On usury 2 (of 3)

Years ago I had the privilege of meeting Dr. Muhammad Yunus, the founder of the Grameen Bank in Bangladesh. I talked with him briefly after he spoke at a conference in Washington.

Grameen is a famed success story of economic development among the very poor. The bank makes "microloans," providing capital that helps transform the lives of its borrowers. Since these customers have no collateral and very little income, they're considered too risky and the amounts too small to bother with for traditional banks. With innovative approaches, such as "peer group" lending, Grameen actually ends up with a repayment rate that makes most traditional lenders jealous (their recovery is about 99 percent).

At the time I met Dr. Yunus, I was reading everything I could get my hands on about Islamic banking. (This was pre-Web, when it was still possible to read everything you could find on a given topic.) Because the Quran forbids the charging of interest, Islamic culture has developed alternatives to capital and mortgage lending at interest. (The system isn't as wholly different as you might expect. Very broadly, the Islamic system tends to make the lender much more of a stakeholder.)

My interest in the subject arose from the realization that early Christian teaching, like current Islamic teaching, forbade the charging of interest, which it called "usury." Over time (as discussed in the previous post), the understanding of usury had evolved from meaning the charging of any interest, to the charging of excessive interest. I was trying to learn whether this evolution had been a matter of principle, or if it was merely a frog-in-the-kettle concession to the gods of this age.

Anyway, I got to meet Dr. Yunus. I asked him whether the Grameen Bank was criticized for lending at interest in Muslim Bangladesh. He told me this had never come up, but that the bank was frequently criticized on allegedly religious grounds because more than 95 percent of its loans went to women (something the Quran never suggests is wrong).

He then gave me what seemed like his elevator pitch for the work of the Grameen Bank. He spoke of access to capital as a human right. Of the bank's lending as a vital and necessary way of empowering the poorest of the poor.

I see nothing usurious in the spirit, mission or practice of the Grameen Bank or of other such institutions, such as CDLFs and CDCUs. Nor, for that matter, do I see anything necessarily exploitative in the work of more traditional lenders like the (fictional, but archetypal) Bailey Bros. Building & Loan.

Dr. Yunus' emphasis on empowerment, I think, gets at the essential meaning of usury.

Lending can empower or it can exploit. The former is a good, the latter is evil -- the sin of usury. Lending at interest enables lenders to continue their business of empowering. It was in recognition of this that Christians -- right around the same time as the modern market economy was developing -- began reconsidering the meaning of the prohibition against usury.

Our understanding of the principle changed, but the principle remains. Exploiting debtors is the sin of usury whether it is done by Dante's Ubriachi or by MBNA and its puppets in Congress.

Comments

[Donald Johnson]

Good post. I wish there were more Christian economists, and by that I mean Christians who actually take the Bible's teachings about the poor seriously. My impression from what little reading of economics texts that I've done is that the concept of two actors in a market transaction having different amounts of power just doesn't enter into it. Both actors are engaged in a free voluntary exchange and the concept of exploitation makes no sense. From that perspective, why shouldn't credit card companies and loan sharks (if there's a difference) behave any differently from the way they do, since it's all voluntary?

Presumably more sophisticated economists know better, but the dumbed-down version is what seeps into the public discourse. We're all "free to choose", as Milton Friedman would say.

[animus]

Presumably more sophisticated economists know better, but the dumbed-down version is what seeps into the public discourse.

Exactly. It doesn't help that the dumbed-down version is what they teach at business schools.

[Anna in Cairo]

Wow, what a lovely article about Grameen. And I am so impressed you cared enough about the issue to research teh Islamic position on interest. I think that the form of Christianity to which you subscribe is an awful lot like the form of Islam to which I subscribe. I too think that access to capital is a good thing and that Grameen has empowered a lot of people, but I hate the idea of just trying to get people to live beyond their means and get them hopelessly into debt with high interest rates and stuff like creditors in Western countries often do (particularly to the poorer or more desperate classes - recently there were stories about how such companies exploit soldiers on active duty for e.g.).

[bellatrys]

Has anyone here read Dr. Amartya Sen, on economics? I'm just stunned that I've *never* heard anyone talking about him, here, before last week. Nobel Prize winner, moral philosopher-economist, debunker of historical myths, preacher of tolerance and caritas, Oxford chair, someone who has actually seen the ethnic violence and religious warfare that the Heritage Party types get orgasmic over, and renounced it. I can see why the Virtue Party would hate him - he's a godless secular humanist, a brown-skinned non-Christian, and not at all grateful for the "benevolence" of the Raj (the myths he debunks) and yet insists on the brotherhood of humanity and the need for social justice and equality and true charity--

We need to get him into the mainstream here, stat.