Is Ethical to Charge Interest

When we talk about banks, loans or even money, it is very common to hear words such as interest, usury, risks, etc. We mention these words very often and many times we do not even know what they mean. But this is not it; it gets more interesting when we start linking all this stuff with other topics such as religion, ethics and moral values. Going back to the beginning, when we start talking about banks and money, it is known by everybody that banks’ main business are the loans and the interests they ask for them, which many people do not like. They also refer to the banks as usurers, arguing that the interest rates they charge are too high. But who decides (knows) the fair rates to charge? Why people call banks usurers? What is money at the end of the day? It is important to have in mind the meaning of all these words in order to be able to have a judgment of what this topic is about. First of all, let us start by defining some important terms:

- Money: According to Aristotle, “money is just a simply instrument of measure, relating the value of two goods to each other.”

- Interest: Premium asked for lending money

- Usury: Charging excessive interest on loans

- Bank: Financial institution that makes money savers and borrowers meet by acting as an intermediary.

- Religion: A collection of belief systems, cultural systems, and world views that relate humanity to spirituality and, sometimes, to moral values.

- Moral values: The standards of good and evil, which govern an individual’s behavior and choices.

Once we have defined these key terms, we can start asking ourselves all the ethical aspects that money, religion and moral values involve. In one side we have seen thru years when people need a car, a house, a credit card, etc. they usually go to a bank and ask for a loan. It works very easily nowadays, but it was not that easy in the past. Many years ago people used to resort to people called usurers, who charged very high interest rates on loans, making impossible for the borrower pay off his debt. Regarding the agency cost