The relationship between interest and inequality
Interest, in its very nature, is a form of injustice. It disproportionately affects those who have the least while enriching those who already have the most. The poor, who are forced to take on loans to cover basic needs such as housing, education, and healthcare, are trapped in a cycle of debt where they pay not only the principal but an ever-increasing amount of interest. Meanwhile, the wealthy, who lend this capital, grow richer by extracting wealth from those who can least afford it.
The former Nigerian President, Olusegun Obasanjo, powerfully summed up this injustice when he said, "All that we had borrowed up to 1985 or 1986 was around $5 billion, and we have paid about $16 billion, yet we are still being told that we owe about $28 billion. That $28 billion came about because of the injustice in the foreign creditors’ interest rates. If you ask me what is the worst thing in the world, I will say it is compound interest."
Obasanjo’s statement underscores how countries like Nigeria, despite having paid back their principal many times over, remain shackled by the relentless growth of interest through compounding.
This injustice isn't limited to developing nations. The system of interest-driven debt is a global issue that widens the wealth gap between the rich and the poor. According to Oxfam, the richest 1% of wealth have accumulated nearly 66% of new wealth since 2020. This dramatic disparity has only been exacerbated by the interest-driven financial system, where the wealthy can continuously grow their fortunes through lending, while the poor are left paying the price—literally. The rich get richer, not through productive activity or innovation, but by collecting interest from those who can least afford it.
Interest-based finance accelerates this trend, as the wealthy collect interest on loans, while the poor struggle under the weight of mounting debt. This system ensures that the rich continue to accumulate wealth passively, without creating value, while the poor remain locked in a cycle of repayment.
Islam recognizes this fundamental injustice and specifically prohibits interest, or riba, in the Qur'an. In Surah Al-Baqarah (2:275), it states: “Allah has permitted trade and forbidden riba (interest).” In Surah Al-Imran (3:130), believers are warned: “O you who have believed, do not consume usury, doubled and multiplied, but fear Allah that you may be successful.” These verses highlight the moral imperative to reject interest, as it exploits the vulnerable and distorts economic activity.
To move toward a just and equitable system, we must abandon the interest-based model that enriches a few at the expense of the many. Instead, we should embrace systems that promote real economic activity, where risks and rewards are shared. This will ensure that wealth is generated through productivity and entrepreneurship rather than through the exploitation of the poor. By building a financial system where growth is tied to tangible value creation, we can foster a fairer society, where opportunities for prosperity are accessible to all.
Whilst interest is said to fuel growth, this blog highlights the true cost of this ‘growth’ on society. We believe a growing economy should benefit all those in society, not only a select few.
When we make choices about interest in consuming or benefitting from it, we are directly and indirectly contributing to a world with real consequences.
Wahed’s vision is to create a world free from interest. We believe that growth should come from real economic activity, and wealth should be built sustainably, from investing in real assets. We believe by providing professional grade investments that are always free from interest, we aim to create long-term wealth for our clients without sacrificing their faith and values.
Join the 400,000 strong community that believes in this vision too and become an investor with Wahed today.
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As with any investment, a Wahed Invest Ltd investment puts your money at risk, as the value of your investment can go down as well as up. The tax treatment of your investment will depend on your individual circumstances and may change in the future. If you are unsure about whether investing is right for you, please seek expert financial advice.
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