Are interest rates considered riba?
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Fatwa number ( 5225 )
Q: A discussion took place between me and some American Muslims and immigrants last summer in America during my visit to one of my relatives there. The conversation was about riba, about banking transactions there, and about interest rates, and whether they are considered riba or not. Riba is forbidden, and this is what everyone said, but the disagreement was whether the variable interest rates, whether weekly, monthly,
or annual, which the banks there pay as a result of investing in various projects, are lawful or forbidden, or permissible, and whether they are riba or not? The discussion also covered the projects, their benefit to people, about America being wealthy, and about paying salaries to the unemployed so that they can find jobs. There is no one in need who borrows, and there is no exploitation by the bank or the borrower, let alone regarding the value of paper currency and its difference from gold and silver, which have a stable value if they do not constantly increase. The important point is that we did not reach a unified opinion, but the topic is important; therefore, I request the correct opinion on this matter, knowing that there is no Islamic bank there, and it is not reasonable to invest in an Islamic bank in Egypt for example, considering the distance between the two countries, let alone the fact that these Muslims are residing in America .
A: Riba is forbidden in its two types: riba al-nasi'ah and riba al-fadl, by the Book, the Sunnah, and scholarly consensus. Allah the Exalted said:[Ali 'Imran 3:130] , and Allah the Exalted said: [Al-Baqarah 2:275] , and Allah the Exalted said: [Al-Baqarah 2:278-279] , and it is established in the authentic hadith
that the Prophet (peace and blessings be upon him)Sahih Muslim 1598 , and from Abu Sa'id al-Khudri (may Allah be pleased with him), that the Prophet (peace and blessings be upon him) said: Muwatta Malik 31:36 narrated by al-Bukhari and Muslim, and by this it is known that the interest rates given to the beneficiary as a percentage of the capital, whether weekly, monthly, or annual, are all of the forbidden riba prohibited by the Shari'ah, and whether the rate changes or not. As for investment projects established on correct legal bases, such as a mudarabah partnership, there is no harm with them; because they are from the permissible deeds that are encouraged. Allah the Exalted said: [Al-Jumu'ah 62:10] . And as for paying salaries to the unemployed from zakah, this is something obligatory and prescribed in the wealth of the wealthy Muslims for their poor brothers; if they are unable to earn, and do not find work, or if their earnings are less than their sufficiency, they are given the full amount of that. Allah the Exalted said: [At-Tawbah 9:60] the verse.
And as for the issue of no exploitation by the bank or the borrower, the issue here is not one of exploitation, but one of making lawful and making forbidden. Allah the Exalted says:[Al-Baqarah 2:275] , and He did not specify a certain profit, so how do you break into the doors of riba on the pretext of no exploitation, and leave the command of Allah and His Shari'ah, and contradict the requirement of the Islamic religion, which is submission to Allah and obedience to His commands. And as for paper currency, a decision was issued by the Council of Senior Scholars, issued by majority, and this is its content: The Council of Senior Scholars decided by majority that paper currency is considered currency in its own right, like the currency of gold and silver. If Saudi paper currency is a type, and American paper currency is a type, and so on, every paper currency is an independent type in itself, and the following legal rulings result from that: First: Riba in its two types applies to it as riba in its two types applies to the two currencies of gold and silver, and to other currencies, like the fils. This requires the following: A- It is not permissible to sell some of it for some of it, or for other types of currency
such as gold or silver or others, on credit absolutely. So it is not permissible, for example, to sell the American dollar for five Saudi riyals or less or more on credit. B- It is not permissible to sell some of the same type for some of it with a difference in amount, whether that is on credit or hand-to-hand. So it is not permissible, for example, to sell ten Saudi paper riyals for eleven Saudi paper riyals. C- It is permissible to sell some of it for some of it of a different type absolutely, if that is hand-to-hand. It is permissible to sell the Syrian or Lebanese pound for a Saudi riyal, whether paper or silver, or less than that or more, and selling the American dollar for three Saudi riyals or less or more if that is hand-to-hand. And similar to that in permissibility is selling the Saudi silver riyal for three Saudi paper riyals or less or more, hand-to-hand; because that is considered selling a type for a different type, and there is no effect to mere sharing in name with a difference in reality. Second: The obligation of its zakah if its value reaches the minimum of the two nisabs of gold or silver, or if it completes the nisab with other currencies and goods prepared for trade, if it is owned by those upon whom it is obligatory. Third: The permissibility of making it capital in salam and partnerships. And the issue of the non-existence of an Islamic bank in America and the distance between the residents in America, and Islamic banks do not justify dealing in riba
and engaging in it, and it is possible for one who has surplus money to utilize it in real estate or trade of buying and selling, or giving it to a person to trade in it, with a known shared profit in the legal manner.
Q: A discussion took place between me and some American Muslims and immigrants last summer in America during my visit to one of my relatives there. The conversation was about riba, about banking transactions there, and about interest rates, and whether they are considered riba or not. Riba is forbidden, and this is what everyone said, but the disagreement was whether the variable interest rates, whether weekly, monthly,
or annual, which the banks there pay as a result of investing in various projects, are lawful or forbidden, or permissible, and whether they are riba or not? The discussion also covered the projects, their benefit to people, about America being wealthy, and about paying salaries to the unemployed so that they can find jobs. There is no one in need who borrows, and there is no exploitation by the bank or the borrower, let alone regarding the value of paper currency and its difference from gold and silver, which have a stable value if they do not constantly increase. The important point is that we did not reach a unified opinion, but the topic is important; therefore, I request the correct opinion on this matter, knowing that there is no Islamic bank there, and it is not reasonable to invest in an Islamic bank in Egypt for example, considering the distance between the two countries, let alone the fact that these Muslims are residing in America .
A: Riba is forbidden in its two types: riba al-nasi'ah and riba al-fadl, by the Book, the Sunnah, and scholarly consensus. Allah the Exalted said:
O you who have believed, do not consume usury, doubled and multiplied
يَا أَيُّهَا الَّذِينَ آمَنُوا لاَ تَأْكُلُوا الرِّبَا أَضْعَافًا مُضَاعَفَةًBut Allah has permitted trade and has forbidden interest
وَأَحَلَّ اللَّهُ الْبَيْعَ وَحَرَّمَ الرِّبَا(278) O you who have believed, fear Allah and give up what remains [due to you] of interest, if you should be believers. (279) And if you do not, then be informed of a war [against you] from Allah and His
يَا أَيُّهَا الَّذِينَ آمَنُوا اتَّقُوا اللَّهَ وَذَرُوا مَا بَقِيَ مِنَ الرِّبَا إِنْ كُنْتُمْ مُؤْمِنِينَ (278) فَإِنْ لَمْ تَفْعَلُوا فَأْذَنُوا بِحَرْبٍ مِنَ اللَّهِ وَرَسُولِهِthat the Prophet (peace and blessings be upon him)
cursed the accepter of interest and its payer, and one who records it, and the two witnesses, and he said: They are all equal.
لعن آكل الربا وموكله وكاتبه وشاهديه، وقال: هم سواءDo not sell gold for gold except like for like. Do not increase part of it over another part. Do not sell silver for silver except like for like, and do not increase part of it over another part. Do not sell some of it which is there for some of it which is not.
لا تبيعوا الذهب بالذهب إلا مثلاً بمثل، ولا تشفوا بعضها على بعض، ولا تبيعوا الفضة بالفضة إلا مثلاً بمثل، ولا تشفوا بعضها على بعض، ولا تبيعوا منها غائبًا بناجزAnd when the prayer has been concluded, disperse within the land and seek from the bounty of Allah, and remember Allah often that you may succeed.
فَإِذَا قُضِيَتِ الصَّلاَةُ فَانْتَشِرُوا فِي الأَرْضِ وَابْتَغُوا مِنْ فَضْلِ اللَّهِ وَاذْكُرُوا اللَّهَ كَثِيرًا لَعَلَّكُمْ تُفْلِحُونَZakah expenditures are only for the poor and for the needy
إِنَّمَا الصَّدَقَاتُ لِلْفُقَرَاءِ وَالْمَسَاكِينِAnd as for the issue of no exploitation by the bank or the borrower, the issue here is not one of exploitation, but one of making lawful and making forbidden. Allah the Exalted says:
But Allah has permitted trade and has forbidden interest
وَأَحَلَّ اللَّهُ الْبَيْعَ وَحَرَّمَ الرِّبَاsuch as gold or silver or others, on credit absolutely. So it is not permissible, for example, to sell the American dollar for five Saudi riyals or less or more on credit. B- It is not permissible to sell some of the same type for some of it with a difference in amount, whether that is on credit or hand-to-hand. So it is not permissible, for example, to sell ten Saudi paper riyals for eleven Saudi paper riyals. C- It is permissible to sell some of it for some of it of a different type absolutely, if that is hand-to-hand. It is permissible to sell the Syrian or Lebanese pound for a Saudi riyal, whether paper or silver, or less than that or more, and selling the American dollar for three Saudi riyals or less or more if that is hand-to-hand. And similar to that in permissibility is selling the Saudi silver riyal for three Saudi paper riyals or less or more, hand-to-hand; because that is considered selling a type for a different type, and there is no effect to mere sharing in name with a difference in reality. Second: The obligation of its zakah if its value reaches the minimum of the two nisabs of gold or silver, or if it completes the nisab with other currencies and goods prepared for trade, if it is owned by those upon whom it is obligatory. Third: The permissibility of making it capital in salam and partnerships. And the issue of the non-existence of an Islamic bank in America and the distance between the residents in America, and Islamic banks do not justify dealing in riba
and engaging in it, and it is possible for one who has surplus money to utilize it in real estate or trade of buying and selling, or giving it to a person to trade in it, with a known shared profit in the legal manner.
Source
www.alifta.gov.sa
The Arabic text is copied verbatim from the original source, without any edits.