Lending, the poor, and Islamic scripture : Islamic finance versus welfare Islam

Abstract

This paper contributes to Islamic studies literature by exploring why many Islamic scholars believe that Islam bans conventional lending and mandates Islamic finance, and how the scriptural injunction against ribā is redefined when we consider the features of modern economic systems. The article advocates the view that ribā and charity are inextricably linked and must therefore be considered together. The latter emphasizes helping the poor and the former prevents exploiting them. Islamic finance, however, has been incepted by juxtaposing trade with lending. The study also discusses the fallacies raised by many Islamic scholars against conventional lending. This manuscript demonstrates the necessity of modernizing our religious understanding to accelerate poverty reduction in the Muslim world.