RIBA

Discussion in Islamic-ebook.

RIBA (INTEREST)

In today’s western society, the economic system deals with interest in various situations and forms. Therefore, muslims should exercise extreme caution when undertaking business dealings.

“o those who believe, fear allaah and give up what still remains of the riba (interest) if you are believers, but if you do not, then listen to the declaration of war from allaah and his messenger (s.a.w.) and if you repent, yours is your principal (capital) neither you wrong and not be wronged". (surah bakarah)

The holy prophet (s.a.w.) said: “four kinds of people about whom allaah subhaanahu wa ta’aala has decided not to admit them to paradise and not to let them taste bliss: the one who is addicted to wine, the one who takes riba, the one who exploits the property of orphans and the man who is disobedient to his parents.� (haakim)

Riba in loans

A person asks his friend for a loan of 1000 dollars which is granted on condition that the repayment will be 1500 dollars, the extra 500 dollars paid will be riba and is therefore haraam.

Rasulullah (s.a.w) cursed the one who accepts riba, the one who pays it, the one who writes it and the oerson who bears witness to it, and said, “they are all alike.� (muslim)

Bank overdrafts

A person has 2000 dollars in his account but he needs to pay an account of 2800 dollars so he withdraws 2800 dollars from his account because he has an overdraft agreement with the bank. The condition is that the account holder has to pay interest on the excess amount taken, overdrafts are therefore haraam since interest has to be paid.

Hire purchase

Hire purchase sales are very common in present times. In this transaction a person pays a deposit and takes the goods with an agreement to pay for it in monthly installments. The transaction will be valid if no interest is charged ie 6 months or 12 months treated as cash, however if any deals are made for an extended period of time that will include payment of interest then this transaction will be haraam.

Credit cards

A credit card allows a person to purchase goods etc and to pay for it at a later date. The money owing on the credit card can be paid off within a specified number of days thus preventing the payment of interest, this is valid, however if a person fails to pay and is subsequently charged interest then the transaction with interest is haraam.

Credit cards will be permissible if the user makes sure no interest is incurred.



Fixed deposit

Money is invested for a specified period of time with the intention of accumulating more money, unfortunately, banks pay interest on money invested in this type of account thus resulting in the earnings being totally haraam.

Savings account

The same ruling will apply as in fixed deposits, the bank will pay interest which is totally haraam.

Current/cheque accounts

These accounts are usually opened by businesses who deal in large amounts of money or individuals who are earning well and require the services provided as an incentive. Money saved in these accounts also earn interest that is haraam.

Ulama have given a general ruling that allows for the utilization of the above accounts on condition that the interest (riba) earned be given away in charity (without the intention of earning sawaab)

Alhumdulillaah, today many banking institutions have adopted sharia compliant banking practices that includes interest free investments etc.

Muslims are humbly requested to take advantage of this and save themselves from punishment.

Rasulullaah (s.a.w.) Said “when zina (adultery) and riba (interest) become rampant in the people of a town they themselves invite the punishment of allaah.�

Allaah taaala say’s:

O those who believe, fear allaah and give up what still remains of the riba (interest) if you are believers, but if you donot, then listen to the declaration of war from allaah and his messenger (s.a.w.), and if you repent, yours is your principal (capital), neither you wrong and not be wronged.�

Disposing of haraam wealth is “waajibut-tasadduq� ie, it has to be given into the ownership of deserving poor muslim recipients without the intention of earning sawaab.

Is it permissible?

1. Interest earned cannot be used to pay ones traffic fines.
2. Interest earned cannot be used to pay taxes unless it was earned through a government agency and is going back to the government as tax.
3. Interest earned cannot be used to pay school fees.
4. Interest earned cannot be used for building public toilets, roads etc (some ulama allow it, unfortunately this is against the principal of “waajibut-tasadduq� the money has to be given into the ownership of poor deserving muslim recipients.