an interesting story: There once was a town where the people lived in harmony. Their food, shelter, clothing, and tools came from the land, forests, rivers, and animals around them.