The scourge of interest can be checked effectively only by closing its floodgates first. As long as interest remains legal, there will be no check on capitalists piling up wealth and it will not be possible for any interest-free system to take off the ground and flourish. The only way to accomplish this is to ban all interests at the very outset. This small initial step will automatically lead to the rise of an interest-free economic system. It is essential to combat interest as earnestly as desired by the Religion of Truth. These include practical measures of banning interest, instituting the Zakāh system, and confiscating the property of those found wilfully violating the prohibition of interest-based transactions. Side by side with these measures, effective programs for public reform through education, training, motivation, and missionary zeal in order to curb people’s inclination for easy money and promote healthier trends and tendencies in them.
End Result of a Ban on Interest
The steps of banning interest and the establishment of a state mechanism for the collection and disbursement of Zakāh will lead to the following revolutionary developments from both the financial and economic points of view:
The first outcome will be a reversal of the current unhealthy trend of capital formation. People will spend according to their requirements and the ‘have-nots’ will continue to receive financial support through Zakāh to satisfy their needs. In such an atmosphere, the profits of trade and industrial sectors are both bound to rise to a level at which they are financially independent. These sectors will also get the desired capital for progress much more easily. Savings will now be motivated by people’s affluence, earning more than they need, and even after generously spending, being left with surplus money with no needy or indigent persons around to share this with. These savings will thus get pooled and passed on much better terms to the government, trade, and industry sectors.
The second most welcome result of the abolition of interest will be the urge of the accumulated capital to flow rather than to stagnate. Without interest, but with the system of Zakāh, capital will automatically cease to be as wayward as it is today. It will be invested in different ventures on reasonable terms and conditions and will keep on circulating instead of lying idle.
Thirdly, as a natural corollary of the abolition of interest, the loans sector will be totally separated from the trade and commerce sector. The moment interest is abolished, the operation of loans will become restricted entirely to the emergent needs only, which carry no profit, and will be managed on the principles of al-Qard al-Hasan (benign loans), offered without any ‘mark up’ and with no stipulated date for its return. As for other requirements, the investment will be made exclusively on the principles of profit and loss sharing.
