Interest Issues
 Bank deposits / Loans / Accounting
Lecture Video series of Shaikh Safder Razi of Al Qaem on Banking

PPT by Moulana S M Rizvi       |     Ques & Answers from Aytullah Sistani website |

URDU LECTURES ON BANKING FIQH

A. Interest on Bank Deposit  (DRAFT )
I. Classification of Banks (for the purpose of banking sharia rules)

The classification is based upon the "shareholding structure" of the bank irrespective of the depositors or management.

A. MUSLIM Bank  (M)
1a. 100% private (MP)
1b.100% government in muslim country (need not be Islamic system)? (MG)
 

Rules of Muslim bank will apply even if the Muslim bank is in a Kafir country?

B. Government Bank -G ( since not an individual, considered as "Majhulul Malik" -unknown owner & hence Marja has authority)

If >10% shares are held by Government rules of Semi Govt. bank will apply .(This is useful in case of pvt. banks in Muslim countries)

Government includes Institutions owned/controlled by government

C. KAFIR Bank (including kafir govt) (K)

Mixed Ownership Banks :-

Mixture of Muslim ( any % ?) & Kafir Bank (M+ K) rules of Muslim bank will apply?

 

Mixture between  Government Bank ( if > 10% ) & Muslim Bank & rules of Semi Gov will apply

 

Mixture between Government bank (<10%) and Muslim bank ( any % ) rules of Muslim bank will apply

Mixture of Kafir government bank with small % of Muslim shareholders KG+ M  Rules of ...?

In case of 'Islamic Banks' keeping money & taking profit or taking money & giving Profit is ok irrespective of the type/rules of these Islamic banks.

If the % of Muslim and/or Government is not known do ehtiyat ?
A. Issue of Keeping DEPOSIT & taking interest

Placing money in ANY bank is not a problem at all. The issue is of the 'additional ' amount received on the amount kept in the bank. Principal amount remains unaffected & can be withdrawn despite being deposited in mg,mm,km banks & getting mixed with other money

NIYAT Intention definition ( check)

i Ayatullah Seestanis  The niyat should strictly be for safekeeping or other than to receive interest.(in book of agha sistani the  masala of condition is this ;while depositing the amount one should not put the condition of interest)
 ii Ayatollah Khoie  The initial niyat should be that interest will not be demanded if not given, for all types of banks. However one can even sign any document with any clause.)

RULINGS

*For Muslim Private bank  :-It is ok to receive & keep full interest, presuming that the muslims will be agreeable for such use.
*For Kafir bank : It is ok to receive & keep full interest.

*For Govt bank (whihc is not kafir)(Majhool ul Malik), mm & km banks
Permission has to be taken from Marja/Vakil (general permission given already) AND 50% of interest amount received is to be given as sadqa. (will be determined by live mujtahid.After passing away of Agha khoie his fatwa of 50 % is'nt applicable)
General permission can be taken or may be required every time if mujtahid wants he can give general permission valid till his death

All these rulings including 50% is not applicable after passing away of Ayat Khoie.?
Other marjas ruling if less than 50 % cannot be used by mukallid of ayat khoie?
 

In case of mixed ownership banks, the proportionate amount of interest earned X the % of Muslim Government shareholding will be subject to 50% sadqa

B. Issue of taking Loan from Bank

Interest cannot be paid but the payment of the additional amount ( interest)  demanded is to keep ones status / respect in society as one is forced to pay legally.

 

Govt. bank: Loan is to be taken with intention of majhool-ul-malik.( unknown owner)  Ayatullah Sistani has given this general permission. & there is no harm in giving back extra mount over principal also (??. Dar asal aap loan wapis nahi de rahe. Kaikin agar govt. me loan ki niyyat ki to haraam hoga.)(Urdu 2)

 

Non muslim Bank: The Intention of taking money ( loan) from a Non Muslim bank is since the money is of Kafir is "not mohtaram' it can be taken &used .‘Istinqaz’  ,whether it is private or Government. (Urdu 2)

 

 (?Us mai bhi loan ki niyyat se lena haraam hai. Laikin wo non muslim jis ka maal mohtaram nahi hai is se loan ko laina jaiz hai laikin loan ki niyyat se nahi balke ‘Istinqaz’ ki niyyat se yani iska maal laine ki niyyat se kyunke is ka maal mohtaram nahi hai is liye laina jaez hai but not as a loan. Agha seestani ke lihaaz se chahe pvt. ya non muslim govt. ka bank ho.)

 

Agha Khoei ke lihaaz se non muslim ka ye masala hai. Laikin govt. non muslim = govt. bank.

 

Pvt. bank: (i.e. Muslim Pvt. bank)  There is no way to take a loan with interest Its haraam

But if someone has taken it with intent of loan then the interest is haram but the amount borrowed is halal.

 

But if Muslim Private bank has some share of Goverment ( non muslims ?)  ke koi idare ka ho to use hum govt bank maan sakte hai  
Muslim Govt - definition ? 

 

Click here for Bank classification issue

 

 

 

 

Some Selected Q&A on this topic From Ayatullah Sistani website
http://sistani.org/index.php?p=616687&id=1132  BANKING questions

Question :

If a Muslim tries to get from the bank’s cash dispensing machine some of his own money and more money than what he had asked for is dispensed, is he allowed to take the extra money without the bank knowing about it?

Answer :

It is not allowed.1

Question :

n the West, it is possible for a person to open a variety of current accounts with high or low interest rates equally without any difficulty in both the cases. Is it permissible to open accounts with high interest rate with the understanding that the person will not demand the interest, if the bank denies it to him?
If it is not permissible, is there a solution that would allow them to open such an account knowing well that they, in their heart, are seeking the best interest?

Answer :

They are allowed to open the account in the bank and it is [also] permissible for them to deposit in it with the condition of earning the interest, if the bank is financed by non-Muslim governments or people.2

Question :

Banks in the West give loans —known as mortgage— to those who do not have enough money to buy houses; this is to be paid back in [weekly or monthly] instalments with a high rate of interest. Is a Muslim allowed to use this facility? If it is not permissible, is there a solution in your view for someone who claims that he needs the mortgage to buy his own residential house and does not possess enough money to pay for it?

Answer :

It is permissible to take the money from the bank that is financed by non-Muslim government or private funds but not with the intention of loan. The knowledge that the bank will sooner or later force him to pay the capital as well as the interest does not affect [the lawfulness of] his taking the money.3

Question :

Some trading and manufacturing companies get loans from private or state banks in Muslim countries and also from other [non-Muslim] institutions with the condition of interest; and they also earn interest on the deposits they leave in those banks. Are we allowed to buy shares from these companies or be partners in their ventures?

Answer :

If the partnership with them is like participating in their interest-bearing activities, it is not allowed. However, if Muslims own the company and it receives interest from the banks of non-Muslims, there is no problem [in buying its shares or partnership] from this perspective.4

Question :

Some governments and some companies in non-Muslim as well as Muslim, countries deposit the salaries of their employees directly into their accounts in the banks. The employee does not get the money in his hand, although he can withdraw it whenever he wants. Now, if the statement of his account shows that the money has surpassed his annual expenses, is khums obligatory on it?

Answer :

Khums is obligatory in what has surpassed his annual needs, except in the case of a government employee in a Muslim state that deposits his salary into a state or private bank. In the latter case, khums would not be obligatory on the salary that has been deposited in the bank until he [physically] takes possession of it with the permission of the mujtahid* Then the salary will be included in his income of that year and khums will become obligatory on what is in excess to that year’s expenses.5

Question :

Is it permissible to take bank prizes? Are they halal?

Answer :

If the bank embarks on such a process without imposing a condition on its customer when they deposit their money with it, rather encouraging them to increase their deposit and attract others to join in, it is permissible. It is also permissible for the person who wins a prize to accept it - as majhoulil malik - after getting the permission of the Marji', as a matter of ihtiyat. That is, if the bank was state owned or of joint ownership, he has the right of disposal over it after consulting the Marji'. If the bank, however, is owned by a private party, it is not necessary to obtain the permission of the Marji' to accept the prize and have the right of disposal over its money.
However, if the bank carries out such a free draw and gives the prize in fulfilment of a condition imposed by its customers in the loan contract or the like, it is not permissible to do so. It is not permissible, too, for the winner of the prize to accept it in fulfilment of the condition. It is permissible to accept it without the condition.6

Question :

Is it permissible to “shop around” for the bank or account, which offers us the best return rate on our money (Interest)?

Answer :

It is permissible in a non-Muslim country.7

Question :

What is your definition of Interest or as the Qur`an calls it, Riba (usury)? Does this term apply to all forms of profit, which are given/taken including banks and other institutions, or is there merely given as a “cost of living increase” and “inflation”? Can the Qur`anic definition of Riba be applied today to the Western banking structure?

Answer :

ll instances are considered Riba. However, taking interest from non-Muslim banks is permissible.8

Question :

Is it allowed to invest money in foreign banks?

Answer :

It is permissible.9

Interest Questions :

http://sistani.org/index.php?p=616687&id=1220

Question :

Is it permitted to pay interest to non-Muslims and also take interest from them?

Answer :

Giving interest to a non-Muslim in a deal that is based on interest is impermissible and receiving it (interest) is permissible and there is no objection in it.1

Question :

a) Is it permissible to deposit or borrow money from Muslim banks whereby the interest is either received or paid out?
b) Is the law of interest in borrowing/depositing similar with Muslim /non-Muslim banks?

Answer :

a): It is permissible to deposit money in a bank without prior condition for interest and it is as well permissible to take interest, if the bank in which money is deposited belongs to Muslims. If it belongs to government, it is permissible to take interest provided that half of the interest is given away to poor people (momeneen of them).

It is not permissible to take a loan from a national bank (bank owned by muslims) with interest. But if the bank is owned by government it is permissible to take loan with interest provided that taking loan should be with the intention of securing a property whose owner is unknown. Having taken the loan he considers it as a loan given to him on behalf of a Hakim Shara' (Islamic judge). Grand Ayatollah Seestani has permitted this.

b): Answered above.2

Question :

Is it permissible to receive interest from a non-Muslim bank? What about taking loan with interest, is it permissible?

Answer :

It is absolutely permissible to take interest from a non-Muslim bank. Even making a condition for obtaining interest is permissible. Taking a loan with an interest is not permissible unless one takes it with the intention of securing the money after which he considers it as loan given to him on behalf of Hakim Shar’a (Mujtahed).3

Question :

If I know that the bank will give me interest even without stipulating the conditions, is it permissible for me to deposit in a savings account that takes the form of a term-deposit?

Answer :

Yes, it is permissible, as long as you do not stipulate the conditions of interest.5

Question :

Is it permissible to take interest from unbelievers, especially for those who live in their countries?

Answer :

Yes, apparently one is allowed to take interest from the unbelievers whose property is not honored.6

Question :

Yes, apparently one is allowed to take interest from the unbelievers whose property is not honored.

Answer :

Taking mortgage with interest is not permissible but you can take the money of the unbelievers with the intention of securing the money (from their hands). Then, if you did not spend the money throughout a year, khums (1/5) would become obligatory and it would no longer be dealt with as loan.7

Question :

Can I take an urgent loan from a non-Muslim bank, even if I know that the bank will charge interest?

Answer :

If a Muslim intends to get a loan from such banks, it is necessary that he should do so with the intention that it is a transaction without return, even if he knows that he will end up paying the capital as well as the interest. And he should not do so with the intention of getting the loan with the condition of [paying] interest.

 

Question :

Is it permissible to work in a bank?

Answer :

If your job does not have anything to do with interest, there is no problem in it.

Question : Sir, during his job, an accountant has to deal with different types of interest transactions. However, an accountant has nothing to do with that interest (neither he takes interest nor he gives it), rather his duty is merely to record these transactions and keep a record of that. Moreover, he personally thinks that this is a bad act (giving and taking interest) and that it should not be practiced but he has to do so as this is an integral part of his job. What is your kind opinion in this regard? Is it allowed or not?

A: (016) If he [i.e. the accountant] is able to refrain from recording these transactions then there is no objection, otherwise it is not allowed.
 

Given below is a Q& A from site   http://www.sistani.org/html/eng/menu/4/?lang=eng&view=d&code=62&page=1 can u pl clarify since hardly any one will be able to work as an accountant as most companies' accounts involve recording of interest.

Question : Sir, during his job, an accountant has to deal with different types of interest transactions. However, an accountant has nothing to do with that interest (neither he takes interest nor he gives it), rather his duty is merely to record these transactions and keep a record of that. Moreover, he personally thinks that this is a bad act (giving and taking interest) and that it should not be practiced but he has to do so as this is an integral part of his job. What is your kind opinion in this regard? Is it allowed or not?

Answer : Given the supposition made in your question, the job is not permissible because it involves keeping, recording and dealing with interest based transactions.

 

From Islamic Law book

  1. It is permissible to deposit [money] in non-Muslim (private or state-owned) Banks.
  2. If a Muslim intends to get a loan from such Banks, it is necessary that he should do so with the intention that it is a transaction without return, even if he knows that he will end up paying the capital as well as the interest. And he should not do so with the intention of getting the loan with the condition of [paying] interest. 
Rule 2088. 
A father and his child, and a wife and husband can take interest from one another. Similarly, a Muslim can take interest from a disbeliever (kāfir) who is not under the protection of Islam. However, an interest based transaction with a disbeliever who is under the protection of Islam is unlawful. Of course, after the transaction has taken place, one can take more from him if giving interest is permitted in his religion.

Ruling: 2302

Giving Interest (ribā), just like taking Interest, is unlawful, but the loan itself is valid. Someone who takes a usurious loan becomes the owner of it but the lender does not become the owner of the extra that he takes, and any use he makes of it is unlawful. Furthermore, if the lender purchases something with the same item [i.e. the extra item he received in the usurious loan], he does not become the owner of it. And in the event that had he not made an agreement of usury, the borrower would have consented for the lender to use the money, then his use of it is permitted (jāʾiz). Similarly, if due to not knowing the ruling (masʾalah) the lender takes Interest and after finding out the ruling he repents, then what he took when he did not know the ruling is lawful (ḥalāl) for him.
 
      BANK CLASSIFICATION   Muslim Non Muslim Govt    
              M  N    G     
  muslim country                  
                         
1% Govt   51% Govt   0% Govt   No Info Govt * Iranian Bank or
75% Muslim   40% Muslim   75% Muslim   Muslim   islamic bank
24% Non Muslim   23% Non Muslim   25% Non Muslim   Non Muslim    
                         
                         
  Non Muslim country                
                         
1% Govt   1% Govt   0% Govt   No Info Govt   Iranian Bank
24% Muslim   24% Muslim   2% Muslim   Muslim    
75% Non Muslim   75% Non Muslim   98% Non Muslim   Non Muslim    
                         
*if Ehtemal of Govt shares ?                    
                         
  FOR                      
  Taking Loans                      
                         
  Keeping Deposit                    

 

 

 

Draft Notes

TYPES OF BANK AND THEIR EFFECT IN FIQH
According to Ayt. Khui

1 ) Kafir Bank : If the bank is run by kafir or non muslim individuals it is called Kafir bank and we can take loan with niyyat of Istenqaz (taking maal of kaafir when he is giving). Depositing money Is allowed even with the niyyat of earning interest.


2 ) Muslim Bank : If the Bank is run by only muslims individuals it is called Muslim bank and taking loan from this bank is not allowed. As far as Deposit is concerned according to Ayt. Khui one can deposit the money with the niyyat that if interest is not paid he will not demand it. In this case whatever profit he gets from bank he
can keep full amount of it


3 ) Kafir bank; Muslim Mix : If the bank is run by both muslim and kafir individuals, in this bank both the above parties are involved so both have partnership on each rupee of bank so can not take cash loan from it. but one can deposit money in it with the niyyat of not earning interest and can use full profit from it.


4 ) Govt Bank : this is bank run by Govt and any other bank in which Govt shares even 1 % share is there then it will come under Govt bank category so in this group all govt bank and semi govt bank are included. This has further classification as below.


Govt bank Classification as per Ayt. Khui
Muslim / Kafir Govt bank : if Govt opens bank in the country it will come under the rule of Majhulul Malik it means person can take loan from it with the intention that hakim e sharayee has allowed to take loan and pay the interest to avoid any problem against him by the bank. At the same time one can deposit money in it and what ever profit (interest) he gets he has to give 50% as sadqa to poors.
If Govt Opens bank in Country or any area of that country where most of the depositors are kafirs then it comes under ruling of kafir bank so can take loan with the intention of istenqaz and if majority depositors are muslims it will come under the rule of Mahjhulul Malik. For example if Pakistan govt opens bank in U.K in the area where majority depositors are non muslim then here this bank will fall under category of Kaafir Bank and rules will be applicable of kaafir bank as previously mentioned & vice versa.
In short the effect of bank depositors is important in case of govt. bank.
 

5) Muslim + kaafir + govt : if all these three parties are involved like Muslim &amp; Kaafir individuals &amp; govt then this bank will fall under category of Govt. bank &amp;rules will be applied accordingly.

TYPES OF BANK AND THEIR EFFECT IN FIQH
According to Ayt. Seestani

1 ) Kafir Bank : If the bank is run by kafir or non muslim individuals it is called Kafir bank and we can take loan with niyyat of Istenqaz (taking maal of kaafir when he
is giving). Depositing money Is allowed even with the niyyat of earning interest.
2 ) Muslim Bank : If the Bank is run by only muslims individuals it is called Muslim bank and taking cash loan is not allowed. As far as Deposit is concerned according
to Ayt. Sistani one can keep money in muslim bank only to safe guard it and then what ever profit he gets he can use the full amount of it but initial niyyat should
be to safe guard money or any other niyyaat other then interest earning.
3)Muslim &amp; Kaafir Pvt Bank : if the bank is open by muslim and kaafir individuals then it is not possible to take loan from it but one can deposit the money in it
with the intention of not earning interest can keep full profit of it.
4 ) Kaafir Govt Bank : if the bank is run by kaafir Govt it will be treated like Kaafir bank and rules of kaafir bank as mentioned above will be applicable.

4) Muslim Govt bank : if the bank is run by muslim govt 100%, no other partners are involved then it will fall under rules of govt bank so with the intention of
majhulul maalik one can take loan and he can keep 50% profit of his deposits in this type of bank.
5) New Rule : wherever there is partnership of Muslim individual in any type of bank let it be private bank or govt bank then taking cash loan from these banks is
not possible as per ayt. Seestani.
As far as deposit is concerned one can deposit money in this type of bank and what ever profit he gets he has to give sadqa as 50% of the govt share. Let us say
bank X has 30% govt. share and rest muslim individuals &amp; kafir individuals then whatever profit he gets he has to pay 50% of that 30% of govt share.. in other
words he has to pay 15% of total profit he gets as sadqa.
And if he is not sure of percentage of share, then he can do ehtiyaat.

 

C. Accounting For Interest

It has not been possible to resolve this matter re Permissibility of ' Accounting for interest ' ( Paid or recd) by a Accountant.
There is a person who makes voucher & passes the accounting entry in the computer & there is a person who authorizes or supervises this transaction Please help in completing this chart .This has serious implications for all momin accountants

Permissibility of Accounting for Interest by a Momin Accountant :-

Co./Employer

 

 
Shia (knowing fiqh)
Muslim
Non Muslim
Interest Paid to Lending Bank

 

Muslim Non Muslim Unknown
ok ok ok
     
     
interest Received from Deposit Bank

 

Muslim Non Muslim Unknown
ok ok ok
     
     

Notes
In case of Govt. Bank in Muslim country - treat as Muslim bank
In case of Govt. Bank in Non Muslim country - treat as Non Muslim bank irrespective of Muslim sharholding
In case Shareholding even > 1 % of Muslim treat as Muslim ?