Rather go to bed without dinner than to rise in debt’ is a very insightful remark against indebtedness by Benjamin Franklin (1706-1790), an American polymath and one of the founding fathers of the United States. In fact, debt is a trap easy enough to get into but hard enough to get out of. It promises today’s comfort at staggering cost of tomorrow. Indebtedness is a psychological and financial trap acting as a modern form of slavery that restricts personal freedom and breeds stress.
Pound of Flesh
Today the market is flooded with lending agencies and banks trying to lure the already money starved people with exaggerated promises. Not only the poor farmers or BPL people, even the middle class also falls prey to these predators. They let loose in the market various attractive schemes and different types of loans like house loan, education loan, marriage loan, personal loan as a bait luring the people by painting a rosy picture of such loans and ensnare them under their trap. Even small consumptions are controlled by credit cards. The compound interest on loans compounds the travails of small borrowers. If poor borrowers find themselves unable to repay the loan or seek more time to repay, the lending agencies pounce on them like Shylock making a callous demand for a ‘pound of flesh’.
The harsh consequence of unrestricted indebtedness is as clear as crystal.No day passes without carrying the unfortunate incidents of death by suicide in India due to indebtedness. Suicide by Rameshwar Hazare,a farmer of Nagpur in June 2026 being burdened by outstanding agricultural loan, suicide by Nagaraju, a 35-year-old farmer of Mandya, Karnataka due to harassment by lender over loan repayment, brutal murder of a family of four in Nalgonda district of Telangana over unpaid debts and property disputes are a few examples under which our society is groaning. These unfortunate incidents may well be called tip of the iceberg.
The inexorable price rise, continuous fall in rupee value, ever growing unemployment, economic stagnation, etc. have only added to the distress of poverty-stricken people.
Relentless Consumerism
Consumerism only adds to the bane of indebtedness. Consumerism is a socio-economic concept where personal happiness and societal success are linked to continuous purchase of goods. It describes both the cultural belief that acquiring material possessions is desirable and the economic systems that rely on perpetually high consumer demand to function. It is a mindset that equates buying products with status, identity, and well-being. It often involves acquiring goods far beyond what is necessary for basic survival, frequently driven by advertising and marketing.
Debt disproportionately affects those at the bottom of the socioeconomic pyramid. Lower-income households and vulnerable rural or farming populations often rely on high-interest informal credit. This leads to insurmountable debt traps.In many developing regions, a significant portion of household debt is driven by societal pressures to finance customary expenses (such as weddings or family functions), pushing the economically vulnerable deeper into poverty.
The burden of indebtedness on society is a systemic challenge that goes beyond individual financial distress, stunting economic growth, worsening mental health, and widening socioeconomic gaps. When left unchecked, excessive debt perpetuates poverty, restricts government social spending, and hampers long-term societal well-being.
Vicious Circle
Now we should see how negatively debt impacts our society. At the individual and family level, over-indebtedness acts as a chronic stressor.Heavily indebted households are forced to cut back on discretionary spending and sometimes even essential needs, which directly lowers their overall quality of life.Still further the constant pressure of unpaid obligations is heavily correlated with depression, anxiety, and in severe cases, suicidal thoughts.
Indebtedness puts several harmful effects on individuals, families, and society. Increased poverty, mental stress, family conflicts, social problems, falling economic strength create a vicious circle difficult to get out of.
A Glimpse of Report of High-Level Committee
The interim report of a high-level committee constituted by the Supreme Court of India has sounded an alarm over the condition of agriculture in the country, indebtedness and consequent incidents of suicides. It has recommended loan waiver for farmers and legal recognition of the Minimum Support Price (MSP) to ease the crisis. This stark observation was detailed in the committee’s interim report submitted to the Supreme Court on November 21, 2024.
The report further pointed out that stagnant production and declining incomes have left farmers heavily indebted. This escalating burden is driving many to despair and, tragically, to take their own lives.
According to a 2023 report by the National Bank for Agriculture and Rural Development (NABARD), the debt levels of farmers and agricultural labourers have surged dramatically in recent decades.
The interim report underscored the severity of the crisis, calling the rising debt an ‘ever-increasing crisis’. The committee revealed that over 400,000 farmers and agricultural labourers have died by suicide in the past three decades, a grim testament to the escalating challenges faced by the sector.
Great Economists on Interest-Bearing Loan
The most prominent mainstream economist to rigorously critique the harmful effects of interest was John Maynard Keynes. In his seminal work, The General Theory of Employment, Interest, and Money, Keynes argued that high interest rates act as a barrier to real investment, ultimately leading to unemployment and economic stagnation. Keynes’s core arguments regarding the evils and limitations of interest include what he calls rentier class. The Rentier Class are those who earn wealth purely by hoarding and lending money rather than producing goods or adding value to the economy. Keynes advocated for driving the interest rate down to zero to eliminate the ‘rentier class’. Keynes further says that interest discourages productive enterprise. When interest rates are high, it becomes more profitable to leave money in financial assets than to invest it in factories, machinery, or labour. This stifles growth and job creation.
Not only Keynes even Karl Marx spoke against interest. In his famous work Das Capitol, Marx dissected how the financial system (interest-bearing capital) allows financiers to extract wealth (‘surplus value’) generated by the working class. He viewed usurers and banking capital as highly parasitic, exploiting small producers and peasants.
Silvio Gesell, an influential 19th-century merchant and economist whom Keynes praised, condemned interest, proposing that money should be subject to a ‘use fee’ (demurrage) to prevent it from acting as a brake on trade and commerce.
Islam had already condemned usury or interest some about 1500 years ago. Based on the prohibition of Riba (usury/interest) in the Qur’an (2:280), numerous economists and scholars like Dr.Nejatullah Siddiqi have authored many books and developed a framework of Islamic finance. They argue that interest concentrates wealth in the hands of a few and forces borrowers to bear all the risk, and they advocate for profit-and-loss sharing systems to promote economic equity.
The Only Solution
Islam provides a proactive, compassionate, and practical framework for debt management by strictly prohibiting Riba (usury/interest) to prevent debt traps, while mandating mutual leniency, restructuring, and structured repayment plans to protect the debtor’s dignity and financial well-being. The comprehensive Islamic approach to indebtedness involves the following practical steps:
Ban on Interest (Riba): Islam strictly forbids interest/usury. By utilizing interest-free models and prohibiting predatory lending, borrowers are shielded from compounding debt that causes financial ruin.
Austere Life: Islam recommends to lead simple, contented and austere life and advises to cut coat according to cloth. It prohibits excessive consumerism and participation in the blind material race.
Borrowing Only in Exigencies: Borrowing, of course interest-free borrowing, should never be casual or habitual for luxury. It is only permissible if there is dire need and extreme financial crisis to the level of starvation. Further, the borrower must have genuine intention and a realistic means to repay it. Debts should always be documented in writing and witnessed to avoid disputes and protect both parties.
Leniency and Charity:The Qur’an (2:280) dictates that if a debtor is in genuine hardship, the lender must grant them time until he is in a position to repay.The same verse emphasises that complete writing off the debt as a charity is even more highly rewarding than forcing the poor borrower for repayment. Engaging with Shari’ah-compliant debt negotiation services is permitted, provided they operate transparently and do not charge fees based on increasing the original principal i.e. interest.
Priority to Life Hereafter:Last but not the least, Islam gives topmost importance to the life hereafter meaning thereby that after death we all shall be raised to life and give account of our deeds in this material world. Hence, it advises to give only required importance to this ephemeral material life which may end any moment. That is why, the Qur’an in no uncertain term diagnoses that the root cause of all these worldly problems is that you prefer to this ephemeral world giving less or no importance to the life hereafter which is better and more lasting (87:16-17) that eventually triggers mad-race for worldly gains and distracts from the real issues of life.
Eschew Frenetic Mad-Race
To conclude it can be said that the frenetic mad-race for amassing more and more wealth and worldly comforts, going far beyond the limited means, drives us to indulge in voluptuous luxury and debauchery. This is the root cause of indebtedness which invariably is related to high rate of interest. This negatively affects both individuals and society by causing financial hardship, stress, family problems, and economic instability and adds to even suicide rate. As already stated above, economist like Keynes has argued that high interest rates act as a barrier to real investment, ultimately leading to unemployment and economic stagnation. He advocates for driving the interest rate down to zero to eliminate what he calls ‘rentier class’ i.e. those who earn wealth purely by hoarding and lending money rather than producing goods or adding value to the economy.
Only austere life, responsible spending, avoiding unrestricted consumerism, financial planning and exigent borrowing for only basic and essential needs can help reduce the bane of indebtedness and liberate the society from the trap.