Fatwa No : 181543
Disposing of Riba incurred from a mandatory provident fund
Fatwa Date : Rajab 26, 1433 / 16-6-2012
company's (where i am working) mandatory policy is to cut the 10% of the basic of the employees salary. After at least 25 years of service they return it to the employee with some benefit. Benefit comes to investing in fixed deposits in conventional banks. Is it halal for the employee to take the extra benefit of the Provident fund as the company made his money delayed and the employee has nothing to do? If the option does not exist he can earn more or benefited more? How can we identify an Islamic Bank running according to Shareeah( Inspithe of having Shareeah council or committee, saying that their all transaction are profit sharing based not riba based in their official website, annual report)? Is it it ok for me to take profit fromthis type of islanic bank's savings account or fixed term accounts as it is not possible for the customer get the internal operational details of the bank?
All perfect praise be to Allaah, The Lord of the Worlds. I testify that there is none worthy of worship except Allaah, and that Muhammad is His slave and Messenger.
It is not permissible for the employee to take Riba (interest and/or usury) to benefit himself; rather, he is obliged to get rid of it by giving it to the poor and needy unless he is himself poor or destitute and he needs it, in which case, he should take from it according to his necessity only.
The fact that the company had deducted a portion of his money and invested it in a forbidden manner does not make the Riba – which is a forbidden interest – lawful. Rather, he is entitled only to what was deducted from his salary.
As regards how to ascertain to what extent an Islamic bank abides by the Islamic conditions in its financial dealings, then this can be achieved by looking at its transactions and consulting the scholars who are aware of the reality of the bank the way it really is and asking them about it. Besides, if it has a trustworthy Sharee’ah committee, then one may consult it as well and act according to the Fatwa that it issues about the transactions of the bank.
In any case, there are some Islamic conditions regarding investing in such banks, the most important of which are the following:
1-The bank should take the capital money from its owner and then invests it in buying and selling and in other permissible fields.
2- Both the bank and the owner of the capital money are entitled to a known percentage of the profit for each of them according to the agreement between them, like one-forth, one-third and so forth, and not to a known amount otherwise the transaction becomes a Riba-based one.
3-The capital money should not be guaranteed for its owner; rather, if there is a loss, the owner of the capital money bears it unless there is negligence or transgression on the bank’s part.
Allaah Knows best.