Interest-free banking: Ecological Money?

I recently attended a meeting about Interest-free banking and found it fascinating. I wonder if it offers a true ecology when it comes to the handling of money.
In the Western world vast amounts of time and energy go into charging and paying interest. Yet none of that time and energy creates anything.
The cost of maintaining such a large financial system is huge. It represents a large percentage of human activity and uses a lot of planetary resources supporting all the people and infrastructure which maintains it.
I get paid interest on my saving account, I pay interest on my mortgage and on my credit card transactions. The banks charge each other interest and pay each other interest. Where does all this money paid in interest ultimately end up?
It ends up in the hands of a very few individuals who sit at the top of the financial pile. Those are the ones who ultimately benefit from interest not you and I. They effectively cream a percentage from global financial activity.
On the personal scale making enough money to afford the interest payments on a house creates immense strain. Interest payments triple the cost of a house. The taxes we pay are influenced by the bank interest rate as the Government uses our money to pay the interest it owes.
Why not do away with interest entirely? You might say that you have to earn interest on your savings. But that is mostly because you have to pay interest on what you borrow.
You might say that you need interest in order to maintain the value of any money you save or inflation will eat it away. But, what is it that drives inflation? Inflation is driven by interest rates. If there were no interest inflation would not eat away the value of savings.
It might be tempting to think that we need a complete overhaul of the whole financial system to make any progress on such a large issue. However, this is not the case.
The JAK bank in Sweden has offered interest-free banking for many years. Also the Islamic banks are normally interest-free as Islamists regard it as usury to make money directly from money (but not from supplying goods and services).
Of course, we will still need a system whereby financial services can charge a fee for what they offer. However, such a fee would be subject to competition and therefore much lower than an enforced interest rate. This would help trim the waste out of the financial system.
It would take a sea change in attitudes before interest-free banking would really take off. However, as organisations, industries and countries are increasinlgy being called to account for their ecological footprint perhaps the time won’t be far off when the financial services industry will be called to account too. Perhaps then we can see a whole new understanding of money and much healthier ecology in how we distribute and handle it.

This entry was posted in Ecology and tagged , , , , , , . Bookmark the permalink.

Comments are closed.