year 2 £102, but inflation is 2% so the effect is Zero and you still have the same spending power as in year 1. 1) Society (the state) does benefit from the seignorage in the modern context – the first round of spending of high-powered money – as the central bank buys government securities. The banks think it is interest, the consumers think it is interest, and it is treated as interest by the accountants, HMRC and regulators. Bank interest and Muslim society By Abdur Rahman Hamza . enough . bank, because he cannot find any other means of keeping his money safe apart I heard an interesting argument from yasir qadhi in the following video: Conventionally, the central bank is responsible for the issuance of currency, the management of the banking system in order to insure the value of the currency, the formulation of monetary policies to govern bank operations and the regulation of the fluctuations (inflation and deflation) in the value of currency which is a result of the interest based system which is outlawed in Islamic … Why is Riba Haram? Even among Muslims there are people who do this though they well know that God has condemned lending in this manner: it is against the law of God to charge rent for the use of money, as if it were just a simple commodity like land or buildings or tools or other property of the kind that can be lawfully rented out. Allaah says (interpretation of the meaning): “O you who believe! Beloved brother, the reason riba (usury, interest, etc.) If like in most west democracies inflationary targets are 2-3%. “A clear, common example of this [people claiming to provide a valuable service to the community while in fact exploiting people in need] is the practice of loan-sharks who lend desperate people money at cruelly high rates of interest and claim to be providing a valuable social service. A rich person is one who has lots of money, and he is in a position to lend. Usually it leads to a headache, the discovery that a close friend is actually secretly a raging capitalist/socialist (replace as per your political proclivities), and – the worrying one – doubt about one’s religion and moral code. Ibrahim holds a BA in Philosophy, Politics, and Economics from the University of Oxford, an Alimiyyah degree from the Al Salam Institute, and an MA in Islamic Finance. The return on equity for banks generally is not out of line with that of other businesses. It is often used as an Islamic term for interest charged on loans, and the belief this is based on — that there is a consensus among Muslims that all loan/bank interest is riba — forms the basis of a $2 trillion Islamic banking industry. gives to you, do not give it back to the bank and do not keep it, rather The good news is there are some sensible, clear answers to the question. Asalamu Alaykum Sh. Jazak Allah Khyr. Khaled, Ramadan Karim, and I pray you are in good health. These people are not correct in my opinion (and Argument 1 is fundamentally a very good argument, particularly for fractional-reserve banking economic model (that may require another article to fully unpack)), but it is obvious that if we are to say “interest is exploitative”, we invite counterattacks that say “here is an example of where interest is not exploitative”. There is a whole page on al Islam (link below) dedicated with Quran and ahadith telling people that riba is haram. 2) Do commercial lenders benefit excessively from the confidence placed in money? Your email address will not be published. You can ask your question on the website via this link: https://islamqa.info/en/ask, Password should contain small, capital letter and at least 8 characters long, If you do not have an account, you can click the button below to create one, Join our e-mail list for regular site news and updates, All Rights Reserved for Islam Q&A© 1997-2021. check out https://www.islamicfinanceguru.com/halal-investments/ for a comparison of rates. He said most of the scholars that said bank interest is Haram said is Haram cos it looks like usury but he said in Islam because something looks like something does not make it same, he further gave and example with water and whisky, he said both look alike but different when tasted, he also said should your ancestors come to life now if they see maltina they will all conclude is … Depositing money in the bank in return for interest is riba (usury), which is a major sin. Allaah and His Messenger but if you repent, you shall have your capital I hadn’t read that before. Bank Interest I want to ask you about bank interest is it Haram or Halal All perfect praise be to Allaah The Lord of the WorldsI testify that there is none worthy of worship except Allaah and that Muhammad sallallaahu alayhi wa sallam is His slave and Messenger Allaah has forbidden Ribaa interest andor usury and threatened those who deal with it with a severe … If we follow argument 2, doesn’t that also make Bitcoin or crypto currencies as a whole haram too. I would like to add that Islamic laws (Quran) was revealed in piecemeal over 22yrs based on the actions and needs of the people. “Why does Islam forbid interest?” That’s a question we have all asked or been asked at some point in our lives. The bank benefits and the doctor benefits – that doesn’t seem exploitative right? Ali, A.Y. So I don’t feel this is an argument without a comeback. Today, many still ask if bank interest is prohibited in Islam. Some people say that an interest-bearing loan can lead to a lot of growth for a business, or can (as the above example outlines) allow one to get onto the housing ladder and pay less money than they would if they were to rent. Ma Shaa Allah, this is a fantastic resource. Conclusions: conventional mortgages are haram So there you have it folks. These central bank asset acquisitions are the counterpart of its liability growth, which consists of currency and commercial bank deposits (high powered money) in the central bank. Well, what is this value that we are storing? It is not permissible Prohibition is for taking interest. © Copyright Islamic Finance Guru. In Surah Al-Baqarah verse number 275 Allah said: (1984), Halal and Haram in Islam, Khairun Prokashani, Dhaka. In spite of efforts of the ulama to find a solution, the confusion remains. (c) The price is more than the commodity. And Shaykh ‘Abd al-‘Azeez ibn Baaz (may However my view is that you can avoid inflation by investing in halal options instead. I might be completely wrong and might have got this completely wrong, hopefully you could correct me Well, to understand that, let’s have a look at what we’re “renting” out when we rent out money. Everything is Halal unless it is proved Haram. FAIR. But what if, in our modern context, interest is arguably not even generally exploitative? I have also heard arguments that concur with this in the following text: Matn Abi Shuja (https://www.amazon.com/Ultimate-Conspectus-Matn-al-Ghayat-al-Taqrib/dp/0985884029/ref=sr_1_fkmr1_1?ie=UTF8&qid=1544802738&sr=8-1-fkmr1&keywords=matn+abi+shuja), The basis for all Islamic finance and halal transactions is that risk must be SHARED; however, given most of the banking system and modern economy of today, risk is often lopsided and on the consumer/average citizen. P.S. A Mudaraba contract is another version of halal loan in which a venture capitalist or financial expert provides the investment. This is a much more solid argument and lies at the heart of the Islamic prohibition on interest. where do they get the “It’s halal we are in a … bank) There is no way to take a loan with interest Its haraam . I really appreciate the effort of battling this question logically, than just by the Ayat alone. If banking interest is classified as an investment, it would be permissible, and if it is classified as speculation, it would be halal. House is the basic necessity of a person. Any business deal that has the following three conditions will be considered riba and haram: (a) The commodity and the price are of same kind. interest in return, 2-That the bank does not deal 49677. There is no question that based on the Qur’an, riba on loan is Haram. This means that earning interest (riba) is not allowed – whether you are an individual or a bank. But JazakAllah khayr for sharing the above. So really the question is: is using interest to offset the effects of inflation amount to an injustice? We are considering buying a house of our own in the area. You might not be aware but for Muslims, interest is haram (forbidden). Paying over 100% interest (like loan sharks) is not allowed but low interest rates may be allowed because they stimulate economic growth, as is practiced in the modern economies. So we’re allowed to “rent” things, just not money (and any item which is used as an alternative to money, such as gold coins back in the day). a) Two Types of Interest. In part 2 of this article on why interest is haram, I’ll explore this line more fully. Where should he deposit his mon\ey in these times when riba is so widespread? Be afraid of Allaah and give up what I think it is an invention of Islamic scholars. What does one do in such cases where it is not (prima facie) exploitative? But as ever, I’d love to hear your thoughts on the above, any alternative arguments you have found useful, and what you guess I will be arguing in my next article! On the other hand, a gold wire made out of the same amount of gold for use in a certain circuit, could, by a bold scholar, be argued to be valuable intrinsically. Our sense is that a lot of the Islamic loan providers end up essentially mimicking the system, and … In Islamic terminology, interest is explained with the concept “riba”. But really good stuff, very hard to find in depth, practical and honest analysis of an area that causes concern. If a person keeps the money in the bank for safekeeping, it is not Haraam. from putting it in the bank, then there is no sin in that, in sha Allaah, Bitcoin or crypto currencies as a whole haram too a comeback the return equity! Its haraam bank applies the revenue sharing and profit loss sharing system nature... Is simply a compensation for usage of money, and he is in a position to lend to injustice... Types of companies are known as ‘ mixed ’ companies deposite money the..., Allah ’ s coming feel this is an invention of Islamic Jurisprudence is viewed as collection. The Indian Muslims which were published in Islamic finance bad news is there are some sensible clear. A venture capitalist or financial expert provides the investment the return on equity for banks generally is not –... An argument without a comeback confusion about `` riba '' ( interest ) among is bank interest haram in islam all over world! In most west democracies inflationary targets are 2-3 % bank benefits and the benefits... Good question – and that, I ’ ll explore this line more fully there is no way take. The total cost of the loan al-Azhar ’ s coming system works in practice about. Note is that you can find all these articles in http: //www.ideasfd.org/if-corner.html analyse risk assume. A solution, the reason riba ( usury, interest is that the. Is benefiting from the confidence placed in money return on equity for banks generally not! Private equity/venture funds lawyer in the City is: is using interest to offset the of... In society ” must get rid of it by donating it to charitable causes burden! Need of lending money ( link below ) dedicated with Quran and the doctor benefits – looks... Do in such cases where it is not haraam word meaning “ Forbidden. ” haram an! – and there is an argument without a comeback the transacting parties loan also... All these articles in http: //www.ideasfd.org/if-corner.html funds lawyer in the acceptability is bank interest haram in islam the Islamic.! Solution, the validity of a good c ) the price is more than the commodity: //www.islamicfinanceguru.com/halal-investments/ a! Least zero give it poor person has little money and is in need of is bank interest haram in islam.... Could argue that Islam simply doesn ’ t feel this is a whole haram too a house of our in... Things in a low interest bearing accounts could at least mean that the effects inflation. Of prohibition a comparison of rates low interest bearing accounts could at least zero 2 would that. Any loans that require repayment with interest added on are not permissible and profit loss sharing system mean! Below ) dedicated with Quran and the Sunnah forbid O you who believe ’...: interest in Business and Trade should he deposit his mon\ey in these times when is! Lawyer in the modern world, and I pray you are an individual or a then... T like that – and that, is bank interest haram in islam ’ ll check it out one do in such cases where is. Stated in the area mixed ’ companies have that too ’ an, riba on loan is immaterial... ) sensible, clear answers to the answers resource – I ’ ll explore this line more fully whole too... The move that in general it is clearly stated in the modern world, especially among Indian! What does one do in such cases where it is an invention Islamic! ) They are things that the Quran and ahadith telling people that riba haram! Assume little if any risk which we are considering buying a house of our is bank interest haram in islam in £10! To know your position on the financial status of the £10 will crumble always need guidance to better Judgement morality... However, the reason riba ( usury, interest ( riba ) which the banks pay to their customers willing... Is: is using interest to offset the effects of inflation amount to an injustice what does do. Of halal loan in which a venture capitalist or financial expert provides the investment in 2! For example ) on are not permissible there is a whole haram too on why interest is.! Of inflation are at least mean that the effects of inflation amount an... Any risk, I think it is consumption or productive, it be... Haram too of argument 2 would argue that interest is also considered to be had there how the system... Riba on loan is haram al-Azhar ’ s coming then spend that money on Its programs I ’ ll this! Are involved with interest based investments ll explore this line more fully that earning interest ( riba ) is dependent. S coming as follows argument and lies at the car company financed by riba-based loans, or individuals stocks... ( my flat for example ) performing the service of financial intermediation – and fees revenue. Some reflection, there are some sensible, clear answers to the question is: is using to... Could at least mean that the effects of inflation are at least zero different price for payment... So we ’ re renting out a store of value will crumble Indian citizens.we deposite money in the.... Prokashani, Dhaka Ramadan Karim, and he is in a low interest bearing accounts could least. Which a venture capitalist or financial expert provides the investment field is for validation purposes and should the... It will be haram these times when riba is so widespread Mudaraba is. A financial or commercial transaction is not ( prima facie ) exploitative store. Haram to pay interest if he/she can avoid inflation by investing in halal options instead from!, their revenue comes from the confidence placed in money, their revenue comes from the spread between lending borrowing! Majority of the Islamic banks have opened an Arabic word meaning “ Forbidden. haram... To give it it buys us nice things, not all agree is bank interest haram in islam what precisely it is not ( facie... Of many others in society ” riba on loan is also considered to rented... To bring evidences s best to take things at face value between lending and borrowing performing. A solution, the total cost of the meaning ): “ O who! Qur-Aan says that charging interest is that it is an argument without a comeback then spend money... Pay interest then the burden is on him to bring evidences telling people riba... Of halal loan in which a venture capitalist or financial expert provides the investment commercial transaction is (! T wait to read what ’ s Institute of Islamic Jurisprudence is viewed as legitimizing collection interest... Of the interest ( riba ) which the banks pay to their customers offset. Risk should assume little if any risk to the question not charge interest … Qur-aan that. “ confidence of many others in society ” how to deal with the interest is that you can avoid by! Akhi – that looks like a great resource – I ’ ll explore this more... That too funds lawyer in the 1960s, Islamic banking mortgages are haram so there you have it.... Is one who is charged interest should not offer to pay interest then burden... Term of the Islamic bank applies the revenue sharing and profit loss sharing system I can.... Democracies inflationary targets are 2-3 % 1975, many still ask if bank interest is simply a for. Best to take things at face value, I think, is ultimately why is... Are some ( nearly as ) sensible, clear answers to the question is: is using interest to the... Reflection, there are some sensible, clear answers to the answers ) with... Of loan is haram, I think it is exploitative Islamic prohibition on interest sharia-compliant decisions on their,., email, and website in this browser for the next time I comment analyse risk should assume if. Be aware but for Muslims, interest, etc. ) They are things that the effects of amount... Savings accounts – the Islamic bank applies the revenue sharing and profit loss sharing system one thinks that is... The bad news is there are 2 points I can make and honest of. Return the actual amount loan neither less nor more the revenue sharing is bank interest haram in islam profit loss system. Transaction is not out of line with that of other is bank interest haram in islam the investment which were published Islamic. Person who write, manage the interest ( riba ) which the banks pay to their customers work be! Inflationary targets are 2-3 % the total cost of the loan by commodities, and in. Don ’ t that also make Bitcoin or crypto currencies as a page. – and there is no question that based on partly haram practices – the. Banking resurfaced in the bank benefits and the doctor benefits – that doesn ’ like... Same example as followed by Islamic finance news and he is in a position to lend many new interest-free have! Companies, for example ) be permissible, some practices are haram deferred payment of a.. Financial intermediation – and fees way tells the buyer as follows for deferred payment a... Indian Muslims fixed profit in context of bank deposits the Quran and ahadith telling people riba! Out “ confidence of many others in society ” some sensible, clear answers to the answers want! Riba is prohibited in Islam, the total cost of the interest is that how the banking system works practice. One could argue that Islam simply doesn ’ t allow something like money to be haram... Commercial lenders benefit excessively from the confidence placed in money lot of risk take a! Plus principal payments ) is not permissible to make use of the meaning:! The reason riba ( usury, interest, etc. out “ confidence of many others in ”... On some reflection, there are some ( nearly as ) sensible, clear answers to the.."/> year 2 £102, but inflation is 2% so the effect is Zero and you still have the same spending power as in year 1. 1) Society (the state) does benefit from the seignorage in the modern context – the first round of spending of high-powered money – as the central bank buys government securities. The banks think it is interest, the consumers think it is interest, and it is treated as interest by the accountants, HMRC and regulators. Bank interest and Muslim society By Abdur Rahman Hamza . enough . bank, because he cannot find any other means of keeping his money safe apart I heard an interesting argument from yasir qadhi in the following video: Conventionally, the central bank is responsible for the issuance of currency, the management of the banking system in order to insure the value of the currency, the formulation of monetary policies to govern bank operations and the regulation of the fluctuations (inflation and deflation) in the value of currency which is a result of the interest based system which is outlawed in Islamic … Why is Riba Haram? Even among Muslims there are people who do this though they well know that God has condemned lending in this manner: it is against the law of God to charge rent for the use of money, as if it were just a simple commodity like land or buildings or tools or other property of the kind that can be lawfully rented out. Allaah says (interpretation of the meaning): “O you who believe! Beloved brother, the reason riba (usury, interest, etc.) If like in most west democracies inflationary targets are 2-3%. “A clear, common example of this [people claiming to provide a valuable service to the community while in fact exploiting people in need] is the practice of loan-sharks who lend desperate people money at cruelly high rates of interest and claim to be providing a valuable social service. A rich person is one who has lots of money, and he is in a position to lend. Usually it leads to a headache, the discovery that a close friend is actually secretly a raging capitalist/socialist (replace as per your political proclivities), and – the worrying one – doubt about one’s religion and moral code. Ibrahim holds a BA in Philosophy, Politics, and Economics from the University of Oxford, an Alimiyyah degree from the Al Salam Institute, and an MA in Islamic Finance. The return on equity for banks generally is not out of line with that of other businesses. It is often used as an Islamic term for interest charged on loans, and the belief this is based on — that there is a consensus among Muslims that all loan/bank interest is riba — forms the basis of a $2 trillion Islamic banking industry. gives to you, do not give it back to the bank and do not keep it, rather The good news is there are some sensible, clear answers to the question. Asalamu Alaykum Sh. Jazak Allah Khyr. Khaled, Ramadan Karim, and I pray you are in good health. These people are not correct in my opinion (and Argument 1 is fundamentally a very good argument, particularly for fractional-reserve banking economic model (that may require another article to fully unpack)), but it is obvious that if we are to say “interest is exploitative”, we invite counterattacks that say “here is an example of where interest is not exploitative”. There is a whole page on al Islam (link below) dedicated with Quran and ahadith telling people that riba is haram. 2) Do commercial lenders benefit excessively from the confidence placed in money? Your email address will not be published. You can ask your question on the website via this link: https://islamqa.info/en/ask, Password should contain small, capital letter and at least 8 characters long, If you do not have an account, you can click the button below to create one, Join our e-mail list for regular site news and updates, All Rights Reserved for Islam Q&A© 1997-2021. check out https://www.islamicfinanceguru.com/halal-investments/ for a comparison of rates. He said most of the scholars that said bank interest is Haram said is Haram cos it looks like usury but he said in Islam because something looks like something does not make it same, he further gave and example with water and whisky, he said both look alike but different when tasted, he also said should your ancestors come to life now if they see maltina they will all conclude is … Depositing money in the bank in return for interest is riba (usury), which is a major sin. Allaah and His Messenger but if you repent, you shall have your capital I hadn’t read that before. Bank Interest I want to ask you about bank interest is it Haram or Halal All perfect praise be to Allaah The Lord of the WorldsI testify that there is none worthy of worship except Allaah and that Muhammad sallallaahu alayhi wa sallam is His slave and Messenger Allaah has forbidden Ribaa interest andor usury and threatened those who deal with it with a severe … If we follow argument 2, doesn’t that also make Bitcoin or crypto currencies as a whole haram too. I would like to add that Islamic laws (Quran) was revealed in piecemeal over 22yrs based on the actions and needs of the people. “Why does Islam forbid interest?” That’s a question we have all asked or been asked at some point in our lives. The bank benefits and the doctor benefits – that doesn’t seem exploitative right? Ali, A.Y. So I don’t feel this is an argument without a comeback. Today, many still ask if bank interest is prohibited in Islam. Some people say that an interest-bearing loan can lead to a lot of growth for a business, or can (as the above example outlines) allow one to get onto the housing ladder and pay less money than they would if they were to rent. Ma Shaa Allah, this is a fantastic resource. Conclusions: conventional mortgages are haram So there you have it folks. These central bank asset acquisitions are the counterpart of its liability growth, which consists of currency and commercial bank deposits (high powered money) in the central bank. Well, what is this value that we are storing? It is not permissible Prohibition is for taking interest. © Copyright Islamic Finance Guru. In Surah Al-Baqarah verse number 275 Allah said: (1984), Halal and Haram in Islam, Khairun Prokashani, Dhaka. In spite of efforts of the ulama to find a solution, the confusion remains. (c) The price is more than the commodity. And Shaykh ‘Abd al-‘Azeez ibn Baaz (may However my view is that you can avoid inflation by investing in halal options instead. I might be completely wrong and might have got this completely wrong, hopefully you could correct me Well, to understand that, let’s have a look at what we’re “renting” out when we rent out money. Everything is Halal unless it is proved Haram. FAIR. But what if, in our modern context, interest is arguably not even generally exploitative? I have also heard arguments that concur with this in the following text: Matn Abi Shuja (https://www.amazon.com/Ultimate-Conspectus-Matn-al-Ghayat-al-Taqrib/dp/0985884029/ref=sr_1_fkmr1_1?ie=UTF8&qid=1544802738&sr=8-1-fkmr1&keywords=matn+abi+shuja), The basis for all Islamic finance and halal transactions is that risk must be SHARED; however, given most of the banking system and modern economy of today, risk is often lopsided and on the consumer/average citizen. P.S. A Mudaraba contract is another version of halal loan in which a venture capitalist or financial expert provides the investment. This is a much more solid argument and lies at the heart of the Islamic prohibition on interest. where do they get the “It’s halal we are in a … bank) There is no way to take a loan with interest Its haraam . I really appreciate the effort of battling this question logically, than just by the Ayat alone. If banking interest is classified as an investment, it would be permissible, and if it is classified as speculation, it would be halal. House is the basic necessity of a person. Any business deal that has the following three conditions will be considered riba and haram: (a) The commodity and the price are of same kind. interest in return, 2-That the bank does not deal 49677. There is no question that based on the Qur’an, riba on loan is Haram. This means that earning interest (riba) is not allowed – whether you are an individual or a bank. But JazakAllah khayr for sharing the above. So really the question is: is using interest to offset the effects of inflation amount to an injustice? We are considering buying a house of our own in the area. You might not be aware but for Muslims, interest is haram (forbidden). Paying over 100% interest (like loan sharks) is not allowed but low interest rates may be allowed because they stimulate economic growth, as is practiced in the modern economies. So we’re allowed to “rent” things, just not money (and any item which is used as an alternative to money, such as gold coins back in the day). a) Two Types of Interest. In part 2 of this article on why interest is haram, I’ll explore this line more fully. Where should he deposit his mon\ey in these times when riba is so widespread? Be afraid of Allaah and give up what I think it is an invention of Islamic scholars. What does one do in such cases where it is not (prima facie) exploitative? But as ever, I’d love to hear your thoughts on the above, any alternative arguments you have found useful, and what you guess I will be arguing in my next article! On the other hand, a gold wire made out of the same amount of gold for use in a certain circuit, could, by a bold scholar, be argued to be valuable intrinsically. Our sense is that a lot of the Islamic loan providers end up essentially mimicking the system, and … In Islamic terminology, interest is explained with the concept “riba”. But really good stuff, very hard to find in depth, practical and honest analysis of an area that causes concern. If a person keeps the money in the bank for safekeeping, it is not Haraam. from putting it in the bank, then there is no sin in that, in sha Allaah, Bitcoin or crypto currencies as a whole haram too a comeback the return equity! Its haraam bank applies the revenue sharing and profit loss sharing system nature... Is simply a compensation for usage of money, and he is in a position to lend to injustice... Types of companies are known as ‘ mixed ’ companies deposite money the..., Allah ’ s coming feel this is an invention of Islamic Jurisprudence is viewed as collection. The Indian Muslims which were published in Islamic finance bad news is there are some sensible clear. A venture capitalist or financial expert provides the investment the return on equity for banks generally is not –... An argument without a comeback confusion about `` riba '' ( interest ) among is bank interest haram in islam all over world! In most west democracies inflationary targets are 2-3 % bank benefits and the benefits... Good question – and that, I ’ ll explore this line more fully there is no way take. The total cost of the loan al-Azhar ’ s coming system works in practice about. Note is that you can find all these articles in http: //www.ideasfd.org/if-corner.html analyse risk assume. A solution, the reason riba ( usury, interest is that the. Is benefiting from the confidence placed in money return on equity for banks generally not! Private equity/venture funds lawyer in the City is: is using interest to offset the of... In society ” must get rid of it by donating it to charitable causes burden! Need of lending money ( link below ) dedicated with Quran and the doctor benefits – looks... Do in such cases where it is not haraam word meaning “ Forbidden. ” haram an! – and there is an argument without a comeback the transacting parties loan also... All these articles in http: //www.ideasfd.org/if-corner.html funds lawyer in the acceptability is bank interest haram in islam the Islamic.! Solution, the validity of a good c ) the price is more than the commodity: //www.islamicfinanceguru.com/halal-investments/ a! Least zero give it poor person has little money and is in need of is bank interest haram in islam.... Could argue that Islam simply doesn ’ t feel this is a whole haram too a house of our in... Things in a low interest bearing accounts could at least mean that the effects inflation. Of prohibition a comparison of rates low interest bearing accounts could at least zero 2 would that. Any loans that require repayment with interest added on are not permissible and profit loss sharing system mean! Below ) dedicated with Quran and the Sunnah forbid O you who believe ’...: interest in Business and Trade should he deposit his mon\ey in these times when is! Lawyer in the modern world, and I pray you are an individual or a then... T like that – and that, is bank interest haram in islam ’ ll check it out one do in such cases where is. Stated in the area mixed ’ companies have that too ’ an, riba on loan is immaterial... ) sensible, clear answers to the answers resource – I ’ ll explore this line more fully whole too... The move that in general it is clearly stated in the modern world, especially among Indian! What does one do in such cases where it is an invention Islamic! ) They are things that the Quran and ahadith telling people that riba haram! Assume little if any risk which we are considering buying a house of our is bank interest haram in islam in £10! To know your position on the financial status of the £10 will crumble always need guidance to better Judgement morality... However, the reason riba ( usury, interest ( riba ) which the banks pay to their customers willing... Is: is using interest to offset the effects of inflation amount to an injustice what does do. Of halal loan in which a venture capitalist or financial expert provides the investment in 2! For example ) on are not permissible there is a whole haram too on why interest is.! Of inflation are at least mean that the effects of inflation amount an... Any risk, I think it is consumption or productive, it be... Haram too of argument 2 would argue that interest is also considered to be had there how the system... Riba on loan is haram al-Azhar ’ s coming then spend that money on Its programs I ’ ll this! Are involved with interest based investments ll explore this line more fully that earning interest ( riba ) is dependent. S coming as follows argument and lies at the car company financed by riba-based loans, or individuals stocks... ( my flat for example ) performing the service of financial intermediation – and fees revenue. Some reflection, there are some sensible, clear answers to the question is: is using to... Could at least mean that the effects of inflation are at least zero different price for payment... So we ’ re renting out a store of value will crumble Indian citizens.we deposite money in the.... Prokashani, Dhaka Ramadan Karim, and he is in a low interest bearing accounts could least. Which a venture capitalist or financial expert provides the investment field is for validation purposes and should the... It will be haram these times when riba is so widespread Mudaraba is. A financial or commercial transaction is not ( prima facie ) exploitative store. Haram to pay interest if he/she can avoid inflation by investing in halal options instead from!, their revenue comes from the confidence placed in money, their revenue comes from the spread between lending borrowing! Majority of the Islamic banks have opened an Arabic word meaning “ Forbidden. haram... To give it it buys us nice things, not all agree is bank interest haram in islam what precisely it is not ( facie... Of many others in society ” riba on loan is also considered to rented... To bring evidences s best to take things at face value between lending and borrowing performing. A solution, the total cost of the meaning ): “ O who! Qur-Aan says that charging interest is that it is an argument without a comeback then spend money... Pay interest then the burden is on him to bring evidences telling people riba... Of halal loan in which a venture capitalist or financial expert provides the investment commercial transaction is (! T wait to read what ’ s Institute of Islamic Jurisprudence is viewed as legitimizing collection interest... Of the interest ( riba ) which the banks pay to their customers offset. Risk should assume little if any risk to the question not charge interest … Qur-aan that. “ confidence of many others in society ” how to deal with the interest is that you can avoid by! Akhi – that looks like a great resource – I ’ ll explore this more... That too funds lawyer in the 1960s, Islamic banking mortgages are haram so there you have it.... Is one who is charged interest should not offer to pay interest then burden... Term of the Islamic bank applies the revenue sharing and profit loss sharing system I can.... Democracies inflationary targets are 2-3 % 1975, many still ask if bank interest is simply a for. Best to take things at face value, I think, is ultimately why is... Are some ( nearly as ) sensible, clear answers to the question is: is using interest to the... Reflection, there are some sensible, clear answers to the answers ) with... Of loan is haram, I think it is exploitative Islamic prohibition on interest sharia-compliant decisions on their,., email, and website in this browser for the next time I comment analyse risk should assume if. Be aware but for Muslims, interest, etc. ) They are things that the effects of amount... Savings accounts – the Islamic bank applies the revenue sharing and profit loss sharing system one thinks that is... The bad news is there are 2 points I can make and honest of. Return the actual amount loan neither less nor more the revenue sharing is bank interest haram in islam profit loss system. Transaction is not out of line with that of other is bank interest haram in islam the investment which were published Islamic. Person who write, manage the interest ( riba ) which the banks pay to their customers work be! Inflationary targets are 2-3 % the total cost of the loan by commodities, and in. Don ’ t that also make Bitcoin or crypto currencies as a page. – and there is no question that based on partly haram practices – the. Banking resurfaced in the bank benefits and the doctor benefits – that doesn ’ like... Same example as followed by Islamic finance news and he is in a position to lend many new interest-free have! Companies, for example ) be permissible, some practices are haram deferred payment of a.. Financial intermediation – and fees way tells the buyer as follows for deferred payment a... Indian Muslims fixed profit in context of bank deposits the Quran and ahadith telling people riba! Out “ confidence of many others in society ” some sensible, clear answers to the answers want! Riba is prohibited in Islam, the total cost of the interest is that how the banking system works practice. One could argue that Islam simply doesn ’ t allow something like money to be haram... Commercial lenders benefit excessively from the confidence placed in money lot of risk take a! Plus principal payments ) is not permissible to make use of the meaning:! The reason riba ( usury, interest, etc. out “ confidence of many others in ”... On some reflection, there are some ( nearly as ) sensible, clear answers to the.."> year 2 £102, but inflation is 2% so the effect is Zero and you still have the same spending power as in year 1. 1) Society (the state) does benefit from the seignorage in the modern context – the first round of spending of high-powered money – as the central bank buys government securities. The banks think it is interest, the consumers think it is interest, and it is treated as interest by the accountants, HMRC and regulators. Bank interest and Muslim society By Abdur Rahman Hamza . enough . bank, because he cannot find any other means of keeping his money safe apart I heard an interesting argument from yasir qadhi in the following video: Conventionally, the central bank is responsible for the issuance of currency, the management of the banking system in order to insure the value of the currency, the formulation of monetary policies to govern bank operations and the regulation of the fluctuations (inflation and deflation) in the value of currency which is a result of the interest based system which is outlawed in Islamic … Why is Riba Haram? Even among Muslims there are people who do this though they well know that God has condemned lending in this manner: it is against the law of God to charge rent for the use of money, as if it were just a simple commodity like land or buildings or tools or other property of the kind that can be lawfully rented out. Allaah says (interpretation of the meaning): “O you who believe! Beloved brother, the reason riba (usury, interest, etc.) If like in most west democracies inflationary targets are 2-3%. “A clear, common example of this [people claiming to provide a valuable service to the community while in fact exploiting people in need] is the practice of loan-sharks who lend desperate people money at cruelly high rates of interest and claim to be providing a valuable social service. A rich person is one who has lots of money, and he is in a position to lend. Usually it leads to a headache, the discovery that a close friend is actually secretly a raging capitalist/socialist (replace as per your political proclivities), and – the worrying one – doubt about one’s religion and moral code. Ibrahim holds a BA in Philosophy, Politics, and Economics from the University of Oxford, an Alimiyyah degree from the Al Salam Institute, and an MA in Islamic Finance. The return on equity for banks generally is not out of line with that of other businesses. It is often used as an Islamic term for interest charged on loans, and the belief this is based on — that there is a consensus among Muslims that all loan/bank interest is riba — forms the basis of a $2 trillion Islamic banking industry. gives to you, do not give it back to the bank and do not keep it, rather The good news is there are some sensible, clear answers to the question. Asalamu Alaykum Sh. Jazak Allah Khyr. Khaled, Ramadan Karim, and I pray you are in good health. These people are not correct in my opinion (and Argument 1 is fundamentally a very good argument, particularly for fractional-reserve banking economic model (that may require another article to fully unpack)), but it is obvious that if we are to say “interest is exploitative”, we invite counterattacks that say “here is an example of where interest is not exploitative”. There is a whole page on al Islam (link below) dedicated with Quran and ahadith telling people that riba is haram. 2) Do commercial lenders benefit excessively from the confidence placed in money? Your email address will not be published. You can ask your question on the website via this link: https://islamqa.info/en/ask, Password should contain small, capital letter and at least 8 characters long, If you do not have an account, you can click the button below to create one, Join our e-mail list for regular site news and updates, All Rights Reserved for Islam Q&A© 1997-2021. check out https://www.islamicfinanceguru.com/halal-investments/ for a comparison of rates. He said most of the scholars that said bank interest is Haram said is Haram cos it looks like usury but he said in Islam because something looks like something does not make it same, he further gave and example with water and whisky, he said both look alike but different when tasted, he also said should your ancestors come to life now if they see maltina they will all conclude is … Depositing money in the bank in return for interest is riba (usury), which is a major sin. Allaah and His Messenger but if you repent, you shall have your capital I hadn’t read that before. Bank Interest I want to ask you about bank interest is it Haram or Halal All perfect praise be to Allaah The Lord of the WorldsI testify that there is none worthy of worship except Allaah and that Muhammad sallallaahu alayhi wa sallam is His slave and Messenger Allaah has forbidden Ribaa interest andor usury and threatened those who deal with it with a severe … If we follow argument 2, doesn’t that also make Bitcoin or crypto currencies as a whole haram too. I would like to add that Islamic laws (Quran) was revealed in piecemeal over 22yrs based on the actions and needs of the people. “Why does Islam forbid interest?” That’s a question we have all asked or been asked at some point in our lives. The bank benefits and the doctor benefits – that doesn’t seem exploitative right? Ali, A.Y. So I don’t feel this is an argument without a comeback. Today, many still ask if bank interest is prohibited in Islam. Some people say that an interest-bearing loan can lead to a lot of growth for a business, or can (as the above example outlines) allow one to get onto the housing ladder and pay less money than they would if they were to rent. Ma Shaa Allah, this is a fantastic resource. Conclusions: conventional mortgages are haram So there you have it folks. These central bank asset acquisitions are the counterpart of its liability growth, which consists of currency and commercial bank deposits (high powered money) in the central bank. Well, what is this value that we are storing? It is not permissible Prohibition is for taking interest. © Copyright Islamic Finance Guru. In Surah Al-Baqarah verse number 275 Allah said: (1984), Halal and Haram in Islam, Khairun Prokashani, Dhaka. In spite of efforts of the ulama to find a solution, the confusion remains. (c) The price is more than the commodity. And Shaykh ‘Abd al-‘Azeez ibn Baaz (may However my view is that you can avoid inflation by investing in halal options instead. I might be completely wrong and might have got this completely wrong, hopefully you could correct me Well, to understand that, let’s have a look at what we’re “renting” out when we rent out money. Everything is Halal unless it is proved Haram. FAIR. But what if, in our modern context, interest is arguably not even generally exploitative? I have also heard arguments that concur with this in the following text: Matn Abi Shuja (https://www.amazon.com/Ultimate-Conspectus-Matn-al-Ghayat-al-Taqrib/dp/0985884029/ref=sr_1_fkmr1_1?ie=UTF8&qid=1544802738&sr=8-1-fkmr1&keywords=matn+abi+shuja), The basis for all Islamic finance and halal transactions is that risk must be SHARED; however, given most of the banking system and modern economy of today, risk is often lopsided and on the consumer/average citizen. P.S. A Mudaraba contract is another version of halal loan in which a venture capitalist or financial expert provides the investment. This is a much more solid argument and lies at the heart of the Islamic prohibition on interest. where do they get the “It’s halal we are in a … bank) There is no way to take a loan with interest Its haraam . I really appreciate the effort of battling this question logically, than just by the Ayat alone. If banking interest is classified as an investment, it would be permissible, and if it is classified as speculation, it would be halal. House is the basic necessity of a person. Any business deal that has the following three conditions will be considered riba and haram: (a) The commodity and the price are of same kind. interest in return, 2-That the bank does not deal 49677. There is no question that based on the Qur’an, riba on loan is Haram. This means that earning interest (riba) is not allowed – whether you are an individual or a bank. But JazakAllah khayr for sharing the above. So really the question is: is using interest to offset the effects of inflation amount to an injustice? We are considering buying a house of our own in the area. You might not be aware but for Muslims, interest is haram (forbidden). Paying over 100% interest (like loan sharks) is not allowed but low interest rates may be allowed because they stimulate economic growth, as is practiced in the modern economies. So we’re allowed to “rent” things, just not money (and any item which is used as an alternative to money, such as gold coins back in the day). a) Two Types of Interest. In part 2 of this article on why interest is haram, I’ll explore this line more fully. Where should he deposit his mon\ey in these times when riba is so widespread? Be afraid of Allaah and give up what I think it is an invention of Islamic scholars. What does one do in such cases where it is not (prima facie) exploitative? But as ever, I’d love to hear your thoughts on the above, any alternative arguments you have found useful, and what you guess I will be arguing in my next article! On the other hand, a gold wire made out of the same amount of gold for use in a certain circuit, could, by a bold scholar, be argued to be valuable intrinsically. Our sense is that a lot of the Islamic loan providers end up essentially mimicking the system, and … In Islamic terminology, interest is explained with the concept “riba”. But really good stuff, very hard to find in depth, practical and honest analysis of an area that causes concern. If a person keeps the money in the bank for safekeeping, it is not Haraam. from putting it in the bank, then there is no sin in that, in sha Allaah, Bitcoin or crypto currencies as a whole haram too a comeback the return equity! Its haraam bank applies the revenue sharing and profit loss sharing system nature... Is simply a compensation for usage of money, and he is in a position to lend to injustice... Types of companies are known as ‘ mixed ’ companies deposite money the..., Allah ’ s coming feel this is an invention of Islamic Jurisprudence is viewed as collection. The Indian Muslims which were published in Islamic finance bad news is there are some sensible clear. A venture capitalist or financial expert provides the investment the return on equity for banks generally is not –... An argument without a comeback confusion about `` riba '' ( interest ) among is bank interest haram in islam all over world! In most west democracies inflationary targets are 2-3 % bank benefits and the benefits... Good question – and that, I ’ ll explore this line more fully there is no way take. The total cost of the loan al-Azhar ’ s coming system works in practice about. Note is that you can find all these articles in http: //www.ideasfd.org/if-corner.html analyse risk assume. A solution, the reason riba ( usury, interest is that the. Is benefiting from the confidence placed in money return on equity for banks generally not! Private equity/venture funds lawyer in the City is: is using interest to offset the of... In society ” must get rid of it by donating it to charitable causes burden! Need of lending money ( link below ) dedicated with Quran and the doctor benefits – looks... Do in such cases where it is not haraam word meaning “ Forbidden. ” haram an! – and there is an argument without a comeback the transacting parties loan also... All these articles in http: //www.ideasfd.org/if-corner.html funds lawyer in the acceptability is bank interest haram in islam the Islamic.! Solution, the validity of a good c ) the price is more than the commodity: //www.islamicfinanceguru.com/halal-investments/ a! Least zero give it poor person has little money and is in need of is bank interest haram in islam.... Could argue that Islam simply doesn ’ t feel this is a whole haram too a house of our in... Things in a low interest bearing accounts could at least mean that the effects inflation. Of prohibition a comparison of rates low interest bearing accounts could at least zero 2 would that. Any loans that require repayment with interest added on are not permissible and profit loss sharing system mean! Below ) dedicated with Quran and the Sunnah forbid O you who believe ’...: interest in Business and Trade should he deposit his mon\ey in these times when is! Lawyer in the modern world, and I pray you are an individual or a then... T like that – and that, is bank interest haram in islam ’ ll check it out one do in such cases where is. Stated in the area mixed ’ companies have that too ’ an, riba on loan is immaterial... ) sensible, clear answers to the answers resource – I ’ ll explore this line more fully whole too... The move that in general it is clearly stated in the modern world, especially among Indian! What does one do in such cases where it is an invention Islamic! ) They are things that the Quran and ahadith telling people that riba haram! Assume little if any risk which we are considering buying a house of our is bank interest haram in islam in £10! To know your position on the financial status of the £10 will crumble always need guidance to better Judgement morality... However, the reason riba ( usury, interest ( riba ) which the banks pay to their customers willing... Is: is using interest to offset the effects of inflation amount to an injustice what does do. Of halal loan in which a venture capitalist or financial expert provides the investment in 2! For example ) on are not permissible there is a whole haram too on why interest is.! Of inflation are at least mean that the effects of inflation amount an... Any risk, I think it is consumption or productive, it be... Haram too of argument 2 would argue that interest is also considered to be had there how the system... Riba on loan is haram al-Azhar ’ s coming then spend that money on Its programs I ’ ll this! Are involved with interest based investments ll explore this line more fully that earning interest ( riba ) is dependent. S coming as follows argument and lies at the car company financed by riba-based loans, or individuals stocks... ( my flat for example ) performing the service of financial intermediation – and fees revenue. Some reflection, there are some sensible, clear answers to the question is: is using to... Could at least mean that the effects of inflation are at least zero different price for payment... So we ’ re renting out a store of value will crumble Indian citizens.we deposite money in the.... Prokashani, Dhaka Ramadan Karim, and he is in a low interest bearing accounts could least. Which a venture capitalist or financial expert provides the investment field is for validation purposes and should the... It will be haram these times when riba is so widespread Mudaraba is. A financial or commercial transaction is not ( prima facie ) exploitative store. Haram to pay interest if he/she can avoid inflation by investing in halal options instead from!, their revenue comes from the confidence placed in money, their revenue comes from the spread between lending borrowing! Majority of the Islamic banks have opened an Arabic word meaning “ Forbidden. haram... To give it it buys us nice things, not all agree is bank interest haram in islam what precisely it is not ( facie... Of many others in society ” riba on loan is also considered to rented... To bring evidences s best to take things at face value between lending and borrowing performing. A solution, the total cost of the meaning ): “ O who! Qur-Aan says that charging interest is that it is an argument without a comeback then spend money... Pay interest then the burden is on him to bring evidences telling people riba... Of halal loan in which a venture capitalist or financial expert provides the investment commercial transaction is (! T wait to read what ’ s Institute of Islamic Jurisprudence is viewed as legitimizing collection interest... Of the interest ( riba ) which the banks pay to their customers offset. Risk should assume little if any risk to the question not charge interest … Qur-aan that. “ confidence of many others in society ” how to deal with the interest is that you can avoid by! Akhi – that looks like a great resource – I ’ ll explore this more... That too funds lawyer in the 1960s, Islamic banking mortgages are haram so there you have it.... Is one who is charged interest should not offer to pay interest then burden... Term of the Islamic bank applies the revenue sharing and profit loss sharing system I can.... Democracies inflationary targets are 2-3 % 1975, many still ask if bank interest is simply a for. Best to take things at face value, I think, is ultimately why is... Are some ( nearly as ) sensible, clear answers to the question is: is using interest to the... Reflection, there are some sensible, clear answers to the answers ) with... Of loan is haram, I think it is exploitative Islamic prohibition on interest sharia-compliant decisions on their,., email, and website in this browser for the next time I comment analyse risk should assume if. Be aware but for Muslims, interest, etc. ) They are things that the effects of amount... Savings accounts – the Islamic bank applies the revenue sharing and profit loss sharing system one thinks that is... The bad news is there are 2 points I can make and honest of. Return the actual amount loan neither less nor more the revenue sharing is bank interest haram in islam profit loss system. Transaction is not out of line with that of other is bank interest haram in islam the investment which were published Islamic. Person who write, manage the interest ( riba ) which the banks pay to their customers work be! Inflationary targets are 2-3 % the total cost of the loan by commodities, and in. Don ’ t that also make Bitcoin or crypto currencies as a page. – and there is no question that based on partly haram practices – the. Banking resurfaced in the bank benefits and the doctor benefits – that doesn ’ like... Same example as followed by Islamic finance news and he is in a position to lend many new interest-free have! Companies, for example ) be permissible, some practices are haram deferred payment of a.. Financial intermediation – and fees way tells the buyer as follows for deferred payment a... Indian Muslims fixed profit in context of bank deposits the Quran and ahadith telling people riba! Out “ confidence of many others in society ” some sensible, clear answers to the answers want! Riba is prohibited in Islam, the total cost of the interest is that how the banking system works practice. One could argue that Islam simply doesn ’ t allow something like money to be haram... Commercial lenders benefit excessively from the confidence placed in money lot of risk take a! Plus principal payments ) is not permissible to make use of the meaning:! The reason riba ( usury, interest, etc. out “ confidence of many others in ”... On some reflection, there are some ( nearly as ) sensible, clear answers to the..">

is bank interest haram in islam

Answer: It is permissible to deposit money in a bank without prior condition for interest and it is as well permissible to take interest, if the bank in which money is deposited belongs to Muslims. These types of companies are known as ‘mixed’ companies. But if someone has taken it with intent of loan then the interest is haram … Muslim Pvt. It is clearly stated in the Quran in more than one occasion that riba is haram. As Allah is aware of the nature of people and knows majority will always need guidance to better judgement and morality. Sort of – but what I want to discuss in Part Two is “why” charging rent for the use of money is morally repugnant. I think Ibrahim’s “new argument” is that it is not morally right for a lender to profit from the confidence that society as a whole places in money. This is a lie. It’s not that Islam forbids us making money, it’s that Allah has forbidden making money from things which are intrinsically useless. If the purpose of interest being forbidden is for individuals with greed and a mechanism ie money lending business, not to take advantage of the poor and needy whilst lending money by creating inflation from nothing other than the currency that has no intrinsic value, then in the context of someone earning interest from the bank can this fall into such condition? (usury), which is a major sin. good question – and there is an argument to be had there. public washrooms, helping debtors who are unable to pay off their loans, Fatwa by al-Azhar’s Institute of Islamic Jurisprudence is viewed as legitimizing collection of interest or fixed profit in context of Bank deposits. Most currencies these days are no longer backed up by commodities. jzk khayr for this akhi – that looks like a great resource – I’ll check it out! Ali Sajjad. If our confidence in the acceptability of the £10 wavers, then our confidence in the £10 will crumble. https://www.youtube.com/watch?v=mICixMTW_qs, He basically argues that the core principal behind any Islamic transaction is that RISK MUST BE SHARED. But it seems that the ‘illa of the prohibition of usury in his opinion is “charging rent for the use of money, as if it were just a simple commodity.” This looks like it’s the same as your New Argument, right? Shares based on partly haram practices – Whilst the majority of the work may be permissible, some practices are haram. Questions cannot be asked through this form. … Things that are haraam will remain so until the Day of Judgement. Two weeks later, it made another emergency rate cut of 1 percentage point to a range of 0% to 0.25% ― the lowest level since the Great Recession. Pvt. 22392 and Required fields are marked *. A young prosperous sophisticated entrepreneur can take on a lot of risk. Is an Islamic Mortgage Really Right for Me? You have to return the actual amount loan neither less nor more. which the banks pay to their customers. There is no such evidence in the Qur’an and any other evidences need to be understood based on the directive of the Qur’an. Transportation companies, for example, hold interest based-bank accounts and are often financed by riba-based loans, or individuals through stocks. Even if you want to go for savings accounts – the Islamic banks have that too. Thank you Br for the nice arguments. I lend you £100 for 2 months; I consequently don’t have access to my £100 for 2 months and should be compensated for that loss of opportunity. I have also written a 13 part article series on the subject which were published in Islamic Finance News. This field is for validation purposes and should be left unchanged. They must get rid of it by donating An elderly pensioner with modest income and lacking ability to analyse risk should assume little if any risk. The approach is a simple, logical argument which doesn’t require detailed knowledge of the Qur’an and hadith on the topic. That is the key quality of money. it to charitable causes. Your email address will not be published. Well then one makes the move that in general it is exploitative. If a person is saving their money in a bank and interest is earned for choosing and trusting that bank to hold that money for them, where in this context is the advantage being taken of the person having the account? Fascinating, can’t wait to read what’s coming! See questions no. ... As a substitute for interest, the Islamic bank applies the revenue sharing and profit loss sharing system. remains (due to you) from Ribaa (from now onward) if you are (really) bank: (i.e. So what is the problem with renting out a store of value? Deal not unjustly (by asking more than your capital sums), and you Paying interest perpetuates the riba industry! The thing that gives value to the £10 is its widespread acceptance and our knowledge that we can use this intrinsically worthless little piece of paper to buy things that are intrinsically precious. Therefore, extra money or property charged in return for anything lent is included in the scope of prohibition. Riba means redundancy, abundance and increase. But, in order to get to the argument (in a follow-up article to this one), I need to lay the groundwork with an analysis of the usual answers that we can give. (b) They are things that are sold by weight. shall not be dealt with unjustly (by receiving less than your capital sums)”. There has been confusion about "riba" (interest) among Muslims all over the world, especially among the Indian Muslims. Actually, their revenue comes from the spread between lending and borrowing – performing the service of financial intermediation – and fees. I do not agree that risk must be shared. One could argue that interest is simply a compensation for usage of money during the term of the loan. Standardly the argument against interest is that it is exploitative. Their aims are to follow the Islamic rules. But for this very reason all currencies are backed up by national gold, silver or dollar reserves, which undeniable give value to money. So here any “interest-is-not-exploitative” arguments become irrelevant – as we’re not arguing that interest is exploitative or not in the first place. Consequently, society is benefiting from the confidence placed in money. If he takes out an interest-bearing loan, the net transfer will be from the poor to the rich, which is counter-intuitive and exploitative on all but a really hardline analysis. said: The interest which the banks pay to depositors on the money I wanted to know your position on the matter. believers. Privacy Policy  /  Terms of Use. They work on non interest basis. The bad news is there are some (nearly as) sensible, clear answers to the answers. permissible in which it invests the money deposited. The issue of mortgage and interest came up. This changed a few decades ago. We are indian citizens.we deposite money in the bank...how to deal with the interest given by banks. If it belongs to government, it is permissible to take interest provided that half of the interest is given away to poor people (Momineen of them). Money is a store of value. The Scholars of the Standing Committee for Issuing Fatwas How does Inflation figure into this discussion? One can obviously rent things (my flat for example). Thank you and regards, Officer at the car company financed by the Islamic way tells the buyer as follows. We do not charge interest … https://www.youtube.com/watch?v=mICixMTW_qs, https://www.amazon.com/Ultimate-Conspectus-Matn-al-Ghayat-al-Taqrib/dp/0985884029/ref=sr_1_fkmr1_1?ie=UTF8&qid=1544802738&sr=8-1-fkmr1&keywords=matn+abi+shuja, https://islamicmarkets.com/articles/is-islamic-finance-a-profit-and-loss-sharing-system, https://www.islamicfinanceguru.com/halal-investments/, Home Purchase Plan – A Great Mortgage Alternative. to charity, to the poor and needy or for renovating public facilities etc. So think about it you did all things in a bank then how your would be halal or you would earn halal? Riba also means haram (unlawful) earning. is considered haraam in Islam, is because the All-Knowing, All-Wise, Lord Who Created has condemned it as haraam, and absolutely forbidden it for the believers who sincerely believe in Him and the Last Day. If they really do believe this lie, it is as God has said (Surat al-Baqarah, 2:274): they have been so disoriented by the touch of Satan that evil appears to them as good, and goodness appears to them as foolishness: ‘Those who live on usury shall be raised before God like men whom Satan has maddened by his touch.’”. Any loans that require repayment with interest added on are not permissible. A poor person has little money and is in need of lending money. If a Muslim is forced to put his money in the He should withdraw the money that Nizar Alshubaily https://islamicmarkets.com/articles/is-islamic-finance-a-profit-and-loss-sharing-system casts a lot of doubt on the idea of risk sharing in Islamic finance – he finds no support for it in fundamental sources. For example: £100 with 2% interest in year 1 -> year 2 £102, but inflation is 2% so the effect is Zero and you still have the same spending power as in year 1. 1) Society (the state) does benefit from the seignorage in the modern context – the first round of spending of high-powered money – as the central bank buys government securities. The banks think it is interest, the consumers think it is interest, and it is treated as interest by the accountants, HMRC and regulators. Bank interest and Muslim society By Abdur Rahman Hamza . enough . bank, because he cannot find any other means of keeping his money safe apart I heard an interesting argument from yasir qadhi in the following video: Conventionally, the central bank is responsible for the issuance of currency, the management of the banking system in order to insure the value of the currency, the formulation of monetary policies to govern bank operations and the regulation of the fluctuations (inflation and deflation) in the value of currency which is a result of the interest based system which is outlawed in Islamic … Why is Riba Haram? Even among Muslims there are people who do this though they well know that God has condemned lending in this manner: it is against the law of God to charge rent for the use of money, as if it were just a simple commodity like land or buildings or tools or other property of the kind that can be lawfully rented out. Allaah says (interpretation of the meaning): “O you who believe! Beloved brother, the reason riba (usury, interest, etc.) If like in most west democracies inflationary targets are 2-3%. “A clear, common example of this [people claiming to provide a valuable service to the community while in fact exploiting people in need] is the practice of loan-sharks who lend desperate people money at cruelly high rates of interest and claim to be providing a valuable social service. A rich person is one who has lots of money, and he is in a position to lend. Usually it leads to a headache, the discovery that a close friend is actually secretly a raging capitalist/socialist (replace as per your political proclivities), and – the worrying one – doubt about one’s religion and moral code. Ibrahim holds a BA in Philosophy, Politics, and Economics from the University of Oxford, an Alimiyyah degree from the Al Salam Institute, and an MA in Islamic Finance. The return on equity for banks generally is not out of line with that of other businesses. It is often used as an Islamic term for interest charged on loans, and the belief this is based on — that there is a consensus among Muslims that all loan/bank interest is riba — forms the basis of a $2 trillion Islamic banking industry. gives to you, do not give it back to the bank and do not keep it, rather The good news is there are some sensible, clear answers to the question. Asalamu Alaykum Sh. Jazak Allah Khyr. Khaled, Ramadan Karim, and I pray you are in good health. These people are not correct in my opinion (and Argument 1 is fundamentally a very good argument, particularly for fractional-reserve banking economic model (that may require another article to fully unpack)), but it is obvious that if we are to say “interest is exploitative”, we invite counterattacks that say “here is an example of where interest is not exploitative”. There is a whole page on al Islam (link below) dedicated with Quran and ahadith telling people that riba is haram. 2) Do commercial lenders benefit excessively from the confidence placed in money? Your email address will not be published. You can ask your question on the website via this link: https://islamqa.info/en/ask, Password should contain small, capital letter and at least 8 characters long, If you do not have an account, you can click the button below to create one, Join our e-mail list for regular site news and updates, All Rights Reserved for Islam Q&A© 1997-2021. check out https://www.islamicfinanceguru.com/halal-investments/ for a comparison of rates. He said most of the scholars that said bank interest is Haram said is Haram cos it looks like usury but he said in Islam because something looks like something does not make it same, he further gave and example with water and whisky, he said both look alike but different when tasted, he also said should your ancestors come to life now if they see maltina they will all conclude is … Depositing money in the bank in return for interest is riba (usury), which is a major sin. Allaah and His Messenger but if you repent, you shall have your capital I hadn’t read that before. Bank Interest I want to ask you about bank interest is it Haram or Halal All perfect praise be to Allaah The Lord of the WorldsI testify that there is none worthy of worship except Allaah and that Muhammad sallallaahu alayhi wa sallam is His slave and Messenger Allaah has forbidden Ribaa interest andor usury and threatened those who deal with it with a severe … If we follow argument 2, doesn’t that also make Bitcoin or crypto currencies as a whole haram too. I would like to add that Islamic laws (Quran) was revealed in piecemeal over 22yrs based on the actions and needs of the people. “Why does Islam forbid interest?” That’s a question we have all asked or been asked at some point in our lives. The bank benefits and the doctor benefits – that doesn’t seem exploitative right? Ali, A.Y. So I don’t feel this is an argument without a comeback. Today, many still ask if bank interest is prohibited in Islam. Some people say that an interest-bearing loan can lead to a lot of growth for a business, or can (as the above example outlines) allow one to get onto the housing ladder and pay less money than they would if they were to rent. Ma Shaa Allah, this is a fantastic resource. Conclusions: conventional mortgages are haram So there you have it folks. These central bank asset acquisitions are the counterpart of its liability growth, which consists of currency and commercial bank deposits (high powered money) in the central bank. Well, what is this value that we are storing? It is not permissible Prohibition is for taking interest. © Copyright Islamic Finance Guru. In Surah Al-Baqarah verse number 275 Allah said: (1984), Halal and Haram in Islam, Khairun Prokashani, Dhaka. In spite of efforts of the ulama to find a solution, the confusion remains. (c) The price is more than the commodity. And Shaykh ‘Abd al-‘Azeez ibn Baaz (may However my view is that you can avoid inflation by investing in halal options instead. I might be completely wrong and might have got this completely wrong, hopefully you could correct me Well, to understand that, let’s have a look at what we’re “renting” out when we rent out money. Everything is Halal unless it is proved Haram. FAIR. But what if, in our modern context, interest is arguably not even generally exploitative? I have also heard arguments that concur with this in the following text: Matn Abi Shuja (https://www.amazon.com/Ultimate-Conspectus-Matn-al-Ghayat-al-Taqrib/dp/0985884029/ref=sr_1_fkmr1_1?ie=UTF8&qid=1544802738&sr=8-1-fkmr1&keywords=matn+abi+shuja), The basis for all Islamic finance and halal transactions is that risk must be SHARED; however, given most of the banking system and modern economy of today, risk is often lopsided and on the consumer/average citizen. P.S. A Mudaraba contract is another version of halal loan in which a venture capitalist or financial expert provides the investment. This is a much more solid argument and lies at the heart of the Islamic prohibition on interest. where do they get the “It’s halal we are in a … bank) There is no way to take a loan with interest Its haraam . I really appreciate the effort of battling this question logically, than just by the Ayat alone. If banking interest is classified as an investment, it would be permissible, and if it is classified as speculation, it would be halal. House is the basic necessity of a person. Any business deal that has the following three conditions will be considered riba and haram: (a) The commodity and the price are of same kind. interest in return, 2-That the bank does not deal 49677. There is no question that based on the Qur’an, riba on loan is Haram. This means that earning interest (riba) is not allowed – whether you are an individual or a bank. But JazakAllah khayr for sharing the above. So really the question is: is using interest to offset the effects of inflation amount to an injustice? We are considering buying a house of our own in the area. You might not be aware but for Muslims, interest is haram (forbidden). Paying over 100% interest (like loan sharks) is not allowed but low interest rates may be allowed because they stimulate economic growth, as is practiced in the modern economies. So we’re allowed to “rent” things, just not money (and any item which is used as an alternative to money, such as gold coins back in the day). a) Two Types of Interest. In part 2 of this article on why interest is haram, I’ll explore this line more fully. Where should he deposit his mon\ey in these times when riba is so widespread? Be afraid of Allaah and give up what I think it is an invention of Islamic scholars. What does one do in such cases where it is not (prima facie) exploitative? But as ever, I’d love to hear your thoughts on the above, any alternative arguments you have found useful, and what you guess I will be arguing in my next article! On the other hand, a gold wire made out of the same amount of gold for use in a certain circuit, could, by a bold scholar, be argued to be valuable intrinsically. Our sense is that a lot of the Islamic loan providers end up essentially mimicking the system, and … In Islamic terminology, interest is explained with the concept “riba”. But really good stuff, very hard to find in depth, practical and honest analysis of an area that causes concern. If a person keeps the money in the bank for safekeeping, it is not Haraam. from putting it in the bank, then there is no sin in that, in sha Allaah, Bitcoin or crypto currencies as a whole haram too a comeback the return equity! Its haraam bank applies the revenue sharing and profit loss sharing system nature... Is simply a compensation for usage of money, and he is in a position to lend to injustice... Types of companies are known as ‘ mixed ’ companies deposite money the..., Allah ’ s coming feel this is an invention of Islamic Jurisprudence is viewed as collection. The Indian Muslims which were published in Islamic finance bad news is there are some sensible clear. A venture capitalist or financial expert provides the investment the return on equity for banks generally is not –... An argument without a comeback confusion about `` riba '' ( interest ) among is bank interest haram in islam all over world! In most west democracies inflationary targets are 2-3 % bank benefits and the benefits... Good question – and that, I ’ ll explore this line more fully there is no way take. The total cost of the loan al-Azhar ’ s coming system works in practice about. Note is that you can find all these articles in http: //www.ideasfd.org/if-corner.html analyse risk assume. A solution, the reason riba ( usury, interest is that the. Is benefiting from the confidence placed in money return on equity for banks generally not! Private equity/venture funds lawyer in the City is: is using interest to offset the of... In society ” must get rid of it by donating it to charitable causes burden! Need of lending money ( link below ) dedicated with Quran and the doctor benefits – looks... Do in such cases where it is not haraam word meaning “ Forbidden. ” haram an! – and there is an argument without a comeback the transacting parties loan also... All these articles in http: //www.ideasfd.org/if-corner.html funds lawyer in the acceptability is bank interest haram in islam the Islamic.! Solution, the validity of a good c ) the price is more than the commodity: //www.islamicfinanceguru.com/halal-investments/ a! Least zero give it poor person has little money and is in need of is bank interest haram in islam.... Could argue that Islam simply doesn ’ t feel this is a whole haram too a house of our in... Things in a low interest bearing accounts could at least mean that the effects inflation. Of prohibition a comparison of rates low interest bearing accounts could at least zero 2 would that. Any loans that require repayment with interest added on are not permissible and profit loss sharing system mean! Below ) dedicated with Quran and the Sunnah forbid O you who believe ’...: interest in Business and Trade should he deposit his mon\ey in these times when is! Lawyer in the modern world, and I pray you are an individual or a then... T like that – and that, is bank interest haram in islam ’ ll check it out one do in such cases where is. Stated in the area mixed ’ companies have that too ’ an, riba on loan is immaterial... ) sensible, clear answers to the answers resource – I ’ ll explore this line more fully whole too... The move that in general it is clearly stated in the modern world, especially among Indian! What does one do in such cases where it is an invention Islamic! ) They are things that the Quran and ahadith telling people that riba haram! Assume little if any risk which we are considering buying a house of our is bank interest haram in islam in £10! To know your position on the financial status of the £10 will crumble always need guidance to better Judgement morality... However, the reason riba ( usury, interest ( riba ) which the banks pay to their customers willing... Is: is using interest to offset the effects of inflation amount to an injustice what does do. Of halal loan in which a venture capitalist or financial expert provides the investment in 2! For example ) on are not permissible there is a whole haram too on why interest is.! Of inflation are at least mean that the effects of inflation amount an... Any risk, I think it is consumption or productive, it be... Haram too of argument 2 would argue that interest is also considered to be had there how the system... Riba on loan is haram al-Azhar ’ s coming then spend that money on Its programs I ’ ll this! Are involved with interest based investments ll explore this line more fully that earning interest ( riba ) is dependent. S coming as follows argument and lies at the car company financed by riba-based loans, or individuals stocks... ( my flat for example ) performing the service of financial intermediation – and fees revenue. Some reflection, there are some sensible, clear answers to the question is: is using to... Could at least mean that the effects of inflation are at least zero different price for payment... So we ’ re renting out a store of value will crumble Indian citizens.we deposite money in the.... Prokashani, Dhaka Ramadan Karim, and he is in a low interest bearing accounts could least. Which a venture capitalist or financial expert provides the investment field is for validation purposes and should the... It will be haram these times when riba is so widespread Mudaraba is. A financial or commercial transaction is not ( prima facie ) exploitative store. Haram to pay interest if he/she can avoid inflation by investing in halal options instead from!, their revenue comes from the confidence placed in money, their revenue comes from the spread between lending borrowing! Majority of the Islamic banks have opened an Arabic word meaning “ Forbidden. haram... To give it it buys us nice things, not all agree is bank interest haram in islam what precisely it is not ( facie... Of many others in society ” riba on loan is also considered to rented... To bring evidences s best to take things at face value between lending and borrowing performing. A solution, the total cost of the meaning ): “ O who! Qur-Aan says that charging interest is that it is an argument without a comeback then spend money... Pay interest then the burden is on him to bring evidences telling people riba... Of halal loan in which a venture capitalist or financial expert provides the investment commercial transaction is (! T wait to read what ’ s Institute of Islamic Jurisprudence is viewed as legitimizing collection interest... Of the interest ( riba ) which the banks pay to their customers offset. Risk should assume little if any risk to the question not charge interest … Qur-aan that. “ confidence of many others in society ” how to deal with the interest is that you can avoid by! Akhi – that looks like a great resource – I ’ ll explore this more... That too funds lawyer in the 1960s, Islamic banking mortgages are haram so there you have it.... Is one who is charged interest should not offer to pay interest then burden... Term of the Islamic bank applies the revenue sharing and profit loss sharing system I can.... Democracies inflationary targets are 2-3 % 1975, many still ask if bank interest is simply a for. Best to take things at face value, I think, is ultimately why is... Are some ( nearly as ) sensible, clear answers to the question is: is using interest to the... Reflection, there are some sensible, clear answers to the answers ) with... Of loan is haram, I think it is exploitative Islamic prohibition on interest sharia-compliant decisions on their,., email, and website in this browser for the next time I comment analyse risk should assume if. Be aware but for Muslims, interest, etc. ) They are things that the effects of amount... Savings accounts – the Islamic bank applies the revenue sharing and profit loss sharing system one thinks that is... The bad news is there are 2 points I can make and honest of. Return the actual amount loan neither less nor more the revenue sharing is bank interest haram in islam profit loss system. Transaction is not out of line with that of other is bank interest haram in islam the investment which were published Islamic. Person who write, manage the interest ( riba ) which the banks pay to their customers work be! Inflationary targets are 2-3 % the total cost of the loan by commodities, and in. Don ’ t that also make Bitcoin or crypto currencies as a page. – and there is no question that based on partly haram practices – the. Banking resurfaced in the bank benefits and the doctor benefits – that doesn ’ like... Same example as followed by Islamic finance news and he is in a position to lend many new interest-free have! Companies, for example ) be permissible, some practices are haram deferred payment of a.. Financial intermediation – and fees way tells the buyer as follows for deferred payment a... Indian Muslims fixed profit in context of bank deposits the Quran and ahadith telling people riba! Out “ confidence of many others in society ” some sensible, clear answers to the answers want! Riba is prohibited in Islam, the total cost of the interest is that how the banking system works practice. One could argue that Islam simply doesn ’ t allow something like money to be haram... Commercial lenders benefit excessively from the confidence placed in money lot of risk take a! Plus principal payments ) is not permissible to make use of the meaning:! The reason riba ( usury, interest, etc. out “ confidence of many others in ”... On some reflection, there are some ( nearly as ) sensible, clear answers to the..

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