Skip to main content
SpringerLink
Log in

Usury and Just Compensation: Religious and Financial Ethics in Historical Perspective

  • Published:
Journal of Business Ethics Aims and scope Submit manuscript

Abstract

Usury is a concept often associated more with religiously based financial ethics, whether Christian or Islamic, than with the secular world of contemporary finance. The problem is compounded by a tendency to interpret riba, prohibited within Islam, as both usury and interest, without adequately distinguishing these concepts. This paper argues that in Christian tradition usury has always evoked the notion of money demanded in excess of what is owed on a loan, disrupting a relationship of equality between people, whereas interest was seen as referring to just compensation to the lender. Although it is often claimed that hostility towards ‘usury’ has been in retreat in the West since the protestant Reformation, we would argue that the crucial break came not with Calvin, but with Jeremy Bentham, whose critique of the arguments of Adam Smith, upholding the reasonableness of the laws against usury, led to the abolition of the usury laws in England in 1854. There has to be a role for law, whether Islamic or secular, in regulating financial relationships. We argue that by retrieving the necessary distinction between demanding usury as illegitimate predatory lending and interest as legitimate compensation, we can discover common ground behind the driving principles of financial ethics within both Islamic and Christian tradition that may still be of relevance today. By re-examining past ethical discussions of the distinction between usury and just compensation, we argue that the world’s religious traditions can make significant contributions to contemporary debate.

This is a preview of subscription content, log in via an institution to check access.

Access this article

Log in via an institution

Price excludes VAT (USA)
Tax calculation will be finalised during checkout.

Instant access to the full article PDF.

Institutional subscriptions

Similar content being viewed by others

References

  • Andrews, E. L.: 2005, ‘International Business: Snow Urges Consumerism on China Trip’, New York Times, October 14, p. C1

  • Anon: 1671, A Brief Survey of the Growth of Usury in England and the Mischiefs attending it (London)

  • Anon: 1825, Reasons Against the Repeal of the Usury Laws (London)

  • Aristotle (1952) Great Books of the Western World, vol. 2 (Nicomachean Ethics, Politics). University of Chicago Press, Chicago

    Google Scholar 

  • Aquinas Fund: 2005, ‘LCKM Aquinas Fund: Catholic Value Investing’, http://www.lkcm.com/html/catholic_value.html, 2005, accessed June 7, 2006

  • Ave Maria Fund: 2006, Prospectus. May 1, http://www.avemariafund.com/prospectus.pdf accessed June 7, 2006

  • Baldwin J. W. (1970) Masters, Princes, and Merchants: The Social Views of Peter the Chanter and His Circle. Princeton University Press, Princeton, NJ

    Google Scholar 

  • Baue, W.: 2003, ‘Ave Maria Funds Promote Catholic Values Through Morally Responsible Investing’, http://www.socialfunds.com/news/article.cgi/1219. html accessed June 7, 2006

  • Bentham, J.: 1952 (orig. 1787), Defence of Usury Shewing the Impolicy of the Present Legal Restraints on the Terms of Pecuniary Bargains (T. Payne, and Son, London), reprinted in Jeremy Bentham’s Economic Writings, ed. W. Stark (Allen & Unwin, London), vol. 1, pp. 167–87

  • Cafritz E., Tene O. (2002) Why French Usury Law Must Change. International Financial Law Review 22(12):32–34

    Google Scholar 

  • Center for Responsible Lending/Demos: 2005, ‘The Plastic Safety Net: The Reality Behind Debt in America’ http://www.responsiblelending.org/pdfs/DEMOS-101205.pdf. Accessed 11 June 2006

  • Dow Jones Islamic Fund: No Date, ‘Key Attributes’, http://www.investaaa.com, Accessed June 7, 2006

  • Dunn, S.: 2004, ‘Money: Why ‘Moral’ Investing is a Broad Church’, Independent on Sunday (London), April 25, p. 28

  • The Economist: 1996, ‘Just When you Thought it was Safe...’, The Economist, 7 July, p. 71

  • Ezell, H.: 2005, ‘Your Money: Socially Responsible Funds did Well in ‘04, But Vice did Better’, Atlanta Journal-Constitution, January 23, p. Q5

  • Felton, E.: 2001, ‘In Mutual Funds we Trust’, Wall Street Journal Opinion Journal http://www.opinionjournal.com/taste/?id=95000884, July 27. Accessed November 1, 2005

  • Gittens, R.: 2002, ‘No Usury Please, We’re Bankers’, Sydney Morning Herald, April 1, p. 37

  • Grahame, J.: 1817: Defence of Usury Laws and Considerations on the Probable Consequences of their Projected Repeal (Edinburgh)

  • Hallock M. (2004) Predatory Lending: Legislative and Regulatory Challenges. Bank Accounting & Finance 17(2):42–48

    Google Scholar 

  • Hewitt, P.: 2003, ‘Forward’ in British Department for Trade and Industry, Fair, Clear and Competitive: The Consumer Credit Market in the 21st Century, p. 3

  • Homer S., Sylla R. (1991) A History of Interest Rates, 3rd ed. Rutgers University Press, New Brunswick

    Google Scholar 

  • Howard, P.: 1995, Beyond the Written Word: Preaching and Theology in the Florence of Archbishop Antoninus, 1427–1459 (Olschki, Florence)

  • Hunt E. S., Murray J. M. (1999) A History of Business in Medieval Europe, 1200–1500. Cambridge University Press, Cambridge

    Google Scholar 

  • ICCR: 2003, ‘Faith based Investors Tell Congress Predatory Lending is Bad for Business’, November 9, http://www.iccr.org/news/press_releases/2003/pr_pr edlend.htm accessed June 7, 2006

  • Islamic Bank of Britain: 2006, ‘Halal Personal Finance’, http://www.islamic-bank.com/islamicbanklive/Perso nalFinance/1/Home/1/Home.jsp.accessed June 7, 2006

  • John Paul II, Pope, 1991: http://www.vatican.va/holy_father/john_paul_ii/encyclicals/ documents/hf_jp-ii_enc_01051991_centesimus-annus_en.html

  • Kaye J. (2005) Changing Definitions of Money, Nature, and Equality c. 1140–1270, reflected in Thomas Aquinas’ Question on Usury. In: Quaglioni D., et al (eds): 2005, Credito e usura fra teologia, diritto e amministrazione: linguaggi a confronto, sec. XII–XVI. Ecole française de Rome, Rome, pp 25–55

  • Kedar B. Z. (1969) Arabic: rizq, Medieval Latin: risicum. Studi Medievali 3:255–259

    Google Scholar 

  • Keenan, M.: 2003, ‘Hail Marys Won’t Save ‘Unholy’ Stocks’, National Post (Toronto), August 29, p.␣IN1

  • Kercher, B.: 2000, ‘Why the History of Australian Law is Not English’, http://www.law.mq.edu.au/html/staff/kercher/Castles.htm accessed June 6, 2006

  • Kerridge E. (2002) Usury, Interest and the Reformation. Ashgate, London

    Google Scholar 

  • Langholm O. (1998) The Legacy of Scholasticism in Economic Thought. Cambridge University Press, Cambridge

    Google Scholar 

  • Larkin, N.: 2006, ‘CBA in Remote Losses’, Herald-Sun (Melbourne), January 20, p. 33

  • Lemaître A. J. (2004) Une nouvelle approche. In: Collas-Heddeland E. M., et al. (eds) 2004, Pour une histoire culturelle du risque. Genèse, évolution, actualité du concept dans les sociétés occidentales. Editions Histoire et Anthropologie, Strasbourg, pp. 13–24

    Google Scholar 

  • Leo XIII, Pope: 1891, http://www.vatican.va/holy_ father/leo_xiii/encyclicals/documents/hf_l-xiii_enc_ 15051891_rerum-novarum_en.htm

  • Lewis M. K., Algaoud L. M. (2001) Islamic Banking. Edward Elgar, Cheltenham

    Google Scholar 

  • Little L. K. (1971) Pride Goes before Avarice: Social Change and the Vices in Latin Christendom. American Historical Review 76/1:16–49

    Article  Google Scholar 

  • Little L. K. (1978) Religious Poverty and the Profit Economy in Medieval Europe. Cornell University Press, Ithaca, NY

    Google Scholar 

  • Loomis W. (2006) Theology and Corporate Ethics. Reviews in Religion and Theology 13:149–151

    Article  Google Scholar 

  • Macey, J.: 2005, ‘ASIC Investigates Indigenous Car Loans’, The World at Noon, ABC Radio, 22 September

  • Macquarie Dictionary: 1997, 3rd edn. (Pan Macmillan, Sydney)

  • Maloney R. P. (1972) Early Conciliar Legislation on Usury. Revue de Théologie Ancienne et Médiévale 39:145–157

    Google Scholar 

  • Maloney R. P. (1973) The Teaching of the Fathers on Usury : An Historical Study on the Development of Christian Thinking. Vigiliae Christianae 27:241–265

    Article  Google Scholar 

  • Marx, K.: 1976 (Orig. 1867), Capital: A Critique of Political Economy, Volume 1, trans. Ben Fowkes (Penguin, Harmondsworth)

  • Marx, K.: 1973 (Orig. 1939–1941), Grundrisse, trans. Ben Fowkes (Penguin, Harmondsworth)

  • Marx, K.: 1982 (Orig. 1851), ‘Letter to Engels, 11 August’, 1851. in Karl Marx and Frederick Engels Collected Works, vol. 38 (Lawrence & Wishart, London), pp. 419–420

  • MacDonald, G. J.: 2004, ‘Religious Ethics Clash with Loan Practices; as Easy Money Becomes the Norm in the US, Borrowing Habits Raise More Ethical Concerns’, Christian Science Monitor, September 29, p. 17

    Google Scholar 

  • Mainoni, P.: 2005, ‘Creditio e usura fra norma e prassi. Alcuni esempi lombardi (sec. xii-prima metà xiv)’, in D. Quaglioni, et al. (eds.), Credito e usura fra teologia, diritto e amministrazione: linguaggi a confronto, sec. XII–XVI. (Ecole française de Rome, Rome), pp. 129–58

  • Menning C. B. (1993) Charity and State in Late Renaissance Italy: the Monte di Pietaà of Florence. Cornell University Press, Ithaca, NY

    Google Scholar 

  • Moncrief, M.: 2006, ‘CBA “Sorry” for Losses to Aborigines’, The Age (Melbourne), January 20, p. 4

  • Nelson B. (1969) The Idea of Usury. From Tribal Brotherhood to Universal Brotherhood, 2nd edn. University of Chicago Press, Chicago

    Google Scholar 

  • Noonan J. T. (1957) The Scholastic Notion of Usury. Harvard University Press, Cambridge, MA

    Google Scholar 

  • Oldfield, S.: 2006, ‘CBA Loses Way in Outback’, Australian Financial Review, January 20, p. 19

  • Ong, T.: 2006, ‘Indigenous Loans Reviewed’, The Australian, January 20, p. 2

  • Osuri, L. T.: 2005, ‘Texas May Soon Relax Usury Law’, American Banker, June 20, p. 1

  • Oxford Shorter Dictionary on Historical Principles, 1992: 3rd edn. (Oxford University Press, Oxford)

  • Paganelli, M. P.: 2003, ‘In Medio Stat Virtus: An Alternative View of Usury in Adam Smith’s Thinking’, History of Political Economy 35(1), 21–48

  • Palmer, H.: 2002, ‘Loan Sharks Feed on the Poor’, New Statesman, December 2, p. 18

  • Piron S. (2004) L’apparition du resicum en Méditerranée occidentale, XIIe-XIIIe siecles. In: Collas-Heddeland E., et al. (eds) Pour une histoire culturelle du risque. Genèse, évolution, actualité du concept dans les sociétés occidentales. Editions Histoire et Anthropologie, Strasbourg, pp 59–76

    Google Scholar 

  • Piron S. (2005). Le devoir de gratitude. Emergence et vogue de la notion d’antidora au XIIIe siècle. In: Quaglioni D. et al. (eds.), Credito e usura fra teologia, diritto e amministrazione: linguaggi a confronto, sec. XII-XVI. Ecole française de Rome, Rome, pp. 73–101

    Google Scholar 

  • Regnier, P. and M. Penner: 2001, ‘Debtor’s Revenge’, Time (Australia), 26 February, p. 36

  • Rogers, D., et al.: 1999, ‘Utilitarian Usurers’, Alberta Report, 22 February, p. 14

  • Saeed A. (1999) Islamic banking and interest: a study of the prohibition of riba and its contemporary interpretation. Brill, Leiden

    Google Scholar 

  • Shatzmiller, J. (1990) Shylock Reconsidered. Jews, Moneylending, and Medieval Society. University of California Press, Berkeley, CA

    Google Scholar 

  • Smith, A.: 1976 (orig. 1776), An Inquiry into the Nature and Causes of the Wealth of Nations, R. H. Campbell and A. S. Skinner (eds.), 2 vols (Clarendon Press, Oxford)

  • Tawney, R. H.: 1984 (orig. 1926), Religion and the Rise of Capitalism: A Historical Study (Penguin, Harmondsworth)

  • Troeltsch, E.: 1959, ‘The Economic Ethic of Calvinism’, in R. W. Green (ed.), Protestantism and Capitalism: The Weber Thesis and Its Critics (DC Heath, Lexington, MA), pp. 21–28

  • Van de Mierop M. (2005) The Invention of Interest. Sumerian Loans. In: Goetzmann W. N., Rouwenhorst K. Geert (eds) Of Value. The Financial Innovations that Created Modern Capital Markets. Oxford University Press, Oxford, pp 17–30

    Google Scholar 

  • Vice Fund: 2005, Prospectus, July 29, http://www.vicefund.com/docs/ViceProspectus.pdf, accessed June 7, 2006

  • Viner J. (1978) Religious Thought and Economic Society. Duke University Press, Durham, NC

    Google Scholar 

  • Vogel D. (1991) Business Ethics Past and Present. Public Interest 102:49–84

    Google Scholar 

  • Wade, M.: 2005, ‘Disputes over Credit Card Debts Soar’, Sydney Morning Herald, May 28, p. 3

  • Weber, M.: 1976 (orig. 1920), The Protestant Ethic and the Spirit of Capitalism. Trans. by Talcott Parsons (Allen & Unwin, London)

Download references

Author information

Authors and Affiliations

  1. Centre for Studies in Religion and Theology, Monash University, Wellington Rd, 3800, Melbourne, Victoria, Australia

    Constant J. Mews

  2. School of Political and Social Inquiry, Monash University, Wellington Rd, 3800, Melbourne, Victoria, Australia

    Ibrahim Abraham

Authors
  1. Constant J. Mews
    View author publications

    You can also search for this author in PubMed Google Scholar

  2. Ibrahim Abraham
    View author publications

    You can also search for this author in PubMed Google Scholar

Corresponding author

Correspondence to Constant J. Mews.

Additional information

Constant Mews is Director of the Centre for Studies in Religion and Theology at Monash University. He holds PhD and Masters degrees in medieval history, and pursues research in medieval religion, thought and ethics.

Ibrahim Abraham is a PhD student in the School of Political and Social Inquiry, Monash University, with degrees in religion studies as well as law. His research interests include religion and culture, fair trade, and human rights.

Rights and permissions

Reprints and permissions

About this article

Cite this article

Mews, C.J., Abraham, I. Usury and Just Compensation: Religious and Financial Ethics in Historical Perspective. J Bus Ethics 72, 1–15 (2007). https://doi.org/10.1007/s10551-006-9151-0

Download citation

  • Received:

  • Accepted:

  • Published:

  • Issue Date:

  • DOI: https://doi.org/10.1007/s10551-006-9151-0

Keywords

Search

Navigation