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THIS article aims to respond to the recent directives of the Bangladesh Bank, suggesting that banks may not share profits with their depositors. This raises a foundational question: what are the sources of these profits? More broadly, what are the sources of income that allow Bangladesh Bank and commercial banks to pay salaries and employee benefits and cover their daily operational expenses? The answer, overwhelmingly, is an interest income stream that many deem as haram. In this article, we offer a rationale that distinguishes classical riba from the modern functioning of interest-based financial systems and advance our arguments against advocacy of interest as religiously impermissible.

Banks earn their profits primarily through interest income, which economists categorise as a form of rental income — akin to the income generated from leasing out an apartment. The fundamental difference lies in the nature of the asset: while money functions as a medium of exchange, facilitating transactions across the entire economy, an apartment does not serve that role unless sold in the market. This distinction is crucial, which is often overlooked by those who view all forms of interest as morally prohibitive.

For individuals who consider receiving interest to be haram (prohibited), it logically follows that benefiting from a bank’s profits — derived largely from interest — should also be seen as prohibitive. Likewise, working at a bank and receiving a salary from its interest-based revenue structure raises ethical contradictions. One cannot selectively condemn interest as immoral while simultaneously drawing sustenance from the very institutions and services it funds. Doing so erodes the coherence of the moral position being claimed.

Modern economies depend on interest-bearing financial systems to allocate resources efficiently. Interest acts as a signalling device: it prices time, risk, and opportunity cost. It regulates capital flows, incentivises saving, and enables long-term investment. The engine of economic development — whether in the form of housing, roads, utilities, industry, or healthcare—runs on credit. And credit, by definition, involves and is dependent on interest. There is simply no viable alternative that has proven to work at scale across diverse modern societies.

Global financial institutions such as the International Monetary Fund and the World Bank extend loans to developing countries not as instruments of exploitation but as mechanisms for partnership and development. These loans fund essential infrastructure, health programmes, education systems, and emergency aid. They are structured through negotiated terms, often at concessional or below-market rates, and come with technical expertise and policy guidance. Without interest as a tool to price risk and ensure accountability, such financial intermediation would not function or be possible.

Even on an individual level, interest quietly but pervasively shapes the modern standard of living. The roads we drive on, the office buildings we work in, the appliances in our homes, the car in our garage, and even the diagnostic machines and medicines in hospitals — all exist because someone invested capital, mostly through interest-bearing loans. These conveniences and advancements are not isolated marvels; they are nodes in a vast, credit-enabled financial system. To accept the benefits of this system while denouncing its foundations is not merely inconsistent; it is intellectually dissonant.

A critical point that requires deeper understanding is the distinction between riba, as condemned in Islamic teachings, and the functioning of modern interest. The Qur’anic prohibition of riba targeted an exploitative practice — often coercive and predatory — where desperate borrowers were trapped in cycles of unpayable debt, with compounding interest that violated all principles of equity and compassion. In contrast, modern interest is determined by competitive market forces. It reflects inflation expectations, risk assessments, and the cost of capital — not oppression.

Moreover, today’s financial contracts are governed by transparency, legal frameworks, and institutional checks — features that prevent the kind of exploitation historically associated with riba. To equate market-determined interest with ancient forms of coercive lending is to flatten a highly nuanced issue into false equivalence. It ignores both the moral intent behind the original prohibition and the evolution of financial systems over centuries.

Unfortunately, many people conflate these distinct concepts and reject interest outright, often while continuing to enjoy the fruits of an interest-based world. This results in a form of moral selectivity — benefiting from roads, schools, hospitals, and financial services made possible by credit while condemning the very mechanism that funded them. Such individuals, though perhaps sincere and honest in belief, inadvertently act as societal free riders. They criticise the system but continue to benefit from its outcomes, without proposing any viable alternative capable of supporting complex economic needs at scale.

This is not a call to abandon moral reflection on financial systems. On the contrary, ethics in finance is vital. But moral consistency requires a willingness to understand how modern systems work, to distinguish between abuse and utility, and to avoid simplistic condemnations that undermine both credibility and constructive dialogue. Religious teachings need to be interpreted with historical context, intellectual honesty, and an openness to reevaluate assumptions considering evolving economic realities.

In the end, rejecting interest while living in a world made possible by it is not a stance of purity but a position fraught with contradiction. True moral clarity begins not with slogans or taboos but with the courage to examine the foundations of belief and the realities of the world as it is — complex, interconnected, dynamic and thus constantly changing.

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ÌýDr Abdullah A Dewan is a former physicist and nuclear engineer at BAEC and is professor emeritus of economics at Eastern Michigan University, USA. Humayun Kabir is a former senior official of the UN, from Toronto, Canada.