La cd. “Garanzia Growth”([1]) (la “Garanzia Growth”), operativa dal 1° aprile 20…
As known the prohibition of Riba is central to Islamic finance. All transactions and contracts must be free from elements of Riba. The word Riba literally means increase. However, in debt transactions the word ‘interest’ is generally understood as Riba. Interest is the excess amount which a creditor receives from a debtor in consideration of giving time to the latter for repayment of the loan. It is an application of the principle on which modern finance is based of time value for money.
Shariah prohibits interest irrespective of the amount. However, in the western world, it has been debated over centuries whether interest must be prohibited as such or only when a certain threshold is exceed, ie when the amount which the debtor has to pay to the creditor in addition to the principal becomes usurious.
Judaism, prior to Islam, had also prohibited interest as such. In the Old Testament we read: “If you lend money to any of my people with you who are poor, you shall not be to him as a creditor, neither shall you require interest from him.”
Under Roman law, which is the base of Italian law, only excessive interest rates were considered usurious and therefore prohibited. The threshold was later determined in the amount of 6% per year by Emperor Justinian.
During the Middle Ages, the application of interest as such was strictly forbidden. Saint Augustine and Saint Ambrose considered interest to be in contrast with a passage in the Gospel of Luke: “Give away to everyone who begs of you, and of him who takes away from your goods, do not demand them back again.”
In the 12th century, scholars of the first law faculties of the universities found ways to circumvent the ban on interest and during the 16th and 17th century they asserted the importance of qualifying disproportionate interest as usurious, and therefore prohibited, as the creditor may otherwise legally exploit the debtor.
Today Italian law does not provide for a prohibition of Riba but Article 644 of the Italian Criminal Code qualifies usury a crime. Interest applied by banks and fi nancial intermediaries exceeding a certain threshold provided for according to Article 2 of Law n. 108 of 1996 and set, on a quarterly basis, by a ministerial decree, based on interest applied on the market, is always usurious.
From a civil law perspective, pursuant to article 1815 of the Italian Civil Code, when usurious interest is applied, no interest shall be due and the borrower shall be entitled to claim the reimbursement of all interest amounts already paid to the lender.
The matter has been addressed October last by a decision by the Italian Court of Cassation (n. 27442/2018), which shed light on the distinction between capital interest (‘interessi corrispettivi’) which is the remuneration of money lent, and default interest (‘interessi di mora') which is the compensation for the damage suff ered by the lender for delay payment, and clarified that usury law applies also to default interest.
