Financial instruments are promises between two or more parties with differing resource needs which are tailored to allow both parties to be prudent risk takers when the future is unknown. As argued above, God created humans to be a promise keeping people. That element of creation along with the fact that God created humans social, heterogeneous, time bound, and to be prudent risk takers in a world of uncertainty, gives rise to financial instruments. Financial instruments are the products “manufactured” by intermediaries to meet the needs of savers and borrowers and allow humans to obey God’s creation mandate and to show justice and love in significant ways.
Financial instruments enable good stewardship because they can be tailored to fit the risk, return, and time profile of the particular stewardship opportunity. Thus, if a borrower company has a particular project whose outcome is quite contingent on an uncertain future (i.e., it is risky), then a financial instrument can be crafted which anticipates this risk and thus helps the saver and borrower mutually agree on how exactly to share the requisite resources, very likely with an equity-type instrument.
Financial instruments also allow for a more just society. Instruments can be tailored for the needs of those members of society whose needs are the greatest. Small business loans are instruments that have provided countless opportunities for entrepreneurs to serve society. Student loans are an instrument which has provided great opportunity for young people whose families have not been able to save enough for education. The special tailored instruments used in micro-lending also enable justice. Specialized housing loans with smaller down payments and government insurance have enabled countless low income families to gain the benefits of home ownership. Financial instruments allow those members of society with ample resources one way to show justice to poorer members of society.
A mortgage loan is an example of love enabled by financial instruments. The saver helps the borrower obtain a physical place in which she and her family can flourish. In turn, the borrower helps the saver prepare for later in life when he is old and no longer productive enough to support himself. Through God’s creation design he anticipated that we would develop financial instruments which would enable humans to love each other in such meaningful and useful ways. Of course, the borrower and saver do not specifically know each other but they do know of the other's existence and can thus love each other in this way.
We consider the topics of charging interest to the poor and of charity to the poor later in this article.