Of all the things that observant Muslims try to avoid, interest is the most challenging. It seems impossible to get by in today's world without it. How do you finance your education, buy a home, start a business or get out of a jam when you can't borrow money with interest? What does Islam say about it? Is all interest bad? What is interest for? How does it work? What does it do to people and society?
When Facebook went public on May 18, for the handful of venture capitalists, Accel Partners, Greylock Partners and Meritech Capital, who have been with the company since its early days, it was a massive financial payoff. With the IPO also came fame and reputation. At a closing price of $38.23, Facebook's market value is nearly $105 billion, creating huge paper gains for scores of early insiders and hundreds of employees.
Venture capitalist Accel Partners, which initially invested $12.7 million in Facebook at a $98 million valuation back in 2005, the year after it was founded, is clearly the big winner. With the IPO, the current stake of Accel and its affiliates will be worth $6.3 billion, assuming a mid-point stock price of $31.50.
The Muslim world is in a difficult phase. Even though its people comprise more than a fifth of the world's population, and its regions are resource-rich, it produces only around eight per cent of the purchasing power adjusted gross national product of the world. It is plagued by illiteracy, poverty, unemployment, social sterility and macro-economic imbalances.
We know from history, that this was not always the situation in the Muslim world. We know Muslims enjoyed a glorious past stretching over several centuries. They say history is our best teacher, and I believe very important lessons can be learnt and applied from the economic miracle that occurred in the reign of Caliph Harun al-Rashid from 786 to 809 (170 - 193 A.H.).
The financial system has played an active role in the accelerated development of the world economy, particularly since the Second World War. However in recent years the system has become plagued by persistent crises, one after the other, making it clear for all that a financial system based on interest, produces a debt-ridden society.
The world is drowning in debt: personal debt, credit card debt, mortgage debt, national debt, sovereign debt. Our financial system finances the consumers, the businesses and the government, including local government institutions, by creating debt. In the U.S., federal debt is over $14.5 trillion and states like California are basically bankrupt. In Europe, Greece is on the verge of bankruptcy. And with Spain and Italy looking to refinance hundreds of billions worth of debt, the crisis appears to be far from over. For all we know, this may only be the beginning.