Pbs: Islam And Financing

O ye who believe! Fear Allah, and give up what remains of your demand for usury (i.e., the interest due on a fixed deposit, or on any other loan on interest), if ye are indeed believers. If ye do it not (i.e. if you persist in your claim or demand for the interest due to you), then take notice of (a declaration of) war from Allah and His Messenger: but if ye turn away (from such claim or demand), then you are entitled to the return of your capital sum (placed in the fixed deposit or otherwise lent); do not enter into (such) unjust transactions, nor allow yourselves to be subjected to such.

If (you forgo the interest due to you and then find) the debtor in a difficulty (in respect of returning the capital sum that was lent to him on interest), grant him time till it is easy for him to repay. But if ye remit it by way of charity, that is best for you if ye only knew.

And (in this matter in particular, i.e., lending money on interest) fear the Day when ye shall be brought back to Allah. Then shall every soul be paid what it earned, and none shall be dealt with unjustly. (Quran, al-Baqarah, 2:278-281)

Those who devour usury will not stand (before their Lord for Judgment) except as stands one whom Satan by his touch hath driven to madness.That is because they claim that: Business is like lending on interest, but Allah hath permitted business and forbidden usury. Those who after receiving direction from their Lord, desist, shall be pardoned for the past; their case is for Allah (to judge); but those who persist (in claiming the interest due from fixed deposits or other such loans on interest) are Companions of the Hellfire; they will abide therein (forever).
(Quran, al-Baqarah, 2:275)

Prophet Muhammad (peace be upon him) declared that the consumption of even a Dirham (a silver coin worth a few dollars) of Riba (usury) was equivalent to committing adultery 36 times. He also declared that Riba was comprised of 70 parts and that the smallest part (was so bad that) it was equivalent to a man marrying his own mother. Indeed he cursed all four, and declared that they were all equally guilty—the one who took Riba (i.e., the money-lender), the one who gave Riba (i.e., while paying interst on a loan), the one who recorded the transaction (hence bank personnel), and the two witnesses.

The blessed Prophet declared that any transaction involving an exchange of money for money must be an equal exchange, i.e., with no difference in amount of money exchanged. He declared that an unequal exchange (that would open the door for money to increase over time) would be Riba. Islam also insists that all business transactions must involve risk and hence profit or loss. Allah Most High can then intervene to distribute and redistribute wealth by taking from some and giving to others. In this way the rich would not remain permanently rich, and the poor would not be imprisoned in permanent poverty

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