That's not true. Islamic finance forbids indefinitely growing interest. Sharia finance agreements involve fixed fees or equity shares. Late penalties can be collected but must be donated, not profit. In all cases, the borrower never owes to the lender for the lender to keep more an a fixed amount determined at the strat.
Debt is generally cheaper because lenders face lower risk. Because debtors hold priority claims on assets during liquidation and receive guaranteed fixed payments, they demand lower returns. In contrast, equity investors require higher returns for taking on higher risks.
Companies also often prefer debt because it doesn't dilute shareholders which issuing new shares would do.
It is funny that usury is so evil in Islam at the same time Islam very clearly allows men to own and rape female slaves, "those whom your right hands possess" (ma malakat aymanukum).
Those slaves being raped must be so comforted by knowing that Islam forbids cash loans at reasonable interest rates.
a stranger is asking you to risk $100k on his half-baked plan in exchange for nothing, and you say "sure go ahead take my money!"? no. it doesn't work like that in the islamic world.
as a borrower who's not allowed to compensate for your lenders' risk monetarily, your access to loans is severely restricted. Essentially you have to rely on your extended family. and instead of paying for the risk with interest payments, you have to pay with loyalty and subservience.
it restricts social mobility far more than the western model. it incentivizes clan structures. which incentivize cousin marriage.
power concentrates in the patriarchs of a million little family kingdoms. which causes all kinds of economic inefficiencies.
in the US, even if you're born without any family connections, as a healthy 20 year old you can find a job (hard work) that allows you to save $70k per year and invest it. when you're 30 you have $1M and a good credit history, you can easily leverage that to get a $2M loan at low interest rates, which allows you to start any kind of productive venture you want.
and you can do all this without owing your clan's patriarch access to e.g. your most profitable clients, or your daughters hand in marriage to his retarded son, or anything else he wants in exchange for his generosity.
If you don't understand the difference between a loan for 5% interest and 7 freaking percent of your entire company then you really don't understand finance at all.
The only person confused here is you. It is best you don’t take these topics personally and try to understand it from an objective point of view rather personal dogma.
All interest is usury in Islamic Law (and the laws before it such as Christianity and Judaism). There are ways to to put free cash into productive use without exploitation.
If going by the very poor economic performance of Muslim countries I would say interest is a very good thing if limited to reasonable interest rates and fair bankruptcy laws.
Correlation vs causation (post WWI colonization comes to mind, that continues to this day). Historically, there was a period of time when there were no poor people left to take Zakat, everyone paid their share, and no usurious transactions permitted.
Historically, there was a period of time when there were no poor people left to take Zakat, everyone paid their share, and no usurious transactions permitted.
This is worth treating carefully. There are sources like Ibn Kathir and al-Tabari writing centuries later which claimed that Zakat collectors would return with unspent funds because eligible recipients could not be found. Even if we take this at face value, that's a leap from there being no poor people left. Did it apply to the entire empire or only a few regions? How likely was the collector to actually find recipients if they existed in a given region? etc...
Point is to refute the claim the current situation in some Muslim countries is caused by Islam, instead of it being a direct consequence of colonialism.
