Government Provides Conditioned Subsidy for Business
Fatwa No: 396886

Question

asalakum alakumi am from non Islamic country . government is providing subsidy of 35% for unemployed youth to start up new business as financial assistance this amount has not pay to government back. total investment on business is 100 % out 35% is subsidy by govt and other remaining 65% is provided by banks on interest any unemployed youth who want this scheme has to take loan of 65% on interest and 35% will be provided by govt which is free. it is both mandatory 35% and 65% other wise any one is not eligible for this scheme. but loan of 65% can be closed after 3 years it is rule from govt. i am yet unemployed i do not have money so that i can start business of own . this scheme is also for me but loan on interest is haram what to do shall i go for this or reject this scheme kindly guide according to islam

Answer

All perfect praise be to Allah, The Lord of the Worlds. I testify that there is none worthy of worship except Allah, and that Muhammad  sallallaahu  `alayhi  wa  sallam ( may  Allaah exalt his mention ) is His slave and Messenger.

Since the government subsidy is conditional on borrowing with Riba (interest and/or usury) from the bank, then it is not permissible to enter into such transaction unless one is in dire necessity. Dire necessity is when a person reaches the state that if he does not consume what is forbidden, he will die or will nearly die. Allah Says (what means): {…while He has explained in detail to you what He has forbidden you, excepting that to which you are compelled.......} [Quran 6:119]

If one is not compelled by necessity or dire need to engage in Riba, then it is not permissible for him to engage in it. The fact that the government gives a grant to those who borrow money for that investment project does not make it permissible to enter it. There is nothing good in Riba and there is no blessing in it. Allah Says (what means): {Allah destroys interest and gives increase for charities........} [Quran 2:276]

Nonetheless, in regard to such questions, we advise that the question be asked to the European Council for Fatwa and Research (ECFR), or to the Assembly of Muslim Jurists of America (AMJA), and other institutions that are specialized in issuing Fataawa about the affairs of the Muslim communities in western countries because these communities have special conditions and circumstances that may have an effect on the Fatwa, and these institutions are more familiar with them.

Allah knows best.

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