Re: Does adjusting for inflation count as riba?
There are ways to profitably provide long-term financing without resorting to interest bearing loans.
A case in point is the kind of Islamic bond issued a few years ago by a Malaysian telecommunications company.
A conventional 5-year bond would have involved the company borrowing money and paying it back with interest on top.
The Islamic bond was a zero-coupon bond secured against the company's fixed assets.
In short, the company sold something like $20million of its assets to the bond buyers, with the obligation that it would buy those assets back 5 years later at a much higher price.
This transaction was lucrative for the bond buyers whilst being completely interest free (no money was lent; instead assets were sold and bought).
Islamic interest-free financing is all about finding profitable ways to finance without lending money and making profit on the loan - the latter being the definition of riba.
Interest-free financing does not mean profit-free. Take the case of one form of Islamic mortgage.
Let's say you want to buy a house woth $200,000. With a conventional mortgage, you would borrow $200,000 from the bank. You would buy the house with this money, the house would be your own property but the bank could take it back if you didn't pay up the money on time. You pay it back over 25 years, paying interest on the loan. The interest is the bank's profit.
With an Islamic mortgage, the bank is not allowed to charge you interest. So how does the bank turn a profit? Simple. The bank itself will buy the house for $200,000. The house will legally belong to the bank. The bank will sell the house to you for $300,000 (for example), allowing you to stagger your payments over 25 years and not charging you any interest on that period. The bank will allow you to live in the bank's house for that time period. Once you have made the final payment, the bank will transfer ownership of the house to you.
No interest at all would have been charged in such a mortgage. After all, no money was lent by the bank to you.
Nonetheless, the bank still made a tidy profit... a profit that is about equal to what it would have made form an interest bearing mortgage.
Like I said earlier, interest-free financing is so profitable that all of the world's global Investment Banks want a piece of the pie and have Islamic banking subdivisions.