Notes & Comments: Responsible Debt

3The Review of Religions – January 2006 We have just passed the Christmas festive season which has now become an annual retail bonanza. People are spending huge amounts of money on presents and festivities, often funded by borrowed money, and this trend is being seen across society in Europe and the USA. The rates of interest are low and are encouraging increased borrowing. People have taken on levels of mortgage payments and bank loans such that any increase in rates would put their houses and other assets at risk. Nations too have sometimes been forced to take on huge debts and are now endebted to the richer nations who can then impose unfair trade terms upon them to lock them into a long-term cycle of dependence. Credit Cards are now being offered to children, and people are ‘hiding’ their debt by carrying multiple credit and loyalty store cards and transferring debt from card to card every month. This is fostering a new culture in which carrying huge debt is seen as normal. This is very dangerous as young people now feel it is acceptable and indeed normal to carry huge debt and to decide which bills to pay and which to ignore. They are even starting to ignore certain bills such as those from utilities in the knowledge that they are unlikely to be pursued through the courts for payment. Debt is so common in society that the question is often asked as to the level of debt which is considered responsible. Yet, is enough attention being paid to the lenders as to their responsibility in ensuring that their customers are not burdened with debt? The money-lenders are sometimes Co m m e n t s &Notes Responsible Debt 4 The Review of Religions – January 2006 lending obscene amounts of money in the knowledge that their clients will often fail to repay the loans, and they can then asset-strip their clients to repay huge levels of interest. This leads to a spiral of debt and inability to pay, and it is often the very poor and most vulnerable members of society that are being caught in this trap. There have been numerous cases of people who see their repayment increasing as they fail to pay off the monthly interest, and can never get into a position to pay off the original loan amount. Indeed, they are then offered additional loans to pay off interest payments on other loans, or to ‘consolidate’ multiple loans. This is all the language of exploitation of the poor. The moral teaching on this subject is that it is better to live within your means. It is also a duty to pay your debts, and it is immoral to withhold money from someone who is owed. Islam goes further to emphasise that it is a moral duty to pay off all debts. Muslims are unable to perform the pilgrimage (Hajj) until they have cleared all worldly debts. Likewise, the Holy Prophet( s a ) refused to lead the funeral prayers of one whose debts had not been repaid. At the same time, Islam forbids the taking of interest. This is to protect people from unscrupulous money-lenders who trap them into the debt spiral discussed earlier, and also to encourage Muslims not to take on debts which they are unable to service. In the modern era, a level of debt to finance temporary shortage is unavoidable, but being responsible requires both consumers and lenders to be cognisant of their ability to pay. The tradition of giving presents at Christmas was inspired by the spirit of making sacrifices for others. In the same w a y, Muslims make personal sacrifices during the month of Ramadan. The older generations would have been reluctant to use credit cards, and they would not have been comfortable borrowing money to buy luxuries. Perhaps we need to return to their old-fashioned view of the world. Tanveer Khokhar – UK NOTES AND COMMENTS