Banking | Islamic Laws by The Leader Ayatullah Ali Khamenei
Q1896. Is it incumbent on the person who borrows money from the banks to ask the permission of authorized religious authority, or his agent when the bank demands payment of riba? And is it permissible to borrow without any pressing need?
A: In essence, borrowing, even if it is from a state bank, does not require the permission of an authorized religious authority. As to loan contracts per se, they are valid, even riba-based. However, if riba-based, as a matter of religious duty it is Haram to embark on them, irrespective of whether you get it from a Muslim or a non-Muslim, an Islamic state or a non-Islamic state. The only leeway is circumstances of extreme necessity where committing a sin can be tolerated. No Haram borrowing can become Halal with the permission of an authorized religious authority. Indeed, there is no case for permitting it. However, in this case there could be room for doing away with the Haram aspect, i.e. by not intending to pay the extra amount, albeit the borrower may know that the bank is going to charge him anyway. The permissibility of a riba-free loan does not hinge on the circumstances of necessity and need.
Q1897. The housing bank in the Islamic Republic grants loans to people to buy, build, or refurbish their own property. Having bought the property or refurbished it, the bank retrieves the loan from the borrower by installments. However, the total sum paid back will be larger than the one that had been granted in the first instance. Is there any legal justification for the payment of the extra amount over and above the amount of the loan?
A: It is known that the banks do not grant the money by way of loan, rather it is in accordance with a valid and shari contract, such as partnership, jualah, rent, or the like. However, there is no harm in these transactions provided that the shari provisions therein are respected.
1898. Some banks grant an increase of 3% to 20% on the money deposited with them. As a means of circumventing the dabbling in riba, is it permissible to treat this increase as a compensation for the depreciation in the purchasing power of the money deposited and thus allowing for inflation?
A: If the profits have been realized as a result of investing the deposited money on behalf of the customer according to a valid and shari contract, they cannot be treated as riba. Without doubt, they are profits made from a shari transaction.
Q1899. What is the ruling in the matter of working in banks that deal with riba, especially if there are no other jobs to do?
A: If the work in the bank is, in any way, related to riba-based transactions, it is not permissible. However, the claim that no other Halal employment by which to earn a living is available is not a valid reason to dabble in Haram business.
Q1900. We bought some property through the housing bank. It was agreed that we repay the money the bank gave us by monthly installments. Is this type of transaction valid as per shar, and did we become the owners of the property?
A: There is no objection to that, should the bank have bought the property for itself, then sold it to you by installments.
Q1901. Under the title of partnership or any other deal, the banks grant loans to interested customers for building houses. The banks charge between 5% and 8% increase [interest] on the amount of loan. What is the ruling on this type of loans, especially with this surcharge?
A: Taking the money from the bank under the title of partnership or any other proper and shari transaction cannot be deemed a loan or borrowing. Nor should the profits made by the bank of these shari transactions be considered riba that is forbidden. There is no objection to taking the money under any of those titles to buy or build property. Nor is there any objection to having the right of possession over the property. However, even if it is deemed a loan with a surcharge, the borrowing contract per se is valid and the borrower can use the money, although the usurious borrowing Haram.
Q1902. Is it permissible to receive the interest paid on money deposited with the banks of non-Islamic countries, irrespective of whether the owners were among the People of the Book or polytheist? Is it permissible to have the right of disposal over such money, regardless of whether or not the depositor made it conditional that he be paid the interest?
A: In the given case, it is permissible to take interest, even if it was with the condition of taking such interest.
Q1903. If some of the shareholders of the bank are Muslim, is it permissible to receive the interest?
A: There is no objection to receiving interest from the shares of non-Muslims. It is not permissible to receive interest from the share of a Muslim. That is, where depositing the money with the bank is with the condition of getting interest.
Q1904. What is the ruling in the matter of taking interest on the money deposited with the banks in Islamic states?
A: It is not permissible if the money is deposited under the title of loan and the payment of interest is stipulated in the transaction or depositing money is based on interest.
Q1905. Where the bank charges interest on the loans it grants, can one circumvent this by, say, buying one thousand bank notes for cash to be repaid by twelve monthly installments with the surcharge, or by buying from the bank twelve bills of exchange, totaling one thousand two hundred, for one thousand in cash provided that the total of these bills be settled in twelve months?
A: Such fallacious transaction which is nothing but a way to escape the dabbling in riba-bearing loan is Haram and invalid.
Q1906. Can the transactions of banks in the Islamic Republic of Iran be deemed sound? What is the ruling in the matter of buying property and other things with money borrowed from banks? What is the view on performing ghusl and prayer in the property? And is it permissible to receive the profits arising from depositing money with these banks?
A: Generally speaking, the transactions carried out by the banks in accordance with the laws passed by the Islamic Consultative Assembly, and sanctioned by the esteemed Council for Safeguarding the Constitution should be all right. Accordingly, they are deemed valid.
The owners of the capital can have any profit arising from investing the capital in accordance with any proper Islamic contract.
Taking a loan from the banks to buy a property or other things should be without a problem provided that it is done in accordance with one of the aforesaid contracts. However, if it took the form of a riba-bearing loan, it is Haram as a matter of a religious duty. Yet, the loan contract is concluded; the borrowed money can be had by the borrower, who should, as a result, have the right to use it and to possess whatever is bought with this money.
Q1907. Is the interest taken by the banks in the Islamic Republic on loans granted to people to buy property or livestock, agriculture etc. Halal?
A: If it were true that the banks grant these amounts for building or buying property or other purposes under the title of loan, there would be no doubt that the paid interest was Haram according to shar. Therefore, the banks would have no right to demand payment of such interest. However, banks give the money, apparently, according to one of a host of shari contracts, such as silent partnership, partnership, jualah, or rent.
For example, one way could be that the bank shares the property as a partner by paying part of the constructing expenditure. The bank then sells its share to the other partner to be paid by the latter by installments within, say, twenty years. Another way could be by renting the property to the other partner for a given period of time and rent. Accordingly, there is no problem in taking the money or paying the mark-up which the bank puts for such a transaction. Thus, such transactions have nothing to do with the loan granting and the interest levied thereof.
Q1908. I obtained a loan to set up a joint venture. I gave half of the amount of the loan to a friend of mine and made it conditional that he would pay all the interest due to the bank. Is what I have done shari?
A: If the granting of the money by the bank was on the understanding that the bank was party to the joint venture, that both the parties were aware of, the recipient has no right to dispose of it in any other avenue, let alone lend it to a third party. The recipient should treat the money as a safe deposit with him to be used in the agreed way. Otherwise, the very money should be returned to the bank.
Q1909. A person procured a sum of money from a bank to fund a silent partnership. However, they did so by presenting forged documents. It was agreed that the money would be returned to the bank, over a certain period of time, plus the surcharge. If the bank was unaware of the false documents, would the money be treated as a loan and the interest paid by the borrower as riba? And what is the view if the bank was aware of the falsification of documents?
A: If the validity of the silent partnership contract depended on the genuineness of the documents that were the basis of the contract, the contract would be null and void. On the assumption that the documents were false, taking receipt of the money from the bank cannot be deemed a proper way of borrowing. Nor is it deemed a silent partnership. It would, instead, be considered a procurement of money by way of illegal transaction. Thus, it should be returned to the bank together with any profits made from trading thereof. This is so if the bank was unaware of the situation. If the bank official was aware of the falsity of the papers, the money obtained should be treated as usurped property.
Q1910. Is it permissible to deposit money with a bank and authorize its officials to invest the same in any shari transaction without demanding a specific share of the profits, but on the understanding that the bank would give the investor his share of the profits every six months?
A: There is no objection to this type of deposit if the money is left with the bank with unrestricted freedom, i.e. even choosing the type of investment and specifying the investors share of the profit on their behalf. Nor is there any objection to taking the profit made by investing the money in a legal transaction. There should also be no problem if the investor was ignorant of the size of their share of the profits at the time of depositing the money.