Dealing with Riba-based banks. And the sale of stocks.

The questioner : Peace be upon you, and Allah's mercy and blessings. There is an issue regarding... the matter of stocks traded in the financial market. I have seen that no clear picture or Sharia ruling has been issued to determine their permissibility or prohibition. Likewise, regarding the Islamic bank, I ask you to clarify these issues for us. May Allah reward you with good, my master. We ask you to clarify these two issues and the ruling of the Sharia regarding them. May Allah reward you with good?

The Shaykh : And you too, my brother.

The questioner : May Allah bless you.

The Shaykh : First, regarding stocks, the situation today in our time fits the saying of the Prophet (peace and blessings be upon him): This is an authentic hadith in al-Bukhari. There is another hadith in which there is weakness in its chain: So, the first hadith, which is authentic, we see it manifested today among most Muslims, unfortunately, whether they are merchants, or owners of a profession, or a company, or something similar. The evidence is that you cannot find a company today whose money is not in the banks. Let us set aside the Islamic bank for now, because the other banks are definitely dealing in riba. You cannot find a company that has a special fund of its own with its money kept in its own vault; rather, the money that becomes available and increases day by day is deposited in the bank or banks. This is not permissible, and one should not doubt its impermissibility—may Allah have mercy on you—or should anyone ask whether this is permissible or not. Even if we assume a hypothetical scenario that does not apply to companies but may apply to some individuals—some merchants who also deposit their money in banks, but who have some righteousness and some knowledge by which they act—they deposit their money in the banks but do not take the riba that people today call by a name other than the Sharia name, "interest." They do not take the interest, thinking that this deposit, from which they do not benefit, saves them from Sharia responsibility. But that is not the case. It is not permissible for a Muslim who believes in Allah and His Messenger to deposit money in these banks, even if he does not take riba. Why? First, because of the noble verse, and second, because of the specific, explicit hadith on this issue. The verse is the saying of Blessed and Exalted is He: So, this merchant who deposits his money: the more his money is compared to others, the greater his weight in assisting the bank is compared to others. This is a fact that I do not think anyone would ever dispute. Because if we imagine a group of merchants and wealthy men depositing their money in one of the banks, and then, between one evening and the next morning, may Allah guide them to this Sharia reality, which is that it is not permissible for them to deposit their money in the banks, even if they do not take the riba profits from them, and they withdraw their money, what would happen to the bank? Therefore, this is a fact that no one doubts: these riba-based banks are established on the cooperation of the wealthy with the owners of these banks, even if they do not take interest. In fact, from a material standpoint, it is more profitable for the bank if the owners of the money do not take riba; that is more beneficial for them. If they took the money—and this is not permissible for them—the bank's profit would be less, naturally. So, it is obligatory for every believer in Allah, truly, and by this specific verse , that what he imagines to be a good and righteous man, because he does not take riba in exchange for this money, is only helping the owners of the banks to establish these banks that are established on opposing Allah and His Messenger . As for the hadith, it is as if it was poured over this topic, namely the saying of the Messenger (peace and blessings be upon him): The Messenger (peace and blessings be upon him and his family) addressed in this hadith a matter that existed at that time, within the limits of this cooperation that I can call a four-party cooperation, consisting of one who provides the riba, one who eats the riba, the writer, and the witness. But today, those who cooperate with the banks are not four or ten; God knows, if a person conducted a survey, he would find that the number of those cooperating with these banks is uncountable. So, first, all of them fall under the violation of the previous verse , from the bank manager to the janitor and sweeper of the bank, and there are lower positions than that, but they all cooperate in evil. And our Lord says: Then, these cooperators are also included in the severe warning mentioned in the previous hadith . Now, imagine how many writers process the riba transactions in any bank—and peace be upon you, and Allah's mercy and blessings. So, when we know this reality, we realize that the dealings of Muslim merchants with the banks, by depositing their money only in these banks and without taking riba on their money, is sufficient for them in sin. And worse than that is the one who also eats the riba. If this reality is clear as the sun in the fourth hour of the day and does not warrant questioning, then in my opinion, the answer regarding stocks has been obtained. Because these shareholders and those dealing in stocks: if these stocks turn into goods, into a company—and peace be upon you, and Allah's mercy—into a factory, into anything, where is the money of this placed? It is placed in the bank. And if it has not yet turned into anything, like any company starting to establish a project for itself, they gather money from here and there until it reaches millions, and then the stocks are listed in the markets before they turn into goods, or trade, or anything else, and are sold for more than their price. This is also open riba. Does a company exist except on this shareholding that offers stocks in the markets before the company is realized by its work, its company, its factory, and so on? Some may be surprised at how it is not permissible to sell a stock, for example, whose price is one hundred, for one hundred and ten, because this is the very essence of riba: you sell one hundred dinars for one hundred and ten, and it has not turned into goods until trade in it becomes valid. But after it turns into goods, as we said, the problem is removed, but another problem takes its place, which is that these profits are transferred to the banks. Therefore, if there were an Islamic organization, it should be that every company has a special fund of its own, and there should be a committee specialized in preserving this, recording what comes in and goes out, and so on, and the hand of riba should not reach this money. Then, the companies would be established on what Allah Blessed and Exalted has prescribed. So, this is my answer regarding stocks: in brief, they are of two types. Stocks before they turn into goods: it is not permissible to offer them in the markets with an increase or a decrease. And if they turn into trade or a factory, then their problem begins from one side when the profits and capital are deposited in the banks. As for the Islamic bank, the truth is that the Islamic bank, as far as we know, does not differ in some of its transactions from the other banks. It may have permissible, legitimate transactions, but we do not know this except in the form where the least that can be said is that scholars have differed on it since ancient times.