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Q & A --> Trade and Transactions --> The Ruling for Dealing with Banks

Question : A question was asked regarding the validity of dealing with banks.

Fatwa in Brief: This is not permitted, because they [banks] are built on the practice of charging interest [riba: often translated as “usury”). It is forbidden to put one’s money in them regardless of interest or lack of interest accrued. In fact, doing so only supports sin (ithm) and transgression (‘adwan).

Shaykh Ibn Baz, Majmu‘ Fatawa wa Maqalat, 19/137

Response:

1. Islam defines and prohibits two types of riba: riba al-ziyada, and riba an-nasi’a, and the latter stands for any form of riba that is charged over a fixed period of time. These prohibitions are in keeping with [meanings derived from] the Noble Qur’an and the Sunna and the consensus (ijma‘) of the [Sunni] Muslim Imams.

2. The interest charged by banks is a form of illegal riba. Putting one’s money in banks without gaining interest, however, for the purposes of protecting one’s money is permitted.

Commentary:

Islam declares the charging of interest (riba) to be illegal. The most important type of riba is the taking of a loan with a previously specified agreement on the amount of interest this money will be charged; so that the borrower may delay paying it back [until s/he can do so at a later time]. The fact that this is forbidden is clearly proven by the [words of the] Noble Qur’an, through the Sunna, and [has resulted in] the consensus of the Muslim Imams. God said:

“Those who swallow usury cannot rise up save as he ariseth whom the devil hath prostrated by (his) touch. That is because they say: trade is just like usury; whereas God hath permitted trading and forbiddeth usury. He unto whom an admonition from his Lord cometh, and (he) refraineth (in obedience, thereto), he shall keep (the profits of) that which is past, and his affair (henceforth) is with Gody. As for him who returneth (to usury) – Such are rightful owners of the Fire. They will abide therein”. (Q. 2: 275)

“God hath blighted usury and made almsgiving fruitful. God loveth not the impious and guilty”. (Q. 2: 276)

Similarly, the Prophet (upon him be peace) remarked that “gold is to be exchanged for [the same amount of] gold, and anything extra is riba”. From these texts and others, it is clear that the charging of riba is illegal.

Likewise, if an amount of money is put in a bank, in the understanding that it gains a specified quantity of interest, this is also a form of riba [and thus illegal]. The [overwhelming] evidence against this practice includes the previous texts and the consensus of scholars. However, the practice of keeping one’s money in banks for the purposes of safety, and not for taking interest, is permitted. For, such money is not set aside for the purpose of charging interest; while the fact that a Muslim’s money mixes with money that is gained illegally [through riba] does not render the former also illegal. And if this is the case, Muslims are free to invest their money in any legally permitted way.

Ultimately, God Almighty will ask each Muslim about his/her money. S/he will be asked regarding where s/he earned it, and on what s/he spent it. If banks invest their money, and pay their taxes (zakat) in the ways in which Islam instructs them to do, there is no problem [with them]. This is the opinion of the majority of the modern People of Knowledge from al-Azhar [University] and elsewhere; and this opinion is supported by the relevant scriptural sources.[1]

Other people even believe that charging interest is permitted, following in this the Shafi‘i scholars and others who hold the same view.[2]Their [original] opinion was that only the paying of interest on gold [and the like] was prohibited, and that, even when it became the general currency, this prohibition should not extend to money. Yet, the Shafi‘is view has changed over time. Nowadays, they argue that as paper money became the general form of currency in all eras and places, it has become necessary to categorize it as gold and silver.

And God knows best.

Dr. Anas Abu Shadi


[1] Shaykh ‘Abd al-Majid Salim, Fatawa Dar al-Ifta’ al-Misriyya, no. 615 and 618, 27th Sha‘ban, 1348 AH, 27th January, 1930.

[2] Muhammad Sai‘d Tantawi (Shaykh al-Azhar), Dr. ‘Ali Jum‘a (Mufti of Egypt), and Dr. Nasr Farid Wasal (ex-Mufti).