“Govt unveils new steps to ease poverty” reads the Bangkok Post headline, with the kicker “Democrats flesh out ‘people’s agenda’ with skills training, loans, debt relief”.

Just think about that for a minute. The government will ease poverty by providing both ‘debt relief’ and ‘loans’.

Er, isn’t ‘loans’ just another word for ‘debt’? So they’re going to provide debt relief and debt?

You can sort of see what they’re aiming at. They are trying to change immoral, usurious debt into, well, the normal sort of moral, socially acceptable debt.

But where’s the line between the two? Well, it seems to have something to do with the rate of interest. The government is offering loans at 1% per month. Let’s assume that means the borrower repays 1% of the principal every month for 12 months.

Now that looks like 12% per year, but isn’t. That would be if you paid 12 baht on every hundred borrowed at year end. It is in fact closer to 16% a year, which would be illegal if the Financial Institution Business Act B.E. 2551 (2008) hadn’t exempted the government and banks from Section 654 of the Thai Civil and Commercial Code, which limits interest to 15% per annum.

Now I don’t know which bank has your life savings but mine pays a fraction of this rate. Currently commercial banks offer loans at less than half these rates.

So why would any fool borrow money from the government at a borderline illegally usurious rate when there are much cheaper loans available elsewhere? Because these fools (a) are already paying way more than 15% per year (petty traders who need a float to buy the day’s stock can be charged 25% per day) (yes, that’s right, per day) and (b) in the banks’ eyes, if these people think they are a good enough credit risk for a bank loan, then they really are fools. And who lends to fools?

So where is this line between usury (immoral and evil) and interest (the grease that allows the wheels of capitalism to run smooth)?

Your answer may depend on your religion.

Most people are aware of the Islamic injunction against the payment or receipt of interest. There are clever minds re-interpreting the teachings to camouflage interest-based lending under Islamic terminology, but for many Muslims, this won’t wash and they persist in using a system of interest-free borrowing that once was the norm in global finance.

The Old Testament, by one count, speaks 22 times against the sin of charging interest on a loan. And the Gospel according to Luke tells Christians to ‘lend, hoping for nothing’, which is not an argument you hear very often from the selectively fundamentalist Christian right wing in the US who seem to put more faith in both self-interest and compound interest.

So how did the Christian world lose its interest-free bearings? One crack in the wall was the argument that while interest on a loan may be a no-no, a penalty fee on late repayment was a different matter. This fee would cover the period that is between (in Latin ‘inter est’) the due date and actual repayment. And the longer repayment was delayed, the proportionally higher the penalty fee. By the 16th century, when the mercantilists of England were striving to become full-blown capitalists, Henry VIII changed the law to allow ‘interest’ up to 10% per year while still banning ‘usury’ at rates above that.

Now it’s a funny kind of sin that depends on numbers. It is hard to imagine a religion that says that fornication once a week is alright, but any more often and you’ll go to hell. Or that half a dozen murders or so is OK but a full dozen corpses will see you frying for eternity.

But what is wrong with interest that attracts these religious prohibitions? Well, think it through.

Who wants to borrow? People who do not have enough money. And who is prepared to lend? People who have more money than they need. And borrowers have to pay for the privilege and what they pay depends on how much they want and how long they want it. Sounds reasonable.

But ‘not having enough money’ is another way of saying ‘poor’; and ‘having more money than you need’ is another way of saying ‘rich’.

So interest is a mechanism whereby the poor pay money to the rich.

I’m not sure this is such a good way for the government to ease poverty.

About author: Bangkokians with long memories may remember his irreverent column in The Nation in the 1980's. During his period of enforced silence since then, he was variously reported as participating in a 999-day meditation retreat in a hill-top monastery in Mae Hong Son (he gave up after 998 days), as the Special Rapporteur for Satire of the UN High Commission for Human Rights, and as understudy for the male lead in the long-running ‘Pussies -not the Musical' at the Neasden International Palladium (formerly Park Lane Empire).