Debt and interest: The pitfalls of the current world order and the Islamic alternative.

Credit and interest are a central pillar of the modern economy, which controls the economic flow of the entire world. From individuals to states — everyone is in debt in one way or another. But this debt is never just help; it has an inherent interest rate, which over time bankrupts the borrower. Especially the poor people, the middle class, small businesses and economically weak countries — their backs are against the wall due to this interest cycle.

The modern banking system, microcredit schemes, international lending institutions (such as IMF, World Bank) — all of them are basically based on interest. These institutions impose high-interest loans on poor countries, and in doing so, the countries lose their ability to make independent economic decisions. At the individual level, it is also seen that someone takes out a loan for medical expenses, rent a house or for their children's education, but when they repay it, they become even poorer.

This ‘credit-centric’ structure of the modern economy enriches the profiteering banking group on the one hand, and makes the people dependent like slaves on the other. Yet Islam condemns this system vehemently. The Quran says that interest is “like declaring war on Allah and His Messenger” (Surah Baqarah 2:279). The harshness of this language shows us that the impact of interest is not only economic, but also affects spiritual, social and state stability.

Interest-based transactions are completely prohibited in Islam. Islam says that business is halal; but interest is haram. This policy leads the economy to a structure where wealth is distributed on the basis of justice, and the rich do not become rich by riding on the backs of the poor. In a hadith, the Prophet (peace be upon him) said, “The usurer, the usurer, the usurer and the witness – all are cursed” (Sahih Muslim). That is, everyone involved in the usurious cycle is a criminal in the eyes of Islam.

The Islamic state system breaks this usury foundation and establishes an alternative economic structure — one that is based on profit-loss sharing, genuine business activities, fair distribution, and charity. The most important aspect of the Islamic financial system is that wealth should not be limited to a small group of the economy. The Quran says: “…so that wealth does not become limited to the wealthy among you.” (Surah Hashr 59:7)

In light of this principle, some important measures are taken in the Islamic state. First, all types of interest-based banking are prohibited. Instead, Islamic financial institutions are established — such as Mudaraba (profit-loss sharing), Musharaka (joint investment), Ijara (Islamic leasing), Murabaha (sale at a limited profit), etc. In all these transactions, there is no opportunity to make one party poor and the other rich.

Secondly, the Islamic state encourages charity, zakat, and fair distribution. For those in debt, there is the Baitul Mal. Baitul Mal means the state treasury, which is managed from Zakat, Kharaj, Ushr, Fai, Ghanima and other lawful revenue sources. The Quran states: “For those in debt, Zakat is prescribed.” (Surah At-Tawbah 9:60). That is, the responsibility of helping those in debt falls on the Islamic government.

Another important aspect is that the Islamic state does not encourage debt, but rather teaches not to take it unless necessary. The hadith states, “Whoever takes people’s wealth with the intention of returning it, Allah will arrange for its return; and whoever takes it with cunning, Allah will arrange for his destruction.” (Sahih Bukhari). As a result, a sense of responsibility, honesty and self-reliance is developed among citizens.

Thirdly, the Islamic state teaches citizens financial education to maintain a balance between income and expenditure. They create awareness so that they do not indulge in unnecessary pleasures and do not fall into the trap of debt. They create an environment socially where the ideal of moderate living and sacrifice, rather than capitalist consumption culture, exists.

Thus, the Islamic state system does not stop at just banning interest, but rather provides a complete financial alternative, so that no one, no matter the individual, family, or society, becomes dependent or bankrupt.

Currently, the application of Islamic finance has begun in many countries of the Muslim world, such as: Islamic banks, takaful (Islamic insurance), sukuk (Islamic bonds), halal investment projects, etc. Although many of these are still running on a limited scale and there are many weaknesses due to the lack of a complete structure of the Islamic state, these practical initiatives prove that Islamic economics is not just a theoretical philosophy, but is practical, effective, and just.

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Thus, it was seen that to free society from the trap of debt and interest, radical changes are needed not only at the individual level, but also in the state structure and policies. The Islamic state system is capable of bringing about that change — one where the economy is not structured for slavery, but for the welfare of people and the establishment of justice.