The Case of Riba Based Loan & Selling and Buying Share in Islamic Bank

The Case of Riba Based Loan & Selling and Buying Share in Islamic Bank

Questions:

1. Is it permissible for him to ask the company for accommodation if it will be built with a riba-based loan? Is it permissible to ask the company for accommodation if it will be built by an interest-based loan? Then the company will valuate these buildings and sell them to its clerks in return for installments that will be discounted from their salaries? The price of the accommodation will mostly be very high; to cover the cost of building, the mortgage, and a profit for the company. Some brothers who we think are religious have already asked to buy accommodation from the company considering it normal buying-selling process.

2.      He has a restaurant where he sells alcohol, and he gave her the second part of the mahr from this money. A while ago I got married to someone who worked in a foreign country. He had an import business and after 3 months he opened an Arabic restaurant where he used to sell alcohol and drink it. Is what he gave me as the second part of the mahr after divorce haraam? Please note that when he came to propose marriage to me I did not know that he drank alcohol and did not pray. He told me that he prayed and that he had done ‘umrah twice.

3.    What is the ruling on buying and selling shares in the Islamic Bank?.

4. Buying shares in computer companies. A while ago I got married to someone who worked in a foreign country. He had an import business and after 3 months he opened an Arabic restaurant where he used to sell alcohol and drink it. Is what he gave me as the second part of the mahr after divorce haraam? Please note that when he came to propose marriage to me I did not know that he drank alcohol and did not pray. He told me that he prayed and that he had done ‘umrah twice. Is buying Computer and Technology companies' stocks Halal or Haram? AND WHY?  And if Halal, is giving money to mutual fund company that buy these stock (only Technology stocks) Halal or Haram? and Why?

5.   A company is offering its employees a benefit. Employees can get a home building loan from any bank. The company will pay all the interest accruing to this loan i.e the employee is not paying the interest. But the employee will have to pay some tax on this interest to the Govt. There is no tax on the principal. I would like to know whether such a loan is halal or haram for the employee?.

Answers:

1.   Praise be to Allaah. There are two issues to do with riba which must be dealt with separately. 

(1) –  Causing riba to take place, such as if one of them asks another to take out a riba-based loan for him, or some of them act as a guarantor for someone who will get a riba-based loan from the bank and so on, which is helping and causing people to fall into this major sin. 

Undoubtedly this kind is haraam, because the one who causes others to fall into something haraam has a share of the sin, as Allaah says (interpretation of the meaning): “but do not help one another in sin and transgression” [QS al-Maa’idah 5:1]. 

There is a particularly strong warning against causing people to fall into riba, in the hadeeth of Jaabir ibn ‘Abd-Allaah (may Allaah be pleased with him) who said: The Messenger of Allaah (peace and blessings of Allaah 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. Narrated by Muslim (1598). 

Al-Nawawi (may Allaah have mercy on him) said: “This indicates that it is haraam to help others in falsehood. (Sharh Muslim (11/26)). 

When the Prophet (peace and blessings of Allaah be upon him) cursed khamr (alcohol), he also cursed those who help in its drinking, so he (peace and blessings of Allaah be upon him) said: “Allaah has cursed khamr and the one who drinks it, the one who pours it, the one who sells it, the one who buys it, the one who squeezes it, the one for whom it is squeezed, the one who carries it and the one to whom it is carried.” Narrated by Abu Dawood (3674) and classed as saheeh by al-Albaani in Saheeh Abi Dawood. The one for whom it is squeezed is the one who asks for it to be squeezed for himself or for someone else. See; Tuhfat al-Ahwadhi (4/430). 

The same ruling applies to everyone who asks for riba for himself or for someone else and causes it to occur. On our site we have previously posted answers which give scenarios of the prohibition on helping in riba. See

Riba is a kind of earning which is haraam because of the way in which it is acquired, not in and of itself. In the case of that which is haraam because of the way in which it is acquired, the sin is only on the one who acquires it, and there is no sin on the one who deals with the one who acquires it by buying, selling, giving, or receiving hospitality. The evidence for that is that the Prophet (peace and blessings of Allaah be upon him) would deal with the Jews in Madeenah, buying and selling, and he used to eat with them, although they are the ones whom Allaah described as consuming riba and taking people’s wealth unlawfully. 

Based on that, there is nothing wrong with buying a house from the company, even if it was built with a riba-based loan, because the sin of that is on the one who agreed with the bank to take out the riba-based loan, or who helped with that, or approved of it. As for the employee who is going to buy the house from the company, there is no sin on him. This is like the Prophet’s dealings with the Jews, who used to consume riba, as stated above. And Allaah knows best.

2. Praise be to Allaah. There is no sin on you for what you took of the second part of the mahr, even if your husband’s wealth was as you describe. That is for two reasons: 

(1)  – The scholars have stated that if a person’s wealth is a mixture of halaal and haraam, and they cannot be told apart, it is permissible to interact with him, buying, selling, lending and so on, just as it is permissible to eat from his wealth. The Prophet (peace and blessings of Allaah be upon him) and his companions interacted with the Jews, and ate their food, although their wealth was not free of haraam elements, because they dealt in riba (usury) and consumed people’s wealth unlawfully. What is meant by not telling the halaal apart from the haraam is that your husband’s wealth – for example – combined the price of the alcohol with the price of the food and permissible drinks, and the one was mixed with the other. 

(2)   Some scholars are of the view that wealth that is haraam because of the manner in which it was acquired is haraam only for the one who acquires it, and it is not haraam for the one who takes it from him in a permissible manner. The wealth that your husband acquired from selling alcohol is haraam because it was acquired in a loathsome manner. But it is haraam for your husband only. The mahr that you took from him is halaal for you. 

Shaykh Ibn ‘Uthaymeen (may Allaah have mercy on him) said: As for that which is haraam because of the manner in which it was acquired, such as money that was obtained through cheating or through riba or lying and so on, it is haraam for the one who acquires it, but it is not haraam for anyone else, if he acquires it from him in a permissible manner. This is indicated by the fact that the Prophet (peace and blessings of Allaah be upon him) used to deal with the Jews, even though they consumed haraam things and took riba. This indicates that it is not haraam for anyone other than the one who acquires it. End quote from Tafseer Soorat al-Baqarah (1/198). 

Conclusion: You taking the mahr from this wealth is permissible and there is no sin in that. And Allaah knows best.

3. Praise be to Allaah. If this bank is calling itself “Islamic” in order to deceive people, and it is dealing in riba or other haraam transactions, then it is not an Islamic bank, and it is not permissible to buy shares in it, or to buy and sell its shares, because that is cooperating in doing something haraam. Allaah 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”[QS al-Maa'idah 5:2]

But if this bank is really Islamic, and organizes its dealings in accordance with the Qur’aan and Sunnah, and does not engage in haraam transactions, then there is nothing wrong with buying shares in it and trading in its shares. Rather that should be done, because it will encourage it and help it to deal with the challenges it faces as a result of the spread of riba and haraam transactions. 

We have explained that If these banks really operate according to Islamic shari'a, and they do not deal with riba which is haraam, and they do not take what is called interest in return for deferring payment, which is, in fact, the riba (usury) of the Jaahiliyyah, even if they call it by some other name, and they do not engage in transactions which are not acceptable in shari'a, such as selling what one does not possess, or ‘aynah sales or other kinds of transactions that are not permitted by shari'a – then undoubtedly a bank that does not do these things is halaal and dealing with it is acceptable according to shari'a. But if these banks are Islamic in name only and they deal with riba and other forbidden transactions, then dealing with them is haraam, even if they call themselves “Islamic banks”, because what counts is what really happens, not mere names.  

The Standing Committee for Issuing Fatwas was asked: Is it permissible to deal with Islamic banks, even though some of them go against shari'a and engage in kinds of transactions that are forbidden? They replied:  “It is permissible to deal with banks and financial institutions that do not deal with riba. But if they deal with riba then it is not permissible to deal with them, and they are not Islamic banks.” (Fataawa al-Lajnah al-Daa’imah, 13/310. ).

And it also says in Fataawa al-Lajnah (13/365): “If the Islamic bank does not deal with riba, and rather it invests money according to shar’i principles, then it is permissible for you to deposit your money with them for investment purposes.”

In Fataawa al-Lajnah al-Daa’imah (13/506) it says: “If banks are based on riba and deal in riba, then it is not permissible to buy shares in them, because this is cooperating in sin and transgression, which Allaah has forbidden when He said (interpretation of the meaning): “but do not help one another in sin and transgression” [QS al-Maa'idah 5:2]. End quote. 

It also says (13/507): “It is permissible to buy shares in banks that do not deal with riba, and to take the profits that come from buying shares in the bank, because this is the result of a transaction that is not haraam and there is nothing wrong with it, so it is halaal. End quote. 

It also says (13/508): “Buying shares in banks or companies that deal with riba is not permitted. If a subscriber wants to get rid of his riba-based shares, he should sell his shares at the current market value but only take his capital; the rest should be donated to charity. It is not permissible for him to take any of the interest of his shares or riba-based profits. But if the shares are in a company that does not deal with riba, then their profits are halaal”. End quote. And Allaah knows best.

4.  Praise be to Allaah. It is permissible for a person to buy shares in these companies if they do not deal in riba [usury/interest] (and they do not sell anything haraam and they do not do business in a manner that is not Islamic). But if they deal in riba then it is not permitted, because it is clearly established in the Qur’aan and Sunnah, and by scholarly consensus, that dealing in riba is haraam.  

There is nothing wrong with selling or buying shares if they are shares in permissible companies. If it is an agricultural company, for example, which produces permissible agricultural products, then it is permissible to buy and sell shares in it; the same applies to companies which deal in real estate, manufacturing, etc. It is permissible to buy the shares of other people and pay them the price immediately so that one will not be selling a loan for a loan. 

Excluded from this are companies which deal in haraam things, such as selling alcohol, tobacco and music tapes. It is not permitted to have shares in these companies, or to buy these shares. If the company openly deals in riba (usury, interest), then it is not permissible to deal with it. but if manufacturing, agricultural or business company is compelled to deposit its money with the bank in order to protect it from being lost or stolen, then it is permissible because of that necessary for the owners of the company to get rid of the interest which the bank gives them on their deposits. Companies should also avoid using riba-based loans in order to set up production lines and factories; that should be achieved by using cash and the money of the shareholders. And Allaah is the source of strength. See Fataawa Islamiyyah, 2/392;

5.  Praise be to Allaah. It is not permissible for the employees to take this loan when they are – in fact – one of the parties to the contract. It is proven in the saheeh Sunnah that the one who consumes riba [usury, interest], the one who pays it, the one who writes it down and the two who witness it are cursed. 

It was narrated that Jaabir said: The Messenger of Allaah (peace and blessings of Allaah be upon him) cursed the one who consumes riba, 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.” (Narrated by Muslim, 1598).

 It seems that the company will only take this riba-based loan if the employee applies for it and cooperates with the company in getting this riba-based contract. And Allaah says (interpretation of the meaning): “do not help one another in sin and transgression”.[QS al-Maa’idah 5:2]. These employees have to do without this loan, and seek the reward for not taking it with Allaah, and Allaah may compensate them with something better than that which they refrained from. And Allaah knows best.

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(Source: https://islamqa.info/en/answers/ ). Questions answered by Islam Q&A Team, Supervised by Syaikh Muhammad Saalih al=Munajid. The related questioned were combined by Editor.

Editor: Ustaz Sofyan Kaoy Umar, email: ustazsofyan@gmail.com