Purchasing Property Through a Bank

Contemporary Fatawa, Economics, Fiqh

Q 1. What is the Islamic ruling on the purchase of residential houses, cars and others home furnishings through Banks and Financial Institutions? The position is that such institutions provide loan by putting these things under mortgage and on this loan they charge interest at fixed rates. An alternate to this situation is that such things be acquired on monthly rental basis. But, this monthly rent generally exceeds the installments charged by Banks as pointed out in the first case.

A. The transaction mentioned above, being based on interest, is impermissible and unlawful. However, Muslims should make efforts to adopt other permissible methods in accordance with the Shari‘ah of Islam as opposed to this interest-based transaction. For example, the Bank could itself sell things pointed out in the question on installments. In other words, the Bank should first buy things from the original seller, add an appropriate profit, then sell it onwards to the customer, and then realize its total price in installments.( Murabahah )

September 13, 2010

Is Bank Employment Permissible?

Contemporary Fatawa, Economics, Fiqh

Q. About being employed in bank. Is it correct Shari’ah-wise?

A. To begin with, employment in a bank, run on the basis of interest, is not permissible. However, a person employed in a bank is advised that he should not leave his job there immediately. He is rather told that he should look for some other permissible job elsewhere, and when he succeeds in getting one, he should leave the job with the bank – but, the important point here is that he should make all possible efforts he can in this direction.

Q. What if he cannot find a suitable job?

August 30, 2010

Entitlement To Death Benefits Payable By Pension Funds

Contemporary Fatawa, Economics, Fiqh

Q. 1. The Pensions Funds Act 1956 (“Act”) regulates pension funds in South Africa.

2. The object of the Act is to provide support for the dependants of a deceased member upon his death. The support is provided by means of lump sum payments and / or annuities.

3. A pension fund established in terms of the Act has separate Juristic personality, and must comply with prescribed requirements including registration, etc.

4. A contribution to a pension fund is deducted at source from the employees salary and paid over to the fund by the employer. The employer also makes defined contributions to the fund.

August 5, 2010

The Use Of Credit Cards

Contemporary Fatawa, Economics, Fiqh

Q. Kindly throw some light on the use of credit cards, which are floating in the market. Majority of these cards belong to Professional banking institutions, such as American Express, City Gold Card etc. However, some cards are issued by companies such as Diners club etc, which are not themselves banking institutions. Please explain the ruling of Shariah about both these cards. In your reply please cover both the aspects of using credit cards, first as holders of the card, used to offset the purchase price and second, when we accept these cards as sellers.
(Muhammad Salman, Karachi)

August 1, 2010

Partnership On A Fixed Profit

Contemporary Fatawa, Economics, Fiqh

Q. I have a considerable amount of money saved by me from my monthly income. I want to invest it in a lawful business which can give me some profit. One of my friends has offered me to enter into partnership with him, I shall give him the money and he will invest it in his business which is already established and run by him. He has agreed to pay me a sum of two thousancs rupees monthly as my share in the profit. Is it permissible for me to enter into partnership on these terms?

A. No. A predetermined amount of money cannot be fixed as a profit in a partnership. If you want to enter into partnership with your friend, you will have to share his risks also. In case he faces a loss, you will have to bear it in proportion to your investment. And if the joint venture brings a profit, the same may be shared on the agreed ratio.

July 30, 2010

The Disposal Of Interest Money

Contemporary Fatawa, Economics, Fiqh

Q. Observing Muslims all over the world which, unfortunately includes those living in Muslim countries, face the problems brought before them by unwanted interest money generated in their name through channels they do not control. This happens inspite of their being careful against whatever is likely to get them involved in interest bearing activity.

In case, interest does come into their accounts, no matter how unwanted, is there a valid way under the Shariah through which the identified interest amount can be disposed off?

1. Can it be taken out of the account and used to pay personal or company income tax.?

July 28, 2010

Economics of the Islamic State (Government)

Contemporary Fatawa, Economics, Fiqh

Q. (i) Does the interest on loans floated by the Government to meet national requirements come under Riba?

(ii) What alternative can be suggested for the banks in case they grant loans without interest for various requirements?

A. (i) Yes the Qur’anic injunctions regarding the prohibition of interest is general. The interest is prohibited both in the public and private sectors and for all types of purposes. Any excess payment made over and above the principal amount is Riba and is thus Haraam. For more details see the answer to the question (1).

July 26, 2010

On Fiscal Laws

Contemporary Fatawa, Economics, Fiqh

Q. What is the deifinition of Riba according to the Holy Quran and Sunnah of the Holy Prophet ( Sallaho Alaihai Wasallam ). Does it cover the simple and compound interest existing in the present day financial transactions?

A. The word, Riba as understood from the Holy Qur’an and Sunnah, is any extra payment received over and above the prin- cipal amount, regardless of the fact that extra amount is significant or insignificant. Islam, therefore, considers the Riba Haraam, in all of its forms.

The Fuqaha have given two interpretations of the word, Riba, : Riba-al-Nasia and Riba al Fadl.

July 22, 2010