A: Before addressing this pertinent issue, it is of paramount importance for us to understand the Islamic way of earning wealth as opposed to the way wealth is earned through the riba based systems of the bank. We hope that through a comparative study between the two and through closely examining how banks operate, one will be in a better position to judge the status of the wealth and benefits acquired through the bank in the light of Shari’ah.
In Islam the permissible and legitimate way of earning a halaal livelihood is through Islamic trade and commerce (dealings sanctioned by Shariah). Allah Ta'ala states:
وأحل الله البيع وحرم الربوا
Allah Ta'ala has permitted trade (as a means of livelihood) and condemned interest dealings
In this verse of the Holy Quraan, Allah Ta’ala draws our attention towards the underlying principle that governs the earning of halaal and haraam. Allah Ta’ala has sanctioned the profit earned through a business transaction as halaal and declared the wealth earned through riba (interest dealings) as haraam. Halaal wealth in the eyes of Shariah is that wealth which is acquired through effecting a business transaction. The transaction is effected between the purchaser and the seller through a proposal and acceptance. The outcome is that both parties acquire ownership of the respective commodities by means of the sale. Thus in the Islamic way of earning wealth, the commodity has been used as the essential means of acquiring profit. Apart from this we observe that in a business transaction both parties gain monetarily and are satisfied mentally. Each party is given an equal chance to deal freely and to profit according to his personal choice.
On the other hand, opposed to the halaal system of acquiring wealth (which is effected through a business transaction) is wealth acquired through riba (interest dealings). In an interest deal, one party gains while the other stands to lose. The transaction is effected by one party giving a loan to the other with the precondition that at the time of repaying the loan, the latter pays extra, either in cash or kind. This inhumane system was in vogue in the pre-Islamic era. However with the advent of Islam, all inhumane and barbaric practices and customs were abolished. It was in this regard that Allah Ta’ala revealed the following verse of the Holy Quraan.
يَأَيُّهَا الَّذِينَ آمَنُوا لَا تَأْكُلُوا الرِّبَوا أَضْعَافًا مُّضَعَفَةً وَاتَّقُوا اللَّـهَ لَعَلَّكُمْ تُفْلِحُونَ ﴿آل عمران: ١٣٠﴾
O you who believe, do not consume interest multiplied manifold and fear Allah so that you may be successful.
Now consider the riba system of conventional banks and other such institutions in contrast to the Islamic system. One will find that the riba system diametrically opposes the principles of Islam. The conventional banks operate through accepting wealth from the people and loaning it to others on interest. Hence, the primary medium utilized by the conventional banks in reaching the goal is not a commodity which is sold for profit, as is the case in the Islamic system, rather it is dealing in money in exchange of money with interest.
Income of the bank
The bank has many sources of income. Apart from the deposits of depositors, the income of the bank can be essentially distributed into three types:
- Interest that is generated through financing, such as home loans, vehicle financing, import/export financing, asset (equipment) financing, etc.
- Companies wherein the bank invests on interest.
- Income acquired through bank charges .
From all these various sources of income, the main sources of income of banks are the first and second source i.e. interest that is generated through financing activities and interest bearing investments of the bank. Hence, the major income of the bank is earned from haraam. As far as depositing one’s money in the bank is concerned the ulama explain that if one does so with the intention of gaining the returns the bank distributes among its depositors it will be totally impermissible. However if one deposits the money in the bank with the intention of safekeeping and making payments through the bank without benefitting in any way from the bank’s interest it will be permissible. The reason for the ulama allowing one to keep one’s money in the bank is that in current times it is not possible for businesses to run without dealing with the banks (securing one’s money in the bank, making payments etc.). Hence, permission has been granted for one to deal with the banks to the point of need.
eBucks – Permissible or not?