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The importance of taking the financial issues seriously in Islam:
Is it essential to learn the fiqh of buying and selling and financial transactions?
If the Muslim understands that the purpose and aim of his being created in this world is to adhere to the laws of Allah, and to worship Allah by doing so, then he will also understand that it is essential for him to learn the rulings of Allah’s laws and learn what his duties are. That is because what is needed in order to do what is obligatory is also obligatory.
It says in the hadith that the Prophet (peace and blessings of Allah be upon him) said: “Seeking knowledge is obligatory for every Muslim.” (Narrated by Ibn Majah (224) and classed as hasan because of its many isnads and corroborating reports by al-Mazzi, al-Zarkashi, al-Suyuti, al-Sakhaawi, al-Dhahabi, al-Manawi, and al-Zarqani. It is also in Sahih Ibn Majah by al-Albani.)
The scholars have stated that the meaning of this hadith is sahih.
Ibn ‘Abd al-Barr (may Allah have mercy on him) said:
“But its meaning is sahih in their opinion, even though they differed somewhat concerning it." (Jami’ Bayan al-‘Ilm 1/53)
Al-Nawawi said something similar in al-Mathurat (p. 287), as did Ibn al-Qayyim in Miftah Dar al-Sa’adah (1/480).
Ibn ‘Abd al-Barr also said:
“The scholars are unanimously agreed that acquiring some types of knowledge is an individual obligation, which each person must learn for himself, and acquiring other types of knowledge is a communal obligation – if some people acquire it then the obligation of others is waived." (Jami’ Bayan al-‘Ilm wa Fadlihi 1/56)
The scholars (may Allah have mercy on them) have described the knowledge which must be learned on an individual basis, and they have spoken of the amount of knowledge which each Muslim must acquire. They said that this includes learning the rulings on selling for those who engage in trade, so that they will not do anything haram or fall into riba (usury) without realizing. There are reports from the Companions (may Allah be pleased with them) which support that.
‘Umar ibn al-Khattab (may Allah be pleased with him) said: “No one should sell in our marketplace except those who have knowledge of Islam.” (Narrated by al-Tirmidhi, 487, who said: it is hasan gharib. It was also classed as hasan by al-Albani in Sahih al-Tirmidhi.)
‘Ali ibn Abi Talib (may Allah be pleased with him) said: “Whoever engages in trade before learning will fall into riba, then fall into riba.” (Mughni al-Muhtaj 2/22)
Ibn ‘Abd al-Barr said:
“What all people must learn is that which they cannot afford to be ignorant of such as bearing witness verbally and believing in the heart that Allah is One and has no partner or associate, and that His names and attributes are eternal; He has no beginning and no end, and He has risen over the Throne.
He should bear witness that Muhammad is His slave and Messenger, and that all people will be resurrected after death to be rewarded or punished for their deeds, and that the Quran is the Word of Allah, and that what is in it is true.
He should affirm that the five daily prayers are obligatory, and he must know what is essential for the performance of the prayer, such as purification and other rulings.
He should affirm that fasting Ramadan is obligatory, and he must know what invalidates the fast and what is essential for the completion of the fast.
If he has enough wealth and is physically able to perform Hajj, he must know what zakah is due on, and when it becomes due, and on how much it is due. He must perform Hajj once in his life if he has the means.
And there are things that he must know in general and he has no excuse for not knowing: such as the fact that zina and riba are forbidden, as are alcohol, pork, eating dead meat and all impure things, embezzling, bearing false witness, consuming people’s wealth unlawfully, all kinds of wrongdoing and oppression, marrying one’s mother or sister or any of those who are mentioned with them, and killing a believer unlawfully.
And he must know all other things that are mentioned in the Book and that the ummah is agreed upon." (Jami’ Bayan al-‘Ilm 1/57)
It says in al-Mawsu’ah al-Fiqhiyyah (30/293):
“Ibn ‘Abidin said, quoting from al-‘Allami:
It is obligatory for every accountable person, male or female, after learning about religion and guidance, to learn about wudu, ghusl, prayer, fasting, zakah for those who have the nisab (minimum threshold of wealth) and Hajj for those for whom it is obligatory.
Merchants must also learn the rulings on trade, so that they can avoid doubtful and makruh things in their transactions; the same applies to those who follow professions.
Everyone who works with something must learn the rulings concerning it so that he can avoid what is haram.
Al-Nawawi said: "As for selling, marriage and the like – which are not obligatory per se – it is haram to engage in them until one has learned their conditions.”
Al-Ghazali (may Allah have mercy on him) said:
“If a Muslim is a merchant and riba is widespread in the land, he must learn about the prohibition on riba. This is knowledge which is an individual obligation, i.e., knowledge of how to do what is required." (Ihya ‘Ulum al-Din 1/33)
‘Ali ibn al-Hasan ibn Shaqiq said to Ibn al-Mubarak:
“What can the believer do with knowledge except seeking it? What is he obliged to learn?
He said: “He cannot afford to do anything without knowledge, and he cannot avoid asking.” (Narrated by Ibn ‘Abd al-Barr in Jami’ Bayan al-‘Ilm (1/56)
Al-Ghazali (may Allah have mercy on him) said:
“Every person in his daily life is bound to face new issues with regard to his worship and dealings with others. So he must ask about everything, whatever new issues he encounters, and he must hasten to find out about what he expects to face before he faces it.” (Ihya ‘Ulum al-Din, 1/34)
Our advice to those who work in trade and buying and selling is to read some of the books that have been written about the fiqh of transactions, such as al-Mulakhkhas al-Fiqhi by Shaykh Salih al-Fawzan, and Ma la Yas’u al-Tajir Jahlulu by Prof. ‘Abd-Allah al-Muslim and Salah al-Sawi.
Working at a Riba involved organizations:
Ruling on working for a company that maintains the Central Bank building
It is not permissible for you to work in the Central Bank either directly or by working for a company that maintains and operates the bank’s equipment, because this involves cooperating in sin and transgression.
This central bank is responsible for all the banks and for deciding their interest rates (riba) and enforcing their regulations and promulgating laws and systems that go against the laws of Allah.
If you work for a maintenance and operation company there is no reason why you should not maintain and operate companies that deal with things that are permissible according to the rulings of Shari’ah, even if your company has other branches that deal with things that are not permissible. What is important for you is not to accept work in this field; you should look for another field where you can operate and maintain things that are permissible according to Shari’ah.
On this site you will find many fatwas concerning the ruling on working for riba-based banks and for organizations that guard riba-based banks or operate programs for them. We have quoted in these fatwas the comments of the scholars stating that such jobs are haram, and this applies completely – if not more emphatically – to companies that take care of these banks.
Guidelines on the kind of helping in sin that is prohibited
Is it forbidden to help others in sin?
It is forbidden to help others in sin, because Allah, may He be Exalted, says (interpretation of the meaning):
“Help you one another in virtue, righteousness and piety; but do not help one another in sin and transgression. And fear Allah. Verily, Allah is Severe in punishment” [Al-Ma’idah 5:2]
Additionally, the Prophet (blessings and peace of Allah be upon him) said: “Whoever calls people to guidance will have a reward like that of those who follow him, without that detracting from their reward in the slightest, and whoever calls people to misguidance will have a burden of sin like that of those who follow him, without that detracting from their burden of sin in the slightest.” (Narrated by Muslim, 4831)
There are other texts which prove that the one who helps someone else in sin is also sinning , such as the text which curses the one who records Riba and the two who witness it, and the curse on the one who carries alcohol (to someone who will drink it) and on the one who presses (the grapes etc. with which it is made), and so on.
Nonetheless, not every kind of help is prohibited; rather what is prohibited is deliberate help in which the one who offers it intends to help the person in his sin, or direct help such as carrying alcohol or writing down contracts involving Riba.
With regard to indirect help, when one does not deliberately intend to help in sin, this is not prohibited; if it were to be prohibited, it would cause a great deal of hardship to people.
For example, it is confirmed that it is permissible to interact with the disbelievers in terms of buying, selling, lending, borrowing, and holding items in pledge, as is indicated by the authentic Sunnah, even though this involves indirectly helping them (in sin), because it is benefitting the disbeliever in financial terms, and enabling him to use that wealth in prohibited things such as Riba and the like, yet despite that Islamic teaching overlooks this kind of helping.
Categories of helping in sin and transgression
Dr Walid Al-Minisi, a member of the Council of Islamic Jurists in America, said:
“The issue of guidelines on helping in sin and transgression was the subject of a lengthy discussion and debate among the members of the Council of Islamic Jurists in America, in its fifth session held in Bahrain in 1428 AH.
To sum up the conclusion they reached: helping in sin and transgression falls into four categories:
Direct and intentional help, such as someone who gives alcohol to another person with the intention of helping him to drink it.
Unintentional, such as selling prohibited things that have a permissible use, if there is no intention to help them in using them in prohibited ways.
Intentional but indirect, such as someone who gives another person money with which to buy alcohol. Indirect manslaughter is also included in this category.
Indirect and unintentional, such as someone who sells things that may be used for lawful or unlawful purposes, and does not intend to help those who use them for unlawful purposes, such as someone who gives another person money not for the purpose of buying alcohol. If he buys alcohol with it and drinks it, there is no sin on the one who gave him the money, so long as he did not intend to help him with something unlawful.
This fourth category also includes buying and selling and renting from polytheists and Muslims who are evildoers, and giving money to them in charity.
The decision of the council was that the first three types are prohibited and the fourth type is permissible, which is the one that is not direct and not intentional.”
An exception is made from the fourth category in cases where it is known or thought most likely that the person who is helped will use it for sinful purposes. For this reason, many of the jurists prohibited the sale of grapes to someone who will press them for wine, and the sale of weapons during times of turmoil, even though grapes and weapons may be used for both lawful and unlawful purposes.
Therefore Shaykh Al-Islam Ibn Taymiyyah (may Allah have mercy on him) said:
“Every garment that he thinks will most likely be used for sinful purposes, it is not permissible to sell it to or sew it for one who will use it for sinful and wrong purposes. … The same applies to everything that is basically permissible, when it is known that it will be used for sinful purposes.” (Sharh Al-‘Umdah, 4/386)
Going back to your question, it seems that offering direct help to this employee would mean someone taking him there in his car, or buying him a ticket of admittance, and the like.
As for simply allowing him to park his car, this is indirect help, and there is not necessarily any connection between that and the sin; he may not go to the match, or he may go but not commit any unlawful action, such as looking at ‘Awrahs or mixing (with women) in a prohibited way. In principle, it is essential to differentiate between going to commit sin and going to do something permissible that may be accompanied by something sinful, as the jurists differentiated between someone who rents out his house to be used for sinful purposes, such as making it into a tavern, and someone who rents out his house for permissible accommodation, but alcohol is drunk in it. The former kind of renting is prohibited but not the latter.
Undoubtedly, differentiating between direct and indirect help will vary from one issue to another. So the scholar should try to examine the case, with reference to what the jurists have mentioned about similar cases.
To sum up: letting this employee park his car in your driveway is not directly helping him in sinful actions such as looking at ‘Awrahs or listening to music, and other evils that are present in the stadium; rather it is helping him and comes under the same heading as helping him by selling food, drink and clothing to him. That is not prohibited on the grounds that it may help him to remain strong and healthy and enable him to commit unlawful actions, because that is indirect and unintentional help, therefore Islamic teaching overlooks it and permits us to buy and sell and engage in commercial transactions with the disbelievers, as mentioned above.
Assisting someone take an admission exam using your laptop for loan-financed studies
There is nothing wrong with allowing your relative to take the acceptance test for admission to his studies using your laptop, even if he is going to pay for his studies with an interest-based loan. That is because studying is permissible, and you are only helping him with that, not with the loan.
Rather it is forbidden for him to use your computer to get this unlawful loan, because that comes under the heading of helping him with that sin.
You should understand that whoever takes out an interest-based loan, despite the fact that it is sinful, takes possession of the money that he borrows and it is permissible for him to make use of it with regard to his food, drink, accommodation, studies and other things, and he does not have to get rid of any of these things. So, there is nothing wrong with you helping this relative and others with regard to permissible studies.
Can you stipulate late payment fees in case of interest-free loans?
Interest-free loans are prohibited if it is stipulated that a penalty be paid in the event of late repayment, because this comes under the heading of approving of Riba, along with the possibility of actually falling into Riba.
It says in a statement of the Islamic Fiqh Council belonging to the Muslim World League in Makkah, issued during its eleventh session, statement no 8:
“If the lender stipulates that the borrower has to pay a sum of money as a financial penalty of a fixed amount or a specific percentage, if there is any delay in repayment beyond the time agreed upon by both, then this is an invalid condition, and he is not required to fulfil it; indeed it is not permissible, regardless of whether the one who stipulated it was the bank or anyone else, because this in and of itself is the Riba of the pre-Islamic era that the Quran forbids.”
Taking a Riba based loans:
Ruling on building a mosque or addition to a mosque with haraam wealth
Haraam wealth is either haraam in and of itself, or it is haraam because of the manner in which it was acquired.
If the wealth is haraam in and of itself, such as extorted and stolen wealth, this it is not permissible for anyone of make use of it if he knows that it was stolen from so and so, rather it must be returned to its owner.
The way in which to repent from extorting this money is to return it to its owner. It is not sufficient for the robber to donate it for building a mosque when he is able to return it to its owner.
But if he is not able to return it to its owner (such as money that has been stolen by some oppressive governments from the people), then there is nothing wrong with spending it on the public interests of the Muslims, which includes building mosques.
Shaykh al-Islam Ibn Taymiyah (may Allah have mercy on him) said in al-Siyaasah al-Shar’iyyah (p. 35):
If the wealth was taken unlawfully and he is unable to return it to its owners, like much of the government wealth (which has been stolen by the ruler), then helping to spend this wealth in things that serve the interests of the Muslims, such as guarding the borders, covering the expenses of the troops and so on is a kind of helping in righteousness and piety, because what the ruler should do with this money – if he cannot find its owners and return it to them or to their heirs – is to spend it on the interests of the Muslims, as well as repenting if he is the one who did wrong. This is the view of the majority of scholars such as Maalik, Abu Haneefah, and Ahmad. It was also narrated from more than one of the Sahaabah and this is what is indicated by the shar’i evidence.
Even if someone else took it unlawfully, then he must still do that with it. End quote.
As for wealth that is haraam because of the way in which it was acquired, this is wealth which a person earned in a haraam way, such as selling alcohol and dealing in riba, or payments for singing and prostitution and so on. This wealth is haraam only for the one who acquired it. If someone else takes it from him in a permissible manner, there is no sin in that, such as if he were to donate it to build a mosque, or to give it as wages to a worker who did a job for him, or he spends it on his wife or children – it is not haraam for them to benefit from it, rather it is haraam only for the one who acquired it in a haraam manner.
The way to repent from acquiring haraam wealth is to get rid of it, and to spend it on charitable causes, which include building mosques.
Al-Nawawi (may Allah have mercy on him) said in al-Majmoo’ (9/330):
Al-Ghazaali said: If he has any haraam wealth and he wants to repent and get rid of it – if it has a particular owner then he must give it to him or to his representative. If he is dead then he must give it to his heir. If it belongs to someone who he does not know and he has no hope of finding him, then he should spend it on the public interests of the Muslims, such as bridges, border posts and mosques, and other things which the Muslims share. Otherwise he may give it in charity to poor people. This is what al-Ghazaali said and what others of our companions mentioned, and it is as they said, because it is not permissible to destroy this wealth or throw it into the sea. There is no other option but to spend it on the Muslims’ interests. And Allah, may He be glorified and exalted, knows best.
Shaykh Ibn ‘Uthaymeen (may Allah have mercy on him) was asked about the ruling on praying in a mosque that was built with haraam money. He replied:
It is permissible to pray in it and there is no sin in that, because the one who built it from haraam wealth may have intended by building it to rid himself of the haraam wealth that he had acquired, in which case it was permissible for him to build this mosque, if his intention was to get rid of haraam wealth. But getting rid of haraam wealth is not only done by building mosques, rather if a person spends that on any charitable project, he has achieved the same aim. End quote.
Majmoo’ Fataawa Ibn ‘Uthaymeen, 12/question no. 304. See also al-Sharh al-Mumti’, 4/344.
Ruling on buying a mosque with an interest-based loan
It is not permissible for you to take out a loan with ribaa (interest), because Allah has prohibited ribaa and has issued the strongest warning to those who deal in it. The Prophet (peace and blessings of Allah be upon him) cursed the one who consumes ribaa, the one who gives it, the two who witness it and the one who writes it down. Ribaa is not permitted under any circumstances whatsoever. Do not buy the place to which you refer unless you have the financial resources to buy it without resorting to ribaa. Pray as best you can, all together or separated into a number of groups in different places.
And Allah is the source of strength. May Allah bless our Prophet Muhammad and his family and companions, and grant them peace.
Should he go for an interest-based mortgage if that is cheaper than renting?
Dealing with riba (interest, usury) is haraam according to the Qur'an, Sunnah and scholarly consensus. So, it is not permissible to do that, no matter how great the need. The fact that a person may need a house or car, or to get married, or any other need, does not give him the excuse to do something that Allah has forbidden. The Muslim has to fear Allah and remember that He is always watching; he should prefer the Hereafter to this life. If he finds someone who will lend him the money then all well and good. If he cannot find anyone who will do that then he could borrow from a Muslim, taking a loan with no interest involved. If he cannot find anyone to lend him money then he should be patient in the hope of earning reward. Whoever gives up something for the sake of Allah, Allah will compensate him with something better than that.
Borrowing from the bank to buy a house
Types of loans from banks
Loans from banks are of two types:
A “goodly loan” (qard hasan) which does not involve any additional payment (interest); there is nothing wrong with this;
A loan with interest, which is riba, and there is scholarly consensus that it is haram. It is not permissible except in cases of urgent necessity which cannot be met except by taking out a riba-based loan. The need for housing does not reach a level which makes it permissible to deal with riba, because this need can be met by renting. So, it is not permissible to take out a riba-based loan in order to buy a house.
Ibn Qudamah (may Allah have mercy on him) said:
“Every loan in which it is stipulated that something extra must be paid back is haram, with no difference of scholarly opinion. Ibn al-Mundhir said: [the scholars] unanimously agreed that if the lender stipulates that the borrower must pay extra or give him a gift, and he lends him money on that basis, then accepting the extra payment is riba. It was narrated from Ubayy ibn Ka’b, Ibn 'Abbas and Ibn Mas’ud that they forbade every loan that brings benefits, because loans should be given as an act of kindness and an act of worship aimed at bringing one closer to Allah. So, if there is a stipulation of extra payment, this diverts the loan from its purpose.” (Al-Mughni, 6/436)
This applies if the aim is to take out a loan from the bank that clearly involves interest.
Taking home loan
If the aim is to buy a house through the bank, this also is of two types:
The role of the bank is to finance the purchase in return for interest, so it pays the price of the house for you, on condition that you will pay it off in installments in return for interest that will be taken from the bank. This is a riba-based loan and is haram.
The bank buys the house for itself first, then sells it to you for a higher price, in installments. There is nothing wrong with this, but it is essential that the contract be free of any stipulation of riba , which is the condition that a penalty be paid in the event of any delay in paying the installments, because stipulating this penalty is riba and is haram.
Prohibition of riba in Islam
It is no secret to you that riba is a major sin, and there are stern warnings concerning it that are not given for other sins; Allah threatens war to the one who commits this sin and He told His Prophet (blessings and peace of Allah be upon him) that there is a curse upon the one who consumes riba and the one who pays it. This is a strong warning against falling into this evil.
“O you who believe! Fear Allah and give up what remains (due to you) from Riba (from now onward) if you are (really) believers. And if you do not do it, then take a notice of war from Allah and His Messenger but if you repent, you shall have your capital sums. Deal not unjustly (by asking more than your capital sums), and you shall not be dealt with unjustly (by receiving less than your capital sums)” [Al-Baqarah 2:278-279]
Muslim narrated (1598) that Jabir (may Allah be pleased with him) said: The Messenger of Allah (blessings and peace of Allah be upon him) cursed the one who consumes riba and the one who pays it, the one who writes it down and the two who witness it, and he said: they are all the same.
And the Prophet (blessings and peace of Allah be upon him) said: “A dirham of riba that a man consumes knowingly is worse before Allah than thirty-six acts of zina (adultery). (Narrated by Ahmad and al-Tabarani; classed as authentic by al-Albani in Sahih al-Jami ‘, no. 3375)
Ruling on buying a house with riba in a kaafir country
Firstly:
It is not permissible to buy a house or anything else by means of riba, whether that is in a Muslim country or non-Muslim country, because of the general meaning of the evidence which forbids riba and curses the one who consumes it and the one who pays it. This is the view of the majority of scholars.
The Hanafis are of the view that it is permissible to take riba from non-Muslims in dar al-harb, and that every contract or transaction that benefits a Muslim is valid so long as it is based on mutual consent and does not involve any kind of deceit or treachery.
Al-Kasaani said in Badaa’i’ al-Sanaa’i’ (7/132): Based on this, if a Muslim or a dhimmi enters dar al-harb peacefully, and enters into a contract with a non-Muslim or any contract that is invalid according to Islamic rulings, that is permissible according to Abu Haneefah and Muhammad (may Allah have mercy on them). The same applies if he is a prisoner being held by them or he became Muslim in dar al-harb and did not migrate to join us, and he entered into a contract with a non-Muslim. The basis for their view is that taking riba comes under the heading of consuming wealth, and consuming the wealth of a harbi non-Muslim is permissible. That is because there is no protection for the property of a harbi non-Muslim. So, the Muslim may take it provided there is no treachery or betrayal; and if the other party gives his consent, there is no betrayal. End quote.
Ibn al-Hammaam said in Fath al-Qadeer (7/39): It seems that it is permissible for the Muslim to deal with riba-based transactions provided that it is the Muslim who is going to gain. End quote.
See: Tabyeen al-Haqaa’iq (4/97); al-‘Inaayah Sharh al-Hidaayah (7/38); Haashiyat Ibn ‘Aabideen (5/186).
It is clear from this that the Hanafis regard it as permissible to take riba from a kaafir who is a harbi – in dar al-harb – because his wealth is basically permissible, so it is permissible to take it with his consent by means of riba.
But as for a Muslim paying riba to a kaafir, that is not permissible.
Thus, it is clear that those who issue fatwas saying that it is permissible for Muslims to pay riba in kaafir lands, based on the Hanafi view, are mistaken.
In fact, all riba is haraam, and it makes no difference whether it is between two Muslims or between a Muslim and a kaafir. The one who consumes riba and the one who pays it are both issued a stern warning. Allah says (interpretation of the meaning):
“O you who believe! Fear Allah and give up what remains (due to you) from Ribaa (from now onward) if you are (really) believers.
279. And if you do not do it, then take a notice of war from Allah and His Messenger but if you repent, you shall have your capital sums. Deal not unjustly (by asking more than your capital sums), and you shall not be dealt with unjustly (by receiving less than your capital sums)”
[al-Baqarah 2:278-279]
And Muslim (1598) narrated that Jaabir (may Allah be pleased with him) said: The Messenger of Allah (peace and blessings of Allah be upon him) cursed the one who consumes riba and the one who pays it, the one who writes it down and the two who witness it, and he said: they are all the same.
Ibn Qudaamah (may Allah have mercy on him) said in al-Mughni (4/47): The prohibition on riba in dar al-harb is the same as the prohibition on riba in dar al-Islam. This is the view of Maalik, al-Awzaa’i, Abu Yoosuf, al-Shaafa’i and Ishaaq. … because Allah says (interpretation of the meaning):
“[Allah has] forbidden Riba”
[al-Baqarah 2:275]
“Those who consume Riba will not stand (on the Day of Resurrection) except like the standing of a person beaten by Shaytaan (Satan) leading him to insanity”
[al-Baqarah 2:275]
“O you who believe! Fear Allah and give up what remains (due to you) from Ribaa”
[al-Baqarah 2:278]
And the Prophet (peace and blessings of Allah be upon him) said: “Whoever pays something extra or asks for something extra has engaged in riba.”
And there are other ahaadeeth.
What is forbidden in dar al-Islam is also forbidden in dar al-harb, such as riba between two Muslims. End quote.
Secondly:
If your husband insists on dealing in riba, then the sin is on him and that will not harm you so long as you hate his action. Hence you should not ask for a divorce, but you should carry on advising him and warning him against falling into this grave major sin. Remind him that that which is with Allah is better and more lasting, and that living in rented accommodation, even if the rent is high, is better than owning a house by means of riba.
There is nothing wrong with using the trick that you mentioned, of appearing keen to buy an expensive house that he cannot afford to pay the instalments for, so as to divert him from riba.
We ask Allah to help and guide you both, and to enable you to be content, and to divert you from riba, its burden of sin, its worry and its evil consequences.
Ruling on rent-to-own schemes
This kind of transaction is known as “rent-to-own”, and the contemporary scholars have differed concerning it. The Council of Senior Scholars has issued the following statement concerning it:
The Council of Senior Scholars has studied the issue of rent-to-own schemes, and after discussing the matter, the majority of the Council thinks that this kind of transaction is not permissible in Shari'ah for the following reasons:
1 – It is a combination of two transactions for one item and is not based on either of them; the two transactions come under two separate rulings and there is a contradiction between the terms of the two transactions.
When something is sold, the item and its benefits or usage must be transferred to the purchaser, so it is not valid for the seller to receive rent for it because it is the property of the purchaser. When something is rented, that means that the usage or benefits of the item (and not the item itself) are transferred to the renter.
Selling something implies that the purchaser both owns the item itself and enjoys usage of it, and if it is worn out or destroyed, he bears the cost of that and the loss of both the item and its benefits; none of that falls upon the seller. But if something is rented, the owner who is renting it out bears the cost of any loss or any wear or tear to the item or its benefits, unless the renter has transgressed the limits or shown negligence.
Secondly: The rental fees are calculated on a yearly or monthly basis in such a way that towards the end of the state term, the value of the item is paid off, but the seller calls these payments “rental fees” so that the purchaser cannot not sell the item until he has paid the whole amount.
For example: If the value of the item in question is fifty thousand riyals and the monthly rent is usually one thousand riyals, he makes it two thousand. In fact, this is part of the price until, towards the end of the term, the value of the item is paid. But if the purchaser is unable to make the final payment, for example, the item will be taken away from him on the grounds that it is something rented, and he will not be given back the money that he has paid on the grounds that he has made use of it.
It is obvious that this is wrongdoing and forcing people to borrow money to make the last payment.
Thirdly: This kind of contract leads to the poor being careless about debts until many of them end up heavily in debt. It may even lead to bankruptcy for some of the lenders because of losses incurred because of loans to the poor.
The Council thinks that the two parties should look for a sound way, which is to sell the item and put its price in pledge (rahn) and to protect the seller’s rights by letting him keep the contract document and ownership papers etc.
And Allah is the Source of Strength. May Allah send blessings and peace upon our Prophet Muhammad and his family and companions.
Members of the Council of Senior Scholars who signed this statement include the following:
Shaykh ‘Abd al-‘Azeez ibn ‘Abd-Allah Aal al-Shaykh
Shaykh Saalih al-Lahaydaan
Dr Saalih al-Fawzaan
Shaykh Muhammad ibn Saalih al-‘Uthaymeen
Shaykh Bakr ibn ‘Abd-Allah Abu Zayd.
Borrowing from a riba-based bank in order to buy a house
Dealing with riba (usury, interest) is a major sin against which Allah has issued a stern warning. He says (interpretation of the meaning):
“O you who believe! Fear Allah and give up what remains (due to you) from Ribaa (from now onward) if you are (really) believers.
279. And if you do not do it, then take a notice of war from Allah and His Messenger but if you repent, you shall have your capital sums. Deal not unjustly (by asking more than your capital sums), and you shall not be dealt with unjustly (by receiving less than your capital sums)”
[al-Baqarah 2:278]
“Those who eat Ribaa will not stand (on the Day of Resurrection) except like the standing of a person beaten by Shaytaan (Satan) leading him to insanity. That is because they say: “Trading is only like Riba,” whereas Allah has permitted trading and forbidden Riba. So whosoever receives an admonition from his Lord and stops eating Riba, shall not be punished for the past; his case is for Allah (to judge); but whoever returns (to Riba), such are the dwellers of the Fire — they will abide therein”
[al-Baqarah 2:275]
And it was proven that the Prophet (peace and blessings of Allah be upon him) cursed the one who consumes riba and the one who pays it. Narrated by al-Bukhaari, 5962. In the transaction asked about here, both the individual and the bank are giving and taking riba. The Prophet (peace and blessings of Allah be upon him) said: “A dirham which a man consumes as riba knowingly is worse before Allah than thirty-six acts of zina.” Narrated by Ahmad and al-Tabaraani; classed as saheeh by al-Albaani in Saheeh al-Jaami’, no. 3375. And he said: “There are seventy-two types of riba, the least of which is like a man committing incest with his mother.” Narrated by al-Tabaraani in al-Awsat; classed as saheeh by al-Albaani in Saheeh al-Jaami’, no. 3537.
The scholars are unanimously agreed that every loan involving interest or any kind of benefit is haraam. Ibn Qudaamah (may Allah have mercy on him) said: Every loan in which it is stipulated that an additional payment be made is haraam, with no scholarly dispute. Ibn al-Mundhir said: They are unanimously agreed that if the lender stipulates that the borrower must pay extra or give a gift, and he gives the loan on this basis, this is riba. It was narrated from Ubayy ibn Ka’b, Ibn ‘Abbaas and Ibn Mas’ood that they forbade loans that lead to any kind of benefit (extra payment, gifts, etc.). Al-Mughni, 6/436.
Secondly:
With regard to the idea of you renting the house until the loan is paid off, after which it will be yours, this is also haraam. We have already stated in the answer to question no (14304) that rent-to-own schemes are haraam.
To sum up, this transaction is haraam and it is darkness upon darkness. It is not permissible for a Muslim to take the matter of riba transactions lightly after the stern warning about such transactions has been proven and it has been definitively established that they are haraam. Rather what he must do is to seek that which is halaal, for everybody that is nourished by haraam, the Fire is more suited for it. But whoever gives up something for the sake of Allah, Allah will compensate him with something better than it.
The Standing Committee was asked about the Islamic ruling on taking a loan from a riba-based bank in order to build a modest house. They replied:
It is haraam to take a loan from banks or elsewhere with riba, whether that is to build something or to spend it on food, clothing or medical expenses or to start a business and earn more money, or any other purpose, because of the general meaning of the verses that forbid riba, and the general meaning of the ahaadeeth which indicate that it is haraam. Similarly, it is not permissible to deposit money in banks etc. that pay interest.
And Allah is the Source of strength. May Allah send blessing and peace upon our Prophet Muhammad and his family and companions.
Fataawa al-Lajnah al-Daa’imah (13/385).
Ruling on taking an interest-based loan for an urgent need
Firstly: ribaa (interest, usury) is haraam wherever it exists and whatever form it takes. It is haraam for both the owner of the capital and whoever borrows it from him with interest, whether the borrower is rich or poor. Both are guilty of sin and indeed both of them are cursed. Whoever helps them in that, the one who writes down the contract and the one who witnesses it are also cursed, because of the general meaning of the ayahs and sound ahaadeeth which indicate that it is haraam.
Allah says (interpretation of the meaning):
“Those who eat Ribaa will not stand (on the Day of Resurrection) except like the standing of a person beaten by Shaytaan (Satan) leading him to insanity. That is because they say: ‘Trading is only like Ribaa,’ whereas Allah has permitted trading and forbidden Ribaa. So, whosoever receives an admonition from his Lord and stops eating Ribaa, shall not be punished for the past; his case is for Allah (to judge); but whoever returns (to Ribaa), such are the dwellers of the Fire — they will abide therein.
Allah will destroy Ribaa and will give increase for Sadaqaat (deeds of charity, alms). And Allah likes not the disbelievers, sinners” [al-Baqarah 2: 275-276]
‘Ubaadah ibn al-Saamit (may Allah be pleased with him) narrated that the Prophet (peace and blessings of Allah be upon him) said: “Gold is to be paid for by gold, silver by silver, barley by barley, dates by dates, like by like, payment being made hand to hand. He who made an addition to it, or asked for an addition, in fact dealt in usury [ribaa].” (Narrated by Muslim in his Saheeh).
It was narrated that Jaabir (may Allah be pleased with him) said: “The Messenger of Allah (peace and blessings of Allah be upon him) cursed the one who consumes ribaa, the one who pays it, the one who writes it down and the two who witness it. He said they are all the same.” (Narrated by Muslim).
… Whoever is unable to work and is poor is allowed to ask for help, and to take zakaah and social security.
Secondly: The Muslim, whether he is rich or poor, is not allowed to take a loan from the bank at 5% or 15 % or more or less, because that is ribaa and is a major sin. Allah has caused him to have no need of that because of the ways that He has prescribed such as means of earning a halaal income by working as an employee for company owners, or as a civil servant in permissible work, or by dealing with the money of another on a profit-sharing basis.
Buying real estate through the bank
Firstly:
Buying a property through the bank is done in one of two ways:
1.The role of the bank is merely to finance the transaction, so it gives the money to its customer or pays it on his behalf, on the basis that the customer will pay it back in instalments, with something extra. This is a haraam, riba-based loan.
2.The bank buys the property, then sells it to the customer. This is permissible subject to certain conditions:
(i) That the bank does not stipulate any penalty in the event of late payment of instalments, because stipulating this penalty is a kind of riba which is haraam, whether the bank takes the penalty for itself or distributes it to the poor. Please see the answer to question no. 89978.
(ii) That the customer does not sign any purchase contract or make a promise to purchase before the bank takes possession of the property.
(iii) That the bank does not stipulate that a down payment be made before it takes possession of the property, because the down payment -- according to those scholars who say that it is permissible, namely the Hanbalis -- is not valid before the contract is drawn up.
It says in Ghaayah al-Muntaha (3/79): It [the down payment] means paying some of the price or rent after drawing up the contract and not before. End quote.
But the majority of Hanafi, Maaliki and Shaafa’i fuqaha’ do not regard the down payment as valid and they do not regard it as permissible for the seller to take it, whether it is agreed upon after the contract or before.
Dr. Muhammad al-‘Usaymi (may Allah preserve him) was asked: What is the ruling on the “Manzil Mubaarak” financing program (buying a house in the name of the bank until the loans are paid off) which is offered by al-Bank al-‘Arabi and al-Raajihi bank?
He replied: Many commercial banks offer financing services for buying real estate. In the riba-based banks, the customer asks for financing, and the commercial bank gives the money to the customer, who buys the house and mortgages the title or ownership papers to the bank. There is no doubt that this is riba-based financing and is haraam.
As for the Islamic banks, after the real estate is identified by the customer, the bank buys the property in its own name and the title deeds are transferred to it, then it sells it to the customer for a price to be paid later with a stated, known amount of profit. There is no doubt that this is permissible.
One of the matters that should be noted in this case is that it is not permissible for the bank which offers financing for real estate purchase to demand a down payment from the customer before buying a property. And it is not permissible for it to oblige the customer to buy the property; rather the customer has the choice of buying or not buying.
End quote from the Shaykh’s website.
The point is that it is essential that the bank take possession of the property before selling it to you, and taking possession is done through a purchase contract between the bank and the owner of the property. It is not essential to register the property in the name of the bank, especially if registering involves payment of large fees as is the case in some countries.
Secondly:
It is permissible to buy property from the bank by instalments; it is also permissible to pay part of the price and to pay the rest by instalments, such as if you pay twenty thousand, for example, and pay the rest in instalments in a manner that is compatible with your salary and other commitments. There is nothing wrong with the bank deciding the price of the house on the basis of the number of years you will pay instalments, so that if you pay part of it up front, that will reduce the number of years during which you pay in instalments, thus reducing the price of the property.
Credit Cards:
Ruling on gifts given to one who has a Visa card
If a person puts some money in the bank to use it on the Visa card, by doing so he is lending to the bank, so it is not permissible for him to take gifts or rewards from the back or from those who cooperate with it, because they are gifts in return for a loan, so they are included in the words, “every loan that brings a benefit is riba.”
See: al-Manfa‘ah fi’l-Qard, p, 461
Dr. Muhammad al-‘Usaymi (may Allah preserve him) was asked: What is your opinion on current accounts which are not savings accounts; rather they are for safeguarding money until one needs it, and the bank gives gifts and rewards for them according to the amount deposited in the bank. What is your opinion on the Visa card from the Ahli bank and the rewards offered by the bank or on Saudi airlines that deal with Visa?
He replied: Putting money in a riba-based bank when there is no case of necessity is haraam; the prohibition increases if there are Islamic banks in the country. It is not proper for the Muslim to accept gifts from the riba-based bank in return for current accounts, and they are a kind of riba, unless he takes them to get rid of them if he has no choice but to open an account, as mentioned above. The credit cards issued by riba-based banks are completely haraam, and those that are called Islamic but are based on reversing the transaction (by putting money in the credit card account before spending on the card, instead of spending on the card and then paying what is owed), like the Ahli credit card and the American Bank credit card, are also haraam. And Allah knows best.
End quote from the Shaykh’s website.
What you have to do is get rid of these rewards by giving to the poor and needy or to public projects, but they are not regarded as charity; rather it is getting rid of haraam wealth.
Ruling on using American Express reward points
Firstly:
It is permissible to use credit cards if they are free of the following problematic matters:
Stipulating interest or a penalty in the event of late payment.
Charging a fee for issuing an “unloaded” (not prepaid) credit card that is higher than the actual costs involved.
Charging a percentage as a fee for withdrawals if the card is not prepaid. It is permissible to charge the actual costs only, and anything more than that comes under the heading of riba (usury).
Buying gold, silver and currency with an “unloaded” card.
The Islamic Fiqh Council has issued a statement concerning this matter. Please see the answer to question no. 97530.
Secondly:
It is not permissible to use the card asked about, because it involves paying a penalty in the event of late payment, even if the user is determined to pay on time. It makes no difference whether the penalty is a percentage or a fixed amount. Anything that is stipulated in addition to the debt is riba.
According to the statement of the Islamic Fiqh Council:
Firstly: it is not permissible to issue an “unloaded” credit card or to use it, if it is stipulated that interest be paid, even if the one who is requesting the card is determined to pay it off within the grace period.
Thirdly:
You have to stop using this credit card, and repent to Allah for having fallen into accepting riba and paying it if you actually have to pay the penalty.
Fourthly:
If someone puts money in the bank in order to use it to pay off the credit card, then in effect that is a loan to the bank, so it is not permissible to accept gifts or rewards from the bank, or from the one who is cooperating with the bank, because that is a gift in return for a loan, and thus is included in the hadith, “Any loan that brings a benefit is riba.”
See: al-Manfa‘ah fi’l-Qard, p. 461, and the answer to question no. 147775.
Based on that, it is not permissible to collect reward points, unless that is done in order to get rid of them by giving them to the poor or needy, as is also to be done with interest, but one must also stop dealing with them, as mentioned above.
Having an interest-based credit card in cases of necessity
The basic principle is that interest-based transactions are haraam and it is not permissible to engage in them. This includes the conditions mentioned in the contracts for credit cards. In some countries they rely a great deal on these credit cards, and you can hardly find anyone who does not use them. We put the following question to Shaykh Muhammad ibn Saalih al-Uthaymeen:
Credit cards include conditions based on riba (interest/usury) if you delay payments, they charge an extra penalty. But in the place where I live in America, I cannot rent a car or a shop or use many other services unless I have a credit card. If I do not use a credit card, I will suffer unbearable hardship. If I commit myself to make the payments within a certain time limit, so that I do not have to pay the interest charges, will this allow me to have a credit card and thus relieve some of the hardship I am facing?
The shaykh, may Allah preserve him, answered as follows:
If the hardship he is facing is certain, and the likelihood that he will delay payments is remote, then I hope there is nothing wrong with him having the credit card.
Question:
Do the conditions relating to interest make a transaction invalid or not?
Answer:
If a contract contains an invalid condition, this does not invalidate the entire contract, for a number of reasons: (1) necessity, (2) because it does not really affect anything. The man thinks that he is going to make the payments before interest is due. Because this is more likely than the condition of having to pay interest, and because it is necessary which is the main point I hope that there is nothing wrong with it. We have a definite matter necessity and a matter which is not necessarily going to happen which is delay in payment and the matter that is definite takes precedence over something which may not even happen. And Allah knows best.
Statement of the Fiqh Council on credit cards and taking fees for them
It is permissible to use credit cards that are free of things that are forbidden in Shari'ah, such as charging interest for late payments, or charging a percentage of the money withdrawn, because that comes under the heading of riba which is haraam. But if the bank charges a set fee when issuing or renewing the card as a fee for the services offered, and covering only the cost of those services, there is nothing wrong with that.
The Islamic Fiqh Council has issued a statement – no. 108 (2/12) – concerning non-covered credit cards (i.e., a card covered by money pre-deposited in the card account), and the ruling on the fees charged by the banks.
There follow the texts of this statement:
The International Islamic Fiqh Council, belonging to the Organization of the Islamic Conference, in its eighteenth session in Riyadh, Kingdom of Saudi Arabia from 25 Jumaada al-Aakhirah 1421 AH to the beginning of Rajab 1421 AH (23-28 September 2000 CE).
Based on the statement of the council no. 5/6/1/7 on the subject of financial markets and credit cards, it was decided to give a definitive answer on the shar’i way of dealing with credit cards and the ruling on these cards in a subsequent session.
And in reference to the statement of the council in its tenth session no. 102/4/10 on the subject of non-covered credit cards.
And after listening to the discussion on this subject by fuqaha’ and economists, and referring to the definition of non-covered credit cards as given in statement no. 63/1/7, according to this definition the non-covered credit card is a financial document given by the issuer (the issuing bank) to an individual or company (the card carrier) on the basis of a contract that enables him to buy goods or services from companies who accept it without having to pay on the spot because the issuer of the credit card has to pay according to the contract, and the payment comes from the account of the issuer, then this payment is demanded from the card-carrier at regular intervals. Some of them (card issuers) charge interest on the unpaid balance after a certain amount of time from the date of the bill, and some do not charge interest.
(The council) has decided the following:
Firstly: It is not permissible to issue non-covered credit cards if interest is stipulated, even if the card applicant is determined to pay within the free period.
Secondly: It is permissible to issue non-covered cards if there is no condition of paying interest on the original loan.
Based on that:
(a)It is permissible for the one who issues the card to charge set fees when issuing or renewing a card, because these are fees to cover actual services
(b)It is permissible for the issuing bank to take commission from the company that accepts this card and sells on that basis, provided that the company sells the product by credit card for the same amount as it sells if for cash.
Thirdly: Cash withdrawals by the card carrier are a loan from the issuer, and there is nothing wrong with that from a shar’i point of view so long as it will not result in interest. Set fees that are not connected to the amount or length of this loan are not regarded as interest.
Any charges in addition to the set charges, such as if the charges exceed the amount required to cover the services offered, are haraam because that is riba which is forbidden in Shari’ah, as was stated by the council in its report no. 13 (10/2) and 13 (1/3).
Fourthly: It is not permissible to buy gold and silver or currency with the non-covered card. End quote.
Depositing money in a riba-based bank
It is not permissible to put money in a bank that deals in riba (usury or interest), and the Muslim should not do that unless he is forced to, in which case the following three conditions apply:
1 – He should have the need to do that, meaning that there is no safe place to keep his money except this bank. If he can find another place where he can keep his money apart from this riba-based bank, then it is not permissible for him to deposit his money in this bank which deals with riba.
2 – The bank should not deal one hundred percent with riba; if the bank’s dealings are one hundred percent with riba then it is not permissible to deposit his money with them at all, if you deposit money in the bank then in this case you can be certain that you have helped the bank engage in riba, and it is not permissible to help anyone with riba.
3 – The depositor should not take any profit, because if he takes any profit that will be riba, and riba is haram according to the Qur’an and Sunnah and the consensus of the Muslims.
With regard to the questioner’s saying that if he does not take the interest the bank will take it:
This is not interest, rather it is riba which is haram, and it belongs to the bank in the first place. The depositor does not have the right to take anything of it, because Allah has commanded us to abstain from riba when He said (interpretation of the meaning):
“O you who believe! Be afraid of Allah and give up what remains (due to you) from Ribaa (from now onward) if you are (really) believers”
[al-Baqarah 2:278]
And He warned against taking riba when He said:
“And if you do not do it, then take a notice of war from Allah and His Messenger”
[al-Baqarah 2:278-279]
It should also be noted that depositing this money in the banks is not regarded as depositing it in the shar’i sense, because depositing something in Shari'ah means leaving it with someone for safekeeping, which means that the owner cannot use it; but when money is deposited in the bank, the bank uses the money, so it is a form of lending, not depositing for safekeeping. The fuqaha’ have explained this point, that if the depositor gives the keeper permission to use his money, it is no longer a deposit for safekeeping, rather it is a loan. (Therefore anything added to the principle is riba).
And Allah knows best. May Allah send blessings and peace upon our Prophet Muhammad.
See Fataawa Manaar al-Islam, 2/433-440 by Shaykh Ibn ‘Uthaymeen.
Currency trading:
What is the ruling on buying and selling bitcoin?
The source of this currency is still unknown, and it is surrounded by a great deal of mystery, problems, fears and dangers.
Hence, we do not advise you to invest in it until its true nature becomes apparent and it is known who is behind it.
Even now, the facts of the matter are not clear to us, so we are unable to issue a fatwa concerning it.
Ruling on trading in currencies
Is trading in currencies halal?
Dealing in currencies is permissible so long as the exchange takes place in the same sitting as the contract is made. It is permissible to sell Euros for Dollars so long as the exchange takes place in the same sitting as the contract is made. But when the deal is concerning the same type of currency, such as selling one dollar for two dollars, that is not permissible because it is a type of riba.
In that case they should be of equal amounts and the exchange must take place in the same sitting as the contract if the exchange is concerning one type of currency.
The evidence for that is the report narrated by ‘Ubadah ibn al-Samit (may Allah be pleased with him) who said: The Messenger of Allah (peace and blessings of Allah be upon him) said: “Gold for gold, silver for silver, wheat for wheat, barley for barley, dates for dates, salt for salt, like for like, same for same, hand to hand. If the types are different then sell however you like, so long as it is hand to hand.” (Narrated by Muslim, 1587)
It says in Majmu’ Fatawa Ibn Baz (19/171-174):
“Dealing in currency, buying and selling, is permissible, but that is subject to the condition that the exchange be hand-to-hand if the currencies are different. If a person sells Libyan currency for American or Egyptian or whatever currency hand to hand, there is nothing wrong with that, such as if he buys dollars for Libyan currency hand to hand, exchanging it in one sitting, or he buys Egyptian or English currency etc. for the Libyan or whatever currency hand to hand, there is nothing wrong with that. But if there is a delay, then it is not permissible, and if the exchange is not done in the same sitting, it is not permissible, because in that case it is regarded as a kind of riba-based transaction. So, the exchange must take place in the same sitting, hand to hand, if the currencies are different. But if they are of the same kind, two conditions must be met: they should be of equal amounts and the exchange should take place in the same sitting, because the Prophet (peace and blessings of Allah be upon him) said: “Gold for gold, silver for silver…”
The ruling on currency is as mentioned above; if they are different then it is permissible for the amounts exchanged to be different, so long as the exchange takes place in the same sitting. If they are of the same kind, such as dollars for dollars, or dinars for dinars, then the exchange must take place in the same sitting and they should be of the same amount. And Allah is the source of strength.”
Insurance:
Is Insurance Haram?
All kinds of commercial insurance are clearly and undoubtedly riba (interest/usury). Insurance is the sale of money for money, of a greater or lesser amount, with a delay in one of the payments. It involves riba al-fadl (interest-based transaction) and riba al-nasiah (interest to be charged if payment is delayed beyond the due date), because the insurance companies take people’s money and promise to pay them more or less money when a specific accident against which insurance has been taken out happens. This is riba, and riba is forbidden in the Quran, in many ayat.
Commercial insurance is based on gambling
All kinds of commercial insurance are based on nothing but gambling which is haram according to the Quran:
“O you who believe! Intoxicants (all kinds of alcoholic drinks), and gambling, and Al-Ansab (stone altars for sacrifice to idols etc.) and Al-Azlam (arrows for seeking luck or decision) are an abomination of Shaytan’s handiwork. So, avoid (strictly all) that (abomination) in order that you may be successful.” (al-Maidah 5:90 – interpretation of the meaning).
All kinds of insurance are kinds of playing with chances. They tell you, pay this much money, then if this happens to you, we will give you this much. This is pure gambling. Insisting on differentiating between insurance and gambling is pure stubbornness that is unacceptable to any sound mind. The insurance companies themselves admit that insurance is gambling.
Insurance is based on uncertainty
All kinds of insurance are forms of uncertainty, and transactions which involve uncertainty are forbidden according to many sahih ahadith, such as the hadith narrated by Abu Hurayrah (may Allah be pleased with him):
“The Messenger of Allah (peace and blessings of Allah be upon him) forbade transactions determined by throwing a stone and transactions which involved some uncertainty.” (Narrated by Muslim).
[“Transactions determined by throwing a stone” – this was a type of transaction that was prevalent in the markets of pre-Islamic Arabia, whereby a stone was thrown by either the buyer or the seller, and whatever it touched, its transaction became binding. “Transactions which involve some uncertainty” – is a transaction in which there is no guarantee that the seller can deliver the goods for which he receives payment. Footnotes from the translation of Sahih Muslim. (Translator’s Note)]
All forms of commercial insurance are based on uncertainty of the most extreme kind. Insurance companies and those who sell insurance refuse to insure cases except where there is clear uncertainty in whether or not the condition being insured against will happen or not.
In other words, the condition being insured against must have a possibility of happening or not happening (as opposed to, for example, someone who has a pre-existing condition, such as a person who is on death row applying for life insurance--translator.)
Moreover, this transaction involves something uncertain, which is when an accident will happen and the extent of the damage caused. Hence insurance combines three kinds of extreme uncertainty.
Commercial insurance consumes people’s wealth unjustly
All kinds of commercial insurance consume people’s wealth unjustly, which is haram according to the Quran:
“O you who believe! Eat not up your property among yourselves unjustly” (al-Nisa 4:29 – interpretation of the meaning).
All forms of commercial insurance are fraudulent transactions aimed at consuming people’s wealth unjustly. The precise statistics calculated by one of the German experts’ states that what people get back from what has been taken from them is no more than 2.9%.
Insurance is an immense loss for the nation, and there is no evidence or excuse to be found in the actions of the kuffar who have lost the ties of kinship and friendship and are therefore forced to resort to insurance, which they hate as much as they hate death.
These are only some of the violations of shari’ah which insurance is essentially based upon. There are numerous other violations which we do not have room to mention here, and there is no need to do so, because just one of the violations which we have mentioned above is sufficient to make insurance one of the things which is most prohibited in the Shari’ah of Allah.
It is a shame that some people are deceived by the ways in which the insurance companies make insurance attractive and confuse them by calling it “cooperative” or “mutual support” or “Islamic”, or other names which do not change the unjust nature of insurance in the slightest.
Is cooperative insurance halal?
The insurance companies’ claim that the ‘ulama have issued fatwas stating that so-called “cooperative insurance'' is halaal, is a lie. The reason for this confusion is that some insurance companies approached the ‘ulama with a deceitful set-up which has nothing to do with any kind of insurance, but they said that it was a kind of insurance which they called “cooperative insurance” (to make it sound attractive and to confuse the people).
They said that it was purely in the nature of a donation, and that it was a kind of the cooperation enjoined by Allah in the ayah (interpretation of the meaning): “Help you one another in Al-Birr and At-Taqwa (virtue, righteousness and piety) …” (al-Maidah 5:2), and that the aim was to cooperate in alleviating the overwhelming disasters that may befall people.
But in fact, what they called cooperative insurance was just like any other kind of insurance; the only difference was in the way in which it was set up, not in its essential nature. It was far from being any kind of simple donation or cooperation in righteousness and piety; in fact, it is a kind of cooperation in sin and transgression. It was not aimed at helping to relieve the distress of calamities, but at depriving people of their wealth by unjust means, which is absolutely haram, as are other kinds of insurance. Hence what they proposed to the ‘ulama is not even insurance at all.
With regard to the claim made by some, that part of the premium (money paid to the insurer) is returned, this does not change anything and does not free insurance from the taint of riba, gambling, transactions based on uncertainty, unjust consumption of people’s wealth and going against the principle of trusting in Allah (tawakkul), and other kinds of haram actions.
Insurance is deceit and confusion. Anyone who wishes to learn more should refer to the essay al-Tamin wa Ahkamuhu (Insurance and its rulings). I call on every Muslim who has pride in his religion and whose hopes are focused on Allah and the Last Day to fear Allah and to avoid all kinds of insurance, no matter how attractive their proponents make them, for they are undoubtedly forbidden. In this manner he will protect his religion and his wealth, and he will be blessed with security from the Owner of security, may He be exalted.
May Allah help me and you to have insight into matters of religion and to do that which is pleasing to the Lord of the Worlds.
Stock Market:
Ruling on buying and selling shares
Types of shares
Shares may be divided, according to the field of activity and work involved, into three categories:
Shares based on permissible work, such as companies that deal with transportation, shipping, manufacturing clothing, tools, office supplies, furniture, medical equipment, real estate, and so on, and do not engage in any haram practices or transactions, such as cheating, or lending or borrowing on the basis of riba; rather they follow Islamic rulings in all their transactions and dealings.
These types of companies are called “permissible” or “clean” companies, and it is permissible to buy and sell shares in them.
Shares based on prohibited types of work, such as companies that deal with tourism, hotels that promote and aid in immoral actions, breweries, riba-based banks, commercial insurance companies, companies that print and distribute indecent magazines, and so on. It is not permissible to buy shares or invest in this type of company, and it is not permissible to advertise them or promote them.
With regard to these two types of companies, there is no confusion about the ruling and the matter is quite clear.
Companies whose field of work is basically permissible, but they engage in some haram practices or transactions, such as transportation companies – for example – that have interest-bearing accounts in the bank, or they are financed by means of riba-based loans from banks or from people in the form of stocks.
These types of companies are called “mixed” companies. The contemporary scholars differed concerning the ruling on them, but the most correct view is that it is haram to buy shares in them, invest in them or promote them.
That is because the shareholder is a partner in the company based on the number of shares he holds, so he is a partner to every transaction into which the company enters, such as riba or other haram transactions.
With regard to the prohibition on promoting these companies, that is because of what that involves of co-operating in sin and transgression, helping to spread haram and causing people to fall into it. Allah, may He be exalted, says (interpretation of the meaning):
“Help you one another in Al-Birr and At-Taqwa (virtue, righteousness and piety); but do not help one another in sin and transgression” [al-Maidah 5:2].
This view was favored by the majority of contemporary scholars, including the scholars of the Standing Committee for Issuing Fatwas in the land of the two Holy Sanctuaries. A statement to that effect was also issued by the Islamic Fiqh Council belonging to the Organization of the Islamic Conference, as well as the Islamic Fiqh Council belonging to the Muslim World League.
It says in Fatawa al-Lajnah ad-Daimah, 14/299:
“The basic principle is that it is permissible to hold shares in any company if it does not deal with haram things such as riba and so on. But if it does deal with haram things such as riba, then it is not permissible to hold shares in it.
Based on that, if any of the shares mentioned are in a company that deals with riba or haram things, then it is essential to withdraw from it and get rid of any profit by giving it to the poor and needy.” (Shaykh ‘Abd al-‘Aziz ibn ‘Abdullah ibn Baz, Shaykh ‘Abd ar-Razzaq ‘Afifi, Shaykh ‘Abdullah ibn Ghadyyan, Shaykh Salih al-Fawzan, Shaykh ‘Abd al-‘Aziz Al ash-Shaykh, Shaykh Bakr Abu Zayd)
It also says (14/299, 300):
“Firstly: if it is proven that a company deals in riba, whether taking or giving, it is haram to hold shares in it, because that comes under the heading of helping in sin and transgression. Allah, may He be exalted, says (interpretation of the meaning):
“Help you one another in Al-Birr and At-Taqwa (virtue, righteousness and piety); but do not help one another in sin and transgression. And fear Allah. Verily, Allah is Severe in punishment” [al-Maidah 5:2].
Secondly: if a person previously acquired shares in a company that deals in riba, then he has to sell his shares in it and spend the interest on charitable causes.” (Shaykh ‘Abd al-‘Aziz ibn ‘Abdullah ibn Baz, Shaykh ‘Abd ar-Razzaq ‘Afifi, Shaykh ‘Abdullah ibn Ghadyyan, Shaykh ‘Abdullah ibn Qa‘ud)
Statement of the Organization of the Islamic Conference on shares
The Islamic Fiqh Council belonging to the Organization of the Islamic Conference issued a statement concerning shares in its seventh conference, held in Jeddah, 7-12 Dhu’l-Qa‘dah 1412 AH/ 9-14 May 1992 CE, in which it says:
As the basic principle concerning transactions is that they are permissible, founding a share-based company that has Islamically acceptable aims and activities is something that is permissible.
There is no difference of opinion concerning the prohibition on holding shares in companies whose basic aims are haram, such as dealing in riba, or producing or trading in haram things.
The basic principle is that it is haram to hold shares in companies that sometimes deal in haram things, such as riba and so on, despite the fact that their basic activities are Islamically acceptable.” (Majallat al-Majma‘, issue no. 6, vol. 2, p. 1273; issue no. 7, vol. 1, p. 73; issue no. 9, vol. 2, p. 5)
Statement of the Islamic Fiqh Council of the Muslim World League on shares
The Islamic Fiqh Council of the Muslim World League issued a statement on the same matter in its fourteenth session in 1415 AH/1985 CE, the text of which is as follows:
“As the basic principle concerning transactions is that they are permissible, founding a share-based company that has Islamically acceptable aims and activities is something that is permissible.
There is no difference of opinion concerning the prohibition on holding shares in companies whose basic aims are haram, such as dealing in riba, or manufacturing or trading in haram things.
It is not permissible for a Muslim to buy shares in companies or banks if some of their transactions involve dealing in riba, or manufacturing or trading in haram things.
If an individual purchased shares not knowing that the company deals in riba, then he finds out about that, what he must do is get out of it.
The prohibition in this case is clear because of the general meaning of the evidence in the Quran and Sunnah concerning the prohibition on riba, and because buying shares in companies that deal with riba when the purchaser is aware of that means that the purchaser himself is a partner in dealing in riba, because the share represents part of the company’s capital, and the shareholder has a share in the company’s activities and possessions. So, if the company lends any money with interest, or borrows with interest, the shareholder has a share of that, because those who deal with lending and borrowing on the basis of interest are doing that on his behalf and acting as his delegate, and delegating someone else to do a haram action is not permissible.
May Allah send blessings and peace upon our Prophet Muhammad and upon his family and companions. Praise be to Allah the Lord of the Worlds.”
Dr. Muhammad ibn Sa‘ud al-‘Usaymi (may Allah preserve him) was asked about the ruling on investing in mixed shares.
He replied: “It is not permissible according to the majority of scholars, except investing in “clean” shares, whether one is buying shares or investing.”
Are all shares in all types of companies haram?
With regard to the view that shares in all types of companies are haram, this view is incorrect, because there are some companies of the first type, which are the ones that adhere to Islamic rulings in their dealings. But perhaps those who are of this view were motivated to say that because companies of the first type are very few and most companies are of the second and third types.
Sheikh Muhammad Salih Almunajjid (Islam Questions and Answers).
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