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Fatwa CenterAnswering a misconception about bank interests
Question
salamun alaykum.may Allah bless you.dear sheikh,please i want you to clear this misconception on interest paid by banks on savings account.1.that it is your share of the profit from transacting with your money 2.that it is similar to the incident of three people of cave narrated in hadith where one of them has his money with his employer and the latter transact the money on his behalf and the former was entitled to the profit without his own effort.
Answer
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, sallallaahu ‘alayhi wa sallam, is His Slave and Messenger.
The interests that the Riba-based banks pay originates from lending the depositor's money to the borrowers in return for interest and this is prohibited. Thus the money is not invested according to lawful transactions such as Mudhaarabah (profit-sharing) or Muraabahah (in which one purchases an item and then sells it to the customer by installments with profits after the seller had actually possessed it). Allaah The Almighty has permitted trade and has forbidden interest and denounced those who said trade is like interest and threatened them with a severe punishment saying (what means): {Those who consume interest cannot stand [on the Day of Resurrection] except as one stands who is being beaten by Satan into insanity. That is because they say, "Trade is [just] like interest." But Allaah has permitted trade and has forbidden interest. So whoever has received an admonition from his Lord and desists may have what is past, and his affair rests with Allaah. But whoever returns to [dealing in interest or usury] - those are the companions of the Fire; they will abide eternally therein.}[Quran 2:275]
For more benefit, please refer to Fataawa 85223, 85578 and 121306.
As for what is stated in the story of the (three) people of the cave, it implies no misconception and has nothing to do with Riba for he (the third person of the cave) did not give the laborer the excess in return for delaying giving him his right and both of them did not agree on that. Rather, the laborer left his wages with his employer, refusing to take it; then his employer took care of it, preserved and invested it for him until he returned and he paid it to him. Whether the excess is the right of the worker for it is the increase of his money or it is a donation from the employer, there is nothing wrong at all with that. It was stated in the narration reported by Al-Bukhari: "I invested his wages and I got much property thereby. (Then after some time) he came and I said to him: 'All the camels, cows, sheep and slaves you see are yours."
Accordingly, there is nothing wrong with the permissible investment of money in the Islamic banks or the like and their profits are lawful if they adhere to the Islamic guidelines such as not guaranteeing the capital, agreeing that the profit is a known percentage (of the total profits), and investing the money in lawful business. As for the Riba-based banks, they do not adhere to such guidelines and their interests are prohibited for what we have pointed out.
Allaah Knows best.
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