usury = not cool

[jixapori]

Apologies to anyone I may have inadvertently offended. I am not telling you how to run your business, if you want to want to lend out money, at any interest you want, you are free to do so, likewise people are free to borrow from you if they really feel they are getting a good deal. I am sure some of you are providing a useful service, and at least one person in this thread has commented how it was cost-effective for him at 10%/month, at least for small amounts and in the short term. (However I wonder if this was really an optimal deal, especially since the hardware in question cost dollars and not bitcoins, and the interest rate when borrowing dollars is usually nowhere near that.)

Perhaps the same individual would have preferred a loan at 0% instead? Surely you agree this is at least an intriguing concept. It is not the right business model for maximizing short-term profit, but it is one that could benefit a large number of people. To the person who needed 15000 btc, unfortunately IBB is nowhere near being able to fund that at present, but if it proves successful, maybe it will be in the future, who knows?

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[wachtwoord]

Of course that individual would have preferred 0%. Heck if it would cost me a mere 2% yearly I would lend several billions from anyone willing to lend that to me in a heartbeat since I would able to easily beat that rate in returns (risk free).

Lending at 0% to someone is the same thing as donating money to people. And I, or the other people in this thread are, or strive to be, mother Theresa. In the end the market will decide the price to be at the equilibrium of the highest that people are willing to pay and the lowest people are willing to accept. This is no sin in any rational ideology.

[Sukrim]

As far as I understood islamic banking, you don't charge interest but in general will get shares in whatever the lender is doing/earning with the money. The profit from these shares is then "honestly earned" money. Some limits seem to apply, for example it would not be ok for me to borrow money to buy some spare ribs + beer...

Their idea is more or less "Tell us what you want to do with the money, and if it sounds good to us + our morals, we'll give it to you for a share in it". "Traditional" lending, which is most common here in the forums is more like "I don't care what you do with that money - BUT I want more of it back afterwards". Both concepts seem appealing to me, without lots of funds however I don't really see how IBB will really work out in the longer run (also given the fact that there might be some people around who would even feel good about scamming someone who has "islamic" in their name). It seems to me though that they are opposed to another round of collecting investor money...

[jixapori]

A zero-interest loan is not quite a donation as you are supposed to pay it back   Also, while people may be borrowing money for all kinds of projects, the intent behind interest-free lending is not just to leave money in your pocket for a while so you can turn around and lend it to other people at interest, as was pointed out islamic banking does have a moral aspect and you would not get your loan approved if that was your scheme.

Small micro loans are one thing, but what about the person who wanted a large loan to expand his for-profit business? That seems like a situation where it would definitely be appropriate for the bank to get some shares as in a joint venture or profit sharing. Again, the bank presumably is not set up only to provide you with capital unconditionally. senbonzakura's post explains everything quite well.

[PatrickHarnett]

I do micro lending through Kiva at US25 a pop, and they are syndicated loans to about $2000 (some might be higher), and I receive zero interest on these.  However, there is a small interest rate charged at the local level to help cover costs.  I can choose what type of ventures I put funds into (your moral dimension, if you like), and mostly I target people wanting to expand their businesses - but I'm not getting a share in the business, and there are donations added if you want to.

http://www.kiva.org/lender/patrick7928

[Sukrim]

How does an islamic bank then cover the costs it has from giving out 0% loans (personel, scams, inflation(!), ...)? Only by accepting tips, cross-financed by the investments in companies or somehow else? It might be an ideologic thing or some kind of charity to give out these loans, but without actual income on that end I guess it would make sense to have only a small percentage of total funds going out as loans...

Currently IBB is valued at 270 BTC in total (1000 shares @0.27) while having a balance sheet that is barely positive. Also you seem to have defaulted on a 39(!) BTC loan, at that time ~ 1/2 of all your money. Do you have some regulations in place now that you will only had out max. x% of your money as loans?

Also I wonder how you determine if shares you invest in on GLBSE (like MergedMining, CheaperInBitcoins...) are halal - or do they not have to be halal?

[nedbert9]

No one and nothing is stopping you from lending out your own BTC at a 0% interest rate.

I will offer to take all of your BTC on deposit (no limit) at 0% interest rate.

You cannot tell us what to do.  You are not the boss of us.  Or, are you planning on implementing some sort of system to force us to do what you want to do?

Remember, a big part of the bitcoin philosophy was to solve
many of the problems people have with traditional institutions such as
banks, not make things worse.

Please tell me which part of the Bitcoin philosophy relates to the making or charging of interest.  I missed that chapter I guess.

No, borrowers, at least most consumer level borrowers, cannot tell lenders what to do.

On the other hand.  Banking institutions combined with credit reporting can and does effectively set non negotiable terms with borrowers.

There's a reason ppl get irked by banks and lenders.  The power lies with institutions and cooperation of those institutions to set rates and not the individual borrower.

The BTC loan terms are the way they are due to a consensus of lenders on terms.  The BTC lending market is too small to have any real competition putting downward pressure on interest rates.

[PatrickHarnett]

How does an islamic bank then cover the costs it has from giving out 0% loans (personel, scams, inflation(!), ...)? Only by accepting tips, cross-financed by the investments in companies or somehow else? It might be an ideologic thing or some kind of charity to give out these loans, but without actual income on that end I guess it would make sense to have only a small percentage of total funds going out as loans...

Currently IBB is valued at 270 BTC in total (1000 shares @0.27) while having a balance sheet that is barely positive. Also you seem to have defaulted on a 39(!) BTC loan, at that time ~ 1/2 of all your money. Do you have some regulations in place now that you will only had out max. x% of your money as loans?

Also I wonder how you determine if shares you invest in on GLBSE (like MergedMining, CheaperInBitcoins...) are halal - or do they not have to be halal?

Hi Sukrim,  when thinking about IBB, you might also like to think about the Islamic banks that deal in the billions of dollars and not just the small bitcoin amounts that Sen works with.  It's a challenging business, but it still works for financing a $500 million power station or $5 for something else.  (I came across this a few years ago when researching project finance and the inability to charge interest posed some interesting problems for bond issuers).

Also, having a positive balance sheet isn't necessary for business value - check what-ever the latest internet darling is and you might find zero income/loss making businesses valued in the millions.

[wachtwoord]

A zero-interest loan is not quite a donation as you are supposed to pay it back  

It is a donation just not a donation of the principle. Owning the funds for a certain amount of time has value and you donated that value if you do not charge interest. I would never lend at zero percent to anyone but my friends.

[PatrickHarnett]

Due to inflation, in most situations a naïve zero interest loan is a negative interest loan.  As senbonzakura notes, he's losing money.

When you advise 0% interest rates, you are asking people to give away money, even if the person pays back on schedule.  Taking purchasing power into account, a lender could at best hope to come out slightly behind where she would be if you held the BTC out of circulation, or at worst lose a significant percentage of wealth.  Pricing goods and services based on "x USD in BTC" rather than using BTC as the base currency, introduces an even greater risk than usual.

There is a reason even tiny co-op credit unions charge interest, even before the current level of deregulation.  Fixed costs, transactional costs, risk, and of course rates set by the fed (which does not apply in this case) are all part of the rake.

Hmmm (note not the two "m" version reserved for Sen).

So, I could do zero interest loans, and they are structured like this:
1: Establishment fee 5 BTC (covering credit checks and negotiations)
2: Completion fee 2BTC (covering the costs at the end of the deal - and yes there are some)
3: Default insurance 10 coins per 100 borrowed.

So a one month, 100 coin 0% interest free loan would cost 117 coins.  I would expect howls of anguish and complaint, but for 0% it's not necessarily a bargain.

[Sukrim]

Bitcoins currently have far more than 20% annual inflation... anything below that is basically a loss. You can argue however that the inflation curve for BTC is known since the beginning + can't change, so this means it can be ignored.

You make profit only because (as most people here) you work for free on that project as a hobby.

[JusticeForYou]

Bitcoins currently have far more than 20% annual inflation... anything below that is basically a loss. You can argue however that the inflation curve for BTC is known since the beginning + can't change, so this means it can be ignored.

You make profit only because (as most people here) you work for free on that project as a hobby.

Somewhat agree. But with inflation, one must consider attrition (lost coins), and the percentage of BTC actually in use. Potential for use and actual use are different. If the FED Prints an extra Trillion and just lets it sit there, should it be counted ?

Compared to traditional fiat currency, one could make the argument that BitCoin has the highest savings rate. Maybe to much so.

This thread will get some of those dollars flowing and spurt the economy. If someone loses 10% of his BTC holdings but increase Bitcoin usages by 30%, that 10% loss disappears. No one argued against IBB here, they implied others were 'evil' in some way by charging high interest.

This I believe was realized as a false accusation from the OP.

[frisco2]

Usury is cool, good and moral:

http://www.theobjectivestandard.com/issues/2007-fall/morality-of-moneylending.asp

[copumpkin]

Usury is cool, good and moral:

http://www.theobjectivestandard.com/issues/2007-fall/morality-of-moneylending.asp

The Objective Standard's notion of good and moral isn't necessarily uncontroversial

[frisco2]

The Objective Standard article illustrates that historically usury was frowned upon by religion, however, was in high demand by everyone, because without it economy doesn't work. This dichotomy is easily resolved when you understand that religion is wrong, and there is no conflict.   In fact, this is very simple to understand: when I lend money, I can not use it for some purpose of my own -- in other words, lending, is a kind of service for those who borrow. For that, they pay a fee. It is only natural for this fee to be a percentage of the sum, since I loose a proportional amount of opportunities when I lend more money out. There really is nothing complicated about it. The article talks about historical perspective, in depth, and I highly recommend reading it.

[Hawker]

http://www.project-syndicate.org/commentary/the-challenge-of-islamic-finance

It could that IBB is well positioned to ride the wave of investment in Islamic banking.

[RodeoX]

Usury is a sin. You would not think so talking to American Christians, but it most certainly is according to Christs teachings. America's evangelicals have a weird "get rich" streak in them. They better hope they are wrong about Jesus. He is the dude who was arrested for protesting against the money changers. And the one who said "it is easier for a camel to pass through the eye of a needle than for a rich man to enter the kingdom of heaven."

[frisco2]

How can Christianity talk about morals? It is a sin if you believe in God.  But, the Christian God permits to kill (crusades, inquisition). But to learn why Christianity is evil I refer you to any atheist forum, or speaker. Start with George Carlin.

Lets get back to usury. If you read the article I posted, you will learn that historically usury was in high demand by those same Christians, so much that they didn't want to convert Jews to Christianity -- Jews were conveniently allowed morally to lend money to Christians , according to the interpretation of the bible.

True laissez fair economics will be such only if usury is not condemned.

[RodeoX]

Usury is a sin. You would not think so talking to American Christians, but it most certainly is according to Christs teachings. America's evangelicals have a weird "get rich" streak in them. They better hope they are wrong about Jesus. He is the dude who was arrested for protesting against the money changers. And the one who said "it is easier for a camel to pass through the eye of a needle than for a rich man to enter the kingdom of heaven."

Neither example of which has anything to do with usury.

Fair enough. Here is a link for those who want to learn more.
http://www.tentmaker.org/lists/UsuryScriptureList.html

[nedbert9]

The Objective Standard article illustrates that historically usury was frowned upon by religion, however, was in high demand by everyone, because without it economy doesn't work. This dichotomy is easily resolved when you understand that religion is wrong, and there is no conflict.   In fact, this is very simple to understand: when I lend money, I can not use it for some purpose of my own -- in other words, lending, is a kind of service for those who borrow. For that, they pay a fee. It is only natural for this fee to be a percentage of the sum, since I loose a proportional amount of opportunities when I lend more money out. There really is nothing complicated about it. The article talks about historical perspective, in depth, and I highly recommend reading it.

Objective Standard is good stuff.


Though, it is a mistake to think that religious views of usury is negative and by extension lending capital is also viewed as negative.

Untrue.  The spirit of the view is against evil practices such as predatory lending and inequality of access to capital.

As much as we all believe capitalism is a great system as it fulfills objective needs, fundamentals of common religion place any materialistic system second, and bound, to morality.

The more difficult and vicious ( i.e., efficiency has a cost ) it becomes to make a living the more morality goes out the window.