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Session Details
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| Guest Name |
Dr. Monzer Kahf
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| Profession |
Islamic Economist & Financial Expert
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| Subject |
Financial Fatwa Session
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| Date |
Wednesday,Aug 29 ,2001
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Time |
Makkah
From...
23:00...To...
00:00
GMT
From... 20:00...To...21:00
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| Name |
Host
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| Question |
*** The Session Has Begun. Please Submit Your Questions. ***
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| Answer |
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| Name |
Shamim
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| Profession |
Executive
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| Question |
Assalamu Alaikkum,Sir.Following are some of my doubt regarding Reba.1)Islam prohibits Riba,then is it allowed to used interest accumulated on fixed deposit for welfare activities.2) I would like to ask whether any Islamic country purly insists on Islamic banking system.3)If yes which are the countries?4)If no why they are supporting mordern banking system?
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| Answer |
Wa Assalamu Alaykum wa Rahmatullahi wa Barakatuh.
Al Hamdu li Allah wa al Salatu wa al Salam ala Rasuli Allah.
Dear Brother Shamim,
Riba is certainly prohibited as per the verses of the Quran and sayings of the Prophet (PBUH). Interest in conventional banks is riba as defined in the Quran and Hadith. Hence, lending/borrowing transactions of conventional banks are prohibited in Shari’ah because they are based on riba. Any contract that is based on riba is invalid in accordance with Shari’ah. Invalid contracts do not transfer ownership. Consequently, an amount paid as interest is not legally earned by the recipient and it must be returned to the payer. The rule in Shari’ah in this regard is that an invalid contract does not affect reality as things (including what everybody owns) remains as they were before the invalid contract.
This means that interest taken from any interest payer must be, in principle, returned to the payer. We are, nowadays, faced with a situation of usurers and conventional bankers whose main line of business is to make transactions on the basis of riba. Returning the interest they pay to them would only increase their resources that they use for the evil transaction of riba and would make only a fool of the person who returned the riba to them. As a result of this situation and in application of the rule that requires Muslims to reduce the evil (mafsadah, mafasid) as much as they can. Such riba paid by persons and entities whose main lines of business is riba transactions must be treated as if the owner (payer) is not known. Since we also have a rule that requires halal properties to be kept purely halal as much as possible without mingling it with any forbidden income the amount taken as interest from such persons and entities must be given to charities and not added to ones properties on the basis that such money is treated as if its owners is not known. I hope that answers your wondering why such money should be given to general welfare of Muslims, especially the poor and needy.
Regarding your second through forth questions, about Muslims countries that apply Islamic banking as a total system, we need to realize that almost all Muslim land got occupied by Western Colonial Powers during the 19th and earlier part of the 20th century. During colonial period, western colonialists imposed on the Muslim countries their own system of the economy and their own banking. Many of the Muslim countries have internal socio-political struggles between the Islamists and followers of Western cultures and ideals. With the revival of Islamic thinking and the aspirations of Muslim people to be ruled according to their religion, several Muslim countries have introduced partially the Islamic banking systems. These include Malaysia, Indonesia, Turkey, Bahrain, Kuwait, Senegal, Kenya, Saudi Arabia, Egypt and several others. Only three Muslim countries have transformed their total banking system into Islamic. They are in historical sequence Pakistan, Iran, and Sudan. The Pakistani practice of Islamic banking still needs to be purified from certain incorrect interpretations. A landmark in this regard came in 1999 from the Supreme Court of Pakistan that decided on the elimination of all elements of riba from the Pakistani banking system.
Wa Alhamdu li Allah Rab al ‘Alameen
Wa Allahu A’lam
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| Name |
salih
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Assalamu Alaikum. As a muslim, I believe that all wealth come from Allah. Muslims in the US are restricted in some type of investments due to its relation to usuary. As an expert in the financial arena, what would you suggest for muslims to do with their wealth in order for us to experience growth. Thanks.
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| Answer |
Wa Assalamu Alaykum wa Rahmatullahi wa Barakatuh.
Al Hamdu li Allah wa al Salatu wa al Salam ala Rasuli Allah.
Dear Brother Salih,
It is difficult to suggest any way of investment to you or to any other person living in America. What you need to know is that there are areas of investment that are forbidden in Shari’ah in a clear way such as investment in riba based entities like conventional banks and entities that produced forbidden based products. There are also areas that are completely permissible such as investing in a business of a Muslim friend or investing directly in the growth of ones own business.
Buying stocks of companies whose main line of business is permissible such as technology, medicines, production, and other commodities must be permissible if those companies do not indulge in any prohibited transactions. You know that buying the stocks of a company makes the purchaser a co owner of the company and member of its general assembly. This means that any prohibited transactions such as riba based borrowing undertaken by the companies management is done on behalf of the company’s owners and by de facto delegation of power from the general assembly.
This is the reason why many Muslims scholars prohibit buying companies whose management sometimes undertake prohibited transactions.
On the other hand, some scholars find in this opinion an overdue prohibition that creates difficulty for many small Muslim investors/ savers. And in accordance with the Shari’ah principle for the removal of difficulty when it involves great many people, those scholars argue that difficulty must be removed and consequently buying stocks in this category must be exceptionally permitted with certain conditions that assure a muslim investor that such companies have only minor prohibited transactions in proportion to their main line of business. The conditions suggested by these scholars center mainly in the area of being sure that riba and other prohibited transactions are relatively small in number and important to the company they include things like interest earning must not exceed 10% of net income, receivables and cash must not exceed 50% of asset, borrowing must not exceed 30-50% of net worth and that companies must not be indulged in armament production that is mainly used for acts of aggression against Muslim people and countries. They also add that persons who invest in such companies must regularly estimate the percentage of their earning that results from unlawful transactions of these companies and give away a proportional amount of the return of their investments to general charity in way of keeping ones investment clean and poor.
Wa Alhamdu li Allah Rab al ‘Alameen
Wa Allahu A’lam
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| Name |
Farman
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| Profession |
Engineer
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| Question |
What is your opinion about certain shaikhs and their organization in UK and their fatwa on permitting mortgage to get first home?
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| Answer |
Wa Assalamu Alaykum wa Rahmatullahi wa Barakatuh.
Al Hamdu li Allah wa al Salatu wa al Salam ala Rasuli Allah.
Dear Brother Farman,
The fatwa about getting first residents, that is needed depending on family size, children, schooling, safety and security, etc is not limited to a few scholars in the UK. Many Muslim scholars in the world argue that in application to the Shari’ah rule that difficulties are to be removed when they touch or affect a large number or class of people, it is permissible to take homes that remove such difficulties on mortgage basis if there are no other means to obtain such needed residences without indulging in interest.
The fatwa is certainly exceptional and is limited to exceptional cases because we all know riba is prohibited whether for home purchase or for any other reason.
Wa Alhamdu li Allah Rab al ‘Alameen
Wa Allahu A’lam
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