Question on riba / banking

[Sword]

Dear brother Joseph,


As-salam alaykum.


I have been doing a lot of reading on the topic of 'riba' including your article, and I am still kind of confused whether the modern day banking interest equates to the riba mentioned in the Quran. Dear brother, I do not wish to raise any contentions on this matter and only want to get a direct answer from you to a couple of questions that I have as follows:


1) Do you think it is fine to keep amounts of fixed deposits on 'Islamic banks' where they claim that they invest those monies into businesses and in return profits share profits with the depositors on a monthly / yearly basis? Or do you recommend not to do that? I only want to know your personal opinion.


2) If you do not mind dear brother, can you kindly share whether you have any kind of bank account that you use?



Regards.

[Sword]

There was a little mistake on my first question, so I am putting it down again:


1) Do you think it is fine to keep amounts of fixed deposits on 'Islamic banks' where they claim that they invest those monies into businesses and in return they share profits with the depositors on a monthly / yearly basis? Or do you recommend not to do that? I only want to know your personal opinion.

[Joseph Islam]

Dear Sword,

Wa alaikum assalam


In my humble opinion, attempting to apply Quranic principles to a 21st century modern day banking / transaction system steeped in Riba, is most likely going to be a case of best endeavours and not 'perfection', unless one is somehow able to lead an existence wholly devoid of modern transaction methods.

However, it is also imperative to note that the issue of 'Riba' is so grave, that it is the only matter that is stated as 'war' against God and the messenger. No other action attracts such powerful condemnation.

002.278
"O you who believe! Fear God, and give up what remains of your usury (Arabic: baqiya minal-riba), if ye are indeed believers"
 
002.279
"And if you do it not, then be informed of war from God and His Messenger: And if you repent, you shall have your capital sums (Arabic: amwalikum). Deal not unjustly, and you shall not be dealt with unjustly"

Nevertheless, the nature of the contract is important.

If the bank offers a 'fixed' return, it is most likely to be Riba. If the bank is investing your money into what you deem are 'halal / permissible' investments (as best as can be deduced by yourself) and is promising profits with you which are ‘variable’ depending on how well the investment performs, then this is arguably a better position than the former. However, it is also no good promising returns, if the bank is investing into other commodities / businesses which are based on Riba themselves.

Given the modern societies we live in and its reliance on conventional banking and transaction norms, it is very likely that there will be some form of Riba in any given transaction in the modern banking world. However, this does not mean that believers become apathetic. Given the many verses of the Quran and the duty to do the best we can (istata'a') 64:16, we will be judged on the 'extent' to which we seek a better position and are able to remove potential transgressions. Riba undoubtedly, deserves special attention.

As I am sure you are aware, the Quran does provide authority for a creditor to demand their 'capital' sum back. As depositors in a bank, one would be acting as a 'creditor' and thus such a demand may be argued as being not so unreasonable in this case.

Thus if a certain commodity /amount is deposited, and the value of that commodity drops by a certain amount, say inflation, then one 'may' arguably expect to recover the proportion from the interest that is being offered that would cover just the inflationary aspect (or the devaluation of the commodity deposited). However equally, if the commodity deposited is worth more than it was when it was deposited, then one should be prepared to forgo that element of the gain so that the net gain is equal to zero. Hence, this is why I said this is based on best endeavours.

To be completely rid of any potential 'Riba', one would arguably have to curtail making use of the modern banking system altogether (which would be arduous) or at least, if a commodity / funds are deposited, not to receive any interest whatsoever, as even the interest received to cover the 'inflation element' could still be deemed as acquiring funds from non-permissible means. In other words, for the bank to provide any inflationary element, it may have had to invest your funds into other possibly dubious Riba based investments, to acquire a return.

Ultimately, it is what actions you deem is best given your circumstances, with a view to eliminate any transgressions which matters most, and not what others may or may not do.

You respectfully ask:

2) If you do not mind dear brother, can you kindly share whether you have any kind of bank account that you use?

With respect my dear brother, I would prefer not to discuss my personal arrangements / life (whatever that / they may be), but restrict my answer to what I feel is the best position from the Quran. This is ultimately what is most important. I trust that you will respect my prerogative. JZK

Regards,
Joseph



RELATED:

[1] RIBA
http://quransmessage.com/articles/riba%20FM3.htm