Is banking interests for accounts i...

Egypt's Dar Al-Ifta

Is banking interests for accounts is Halal or not.. if so which type is halal?


Is banking interests for accounts is Halal or not.. if so which type is halal?


Since the emergence of banks in the modern age, jurists have disagreed on how they conceive the nature of banks. Their differences parallel the disagreement between scholars of conventional law and economists over whether the relationship between banks and their clients is one of lending (held by scholars of conventional law), or one of investment (held by economists). Built upon this difference in conception (Ar. taswir) is of difference in legal formulation (Ar. takyif).

The jurists who consider this relationship to be financial lending formulate it as a loan which has brought benefit to the lender. Thus, its ruling would be based on it being unlawful usury. But then the fatwa differed, because some considered this a matter of necessities that are permissible for a Muslim to undertake whenever he is forced to, and is thus based upon the principle of ‘Necessities render the forbidden permissible’, which [in turn] is deduced from the all-encompassing words of God:

But if anyone is forced to eat such things by hunger, rather than desire or excess, he commits no sin. [2:173]

Other jurists maintain that this does not fall under the heading of necessities since necessity is legally defined as ‘something without which one would perish or come close to perishing’. Some of the jurists amongst this group maintain that it is permissible, based upon the principle of need being given the status of necessities - whether those needs are common or individual.

As for the jurists who followed the formulation that the relationship between banks and clients is a relationship based upon investment: some of them consider it an invalid profit sharing venture [mudarabah] that can be rectified by combining it with a lease. Other members of this group maintain that it is a new transaction and a new type of contract which has no name in traditional Islamic law. Thus, they studied the matter in depth, just as the legists of Samarqand researched bay‘ al-wafa’ out of considering it a new type of contract. Likewise, the Shaykh al-Islam Abu al-Su‘ud researched ‘aqd al-mu‘amalah and ruled in favor of its lawfulness – just as the former scholars ruled with the lawfulness of bay‘ al-wafa’.

They arrived at this judgment because they took into account the interests of the people and their dire need for these types of contracts; and because it was a means for market reform, and the masses depended on them for their livelihood. Moreover, it suited the demands of the age’s [new] developments in transportation and communication, and modern technology; population growth; weakened social relations; the development of accounting sciences and book-keeping; and separation between legal entities [e.g. corporations] and individuals, and many other [novel matters].

In brief, there is a difference of opinion concerning the issue of working in bank transactions and transacting with banks: how it is conceived and formulated, and its legal ruling in theory and in application. The established legal maxims are:

Objection is reserved for omitting what is agreed to be a requirement, and performing something that is agreed to be unlawful. Objection is not for issues where there is a difference of opinion.

It is recommended to remove oneself from controversial issues.

Whoever is afflicted with something controversial must follow the opinion of those who permit it.

It is necessarily known in Islam that usury is prohibited. This is because its prohibition has been stated explicitly in the Qur’an and Prophetic hadith, and because of the unanimous consensus of the Muslim community. God the Almighty says:

But those who take usury will rise up on the Day of Resurrection like someone tormented by Satan’s touch. That is because they say, ‘Trade and usury are the same,' but God has allowed trade and forbidden usury. Whoever, on receiving God’s warning, stops taking usury may keep his past gains—God will be his judge—but whoever goes back to usury will be an inhabitant of the Fire, there to remain. [2:275]
The Messenger of God said:

God curses those who take usury, those who give it, those who witness it, and those who record it. [Bukhari and Muslim]
However, the controversy revolves around the true nature of what is derived from banks: whether it is an instance of usury (which is unlawful) or invalid contracts (which are unlawful); or a new form of contract which would be permissible if it achieves the interests of the parties involved and is free of anything which is legally prohibited.

Based on the above, every Muslim must realize that God the Almighty prohibited usury and that there is unanimous consensus concerning its prohibition. He must realize that concerning bank transactions, scholars [in all parts of] the world differ in conceiving, formulating, and arriving at its legal status in theory and in application. He must also realize that it is recommended to remove oneself from controversial issues. Nonetheless, he may follow those who permit it; in such a case, there is no prohibition involved in any form of banking activity: depositing or borrowing money, working in or transacting with them, and so forth.

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