“Those who think interest rates in Turkey are high should look at interest rates in the United States,” said Prime Minister Recep Tayyip Erdoğan back in 2010.
At the time, given the religious sensitivity of conservative circles toward interest (faiz) and Turkey’s struggle to emerge from the 2001 crisis, many foreign observers were genuinely worried about whether the new government would honor its debts. Contrary to these fears, the AKP government adopted an extremely market-friendly stance and demonstrated a thoroughly secular approach to economic management. The crisis faded, and so did the concerns.
For this reason, I initially interpreted the Prime Minister’s remark less as an ideological statement and more as a political one: a concern that high interest rates would harm employment and, by extension, AKP’s vote share in the 2011 elections. Later, Erdoğan began speaking of “zero real interest.” Given that real interest rates in developed economies had already turned negative after the 2008 crisis—and that hot money inflows were not particularly welcome—this seemed reasonable enough.
By 2011, Turkey had a central bank exactly as the government wanted: one that stubbornly resisted raising interest rates. Ironically, the new governor had once had no hesitation in increasing effective rates by five percentage points in a single day. Yet now, he refused to raise the already obsolete policy rate and persisted—alongside the government—in the low-interest rhetoric.
Leaving aside the governor’s famously scolding tone toward journalists (which feels especially jarring today, given how gentle Fatih Terim has become over the years), I began to wonder whether this insistence on ultra-low or even zero interest had entirely lost its rational basis. Could there be something else behind it?
A thought crossed my mind—perhaps conspiratorial, perhaps not. Could it be that, instead of abolishing interest outright (which would openly contradict religious doctrine), the Prime Minister was quietly trying to minimize interest rates as much as possible in order to reduce the amount of “sinful” money in circulation?
What led me down this path was the government’s approach to alcohol. Unable (or unwilling) to ban it outright, they instead made it prohibitively expensive through high excise taxes, restricted licensing through municipalities they controlled, raised the legal drinking age, and invented various pressures on legally operating alcohol vendors. The aim seemed clear: to gradually suppress consumption without formally prohibiting it.
So the question arises: is “less sin” better than “more sin”? That’s a topic for another post.
This long introduction was meant to ground my assumption that the government treats interest much like alcohol—something to be constrained as tightly as possible. (Of course, it’s quite possible that there are more concrete, material reasons behind this policy, and that my conspiracy theory is entirely off the mark.)
So why is interest considered haram? What exactly should a Muslim be careful about?
It would be misleading to dive into this question without first examining Jewish rules and attitudes toward interest. If we recall Murat Çulcu’s Marginal History Theses and—perhaps unfairly—extend his logic, one might compress the argument into a single sentence (not one found in his book): interest was forbidden to Muslims in order to facilitate Jewish dominance of the financial sector.
This may explain how people interpret the prohibition, but it cannot be the reason God forbade interest. At most, it explains how humanity has chosen to understand it. In fact, God did not forbid “interest” as we understand it today.
To see this, we need to look at the economic system of the time when the relevant verses were revealed. The main commodities were agricultural and livestock products, followed later by textiles. Precious metals, already long used as money, must be treated separately.
Now consider the need for credit. Just like today, people needed loans either to survive or to invest. Investment meant something like what Rob Roy MacGregor did: buying 100 head of cattle, trading them, and earning a profit. There were no factories yet. In the film Rob Roy, he agrees to pay 20% net interest on £1,000 for just three months—astonishing.
Earlier still, loans were not even given in money but in the commodities themselves—animals, wheat, and so on. This is where haram enters the picture.
If someone borrowed 10 tons of wheat or 100 head of cattle, they were expected to repay exactly the same quantity. (We’ll ignore issues like reproduction or maintenance costs—those belong more to derivatives markets than to this essay.) If you demanded more wheat than you lent, you had crossed into forbidden territory.
Even today, many Muslim merchants structure credit this way. A textile merchant who borrows ten rolls of fabric does not return ten rolls at maturity; instead, they repay the cash equivalent of those ten rolls. Thus, trade proceeds without violating religious rules.
What about 1,500 years ago? The situation wasn’t so different. If 10 tons of wheat were worth 50 gold coins, then demanding more than either 10 tons of wheat or 50 gold coins at maturity meant charging interest.
So why lend at all? Perhaps the answer to this question is also the answer to why interest was forbidden in the first place.
No one wants to take credit risk without additional return. But if you cannot store your wheat without it rotting, or sell your meat before it spoils, you lend it to those who can use it productively. Trade continues, scarcity is avoided, and society functions.
If this logic were applied today, interest payments would no longer funnel surplus value into the hands of capital. Those unwilling to lend would not overproduce. They would not extend credit merely to offload excess supply. There would be no surplus glut; excess demand would always find a producer.
In other words, capitalism would die before it was even born.
If Marx had been taught the Qur’an this way, would he still have opposed religion?
As we slowly move from 1,500 years ago to today, we see that—like everything else—gold coins were eventually debased. Kings, sultans, and rulers under fiscal pressure reduced the gold content of coins. These early devaluations occurred across civilizations, independent of religion or economic system.
In the Ottoman Empire, many Janissary revolts were triggered by the use of debased coins in their wages. In such a scenario, if you lent 50 gold coins (worth 10 tons of wheat) and were repaid with coins containing half the gold, you would understandably demand 100 coins. No one would object by saying, “Isn’t that 100% interest?” Because inflation had occurred, and 10 tons of wheat now cost 100 coins.
The same logic applies to paper money. Paper currency was originally nothing more than receipts issued by banks against deposited gold. Over time, as the system grew more complex—and especially after Bretton Woods and its collapse—the quantity of paper money far exceeded the gold it supposedly represented. (Incredibly, banks in Scotland still issue their own banknotes.)
Basic economics defines inflation as money growing faster than goods and services. And once you accept that definition, it becomes clear that interest—far from being sinful—is as legitimate as a mother’s milk.