Short Answer: Yes, they are. Why? Because while taking interest is totally haram in Islam, giving interest when you are pressed to is a different thing. If we say to Muslims, “Don’t take a loan on interest,”… the result being, you cannot pursue higher education, then the result will be that Muslims will become oppressed people because others will pursue the education and receive the management positions that allow them to oppress Muslims further. The more accurate statement would be to say it’s makroo, or undesirable. But circumstances might press a person into seeing that in that circumstance it is better to have it than not to have it because to not have it would give you some greater undesirables.
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Dr. Shabir Ally from Let the Quran Speak addresses this question in the video below.
Aisha Khaja: So, Dr. Shabir, we have a range of questions. One came in from Romania. We’ll answer the question that we got from Sweden today.
It’s from someone saying they stopped studying in Sweden because of the fact that they had to take, there is interest bearing student loans.
But then this person goes on to ask, “I’m wondering, isn’t education important for Muslims. Is it really haram for us to take a loan on interest to pursue higher education?”
Dr. Shabir Ally: So, I would answer in brief that no it is not haram to take a student loan on interest to pursue higher education. And it is obviously, if we say it is haram, then there’s a consequence. But we shouldn’t change the ruling because of the consequence.
But I mean, if there’s something clearly haram, then we have to accept the consequences, and just abide by what God has provided us, right?
But the problem here is that the taking of interest is totally haram in the Quran.
And this is viewed as a kind of oppression, like rich people oppressing the poor by lending them money, and then taking the loan back with interest.
So, the interest becomes a burden for the poor people to pay back.
So, the one who’s taking the interest is an oppressor of sorts. And this is what is condemned in the Quran.
And obviously, the oppressor doesn’t have to oppress people by taking interest. They can lend the money for free, for example.
But the one who is acquiring the loan, and has to pay the interest, that is the oppressed person. And actually the Quran comes in the defense of the oppressed people.
Now, if we say to Muslims, “Don’t take a loan on interest,”… the result being, you cannot pursue higher education, then the result will be that Muslims will become oppressed people because others will pursue the education.
They will get the higher paying jobs, and they will have the management positions. They lord it over the others, and so on.
So, the Muslims will be like the underdogs of society. And this cannot be a long-term strategy.
So, it is important then to distinguish between the giving of interest and the taking of interest in a situation like this.
While the taking of interest is absolutely haram and prohibited, and there’s no excuse for taking interest.
And the one who is giving the interest is not doing something that is absolutely haram. It is only haram because it’s a contributing cause.
Or, we should say, more correctly that it’s makroo, undesirable, something to be disliked.
But circumstances might press a person into seeing that in that circumstance it is better to have it than not to have it because to not have it would give you some greater undesirables.
I hope this helps answer your question. Please keep in touch.
(From AboutIslam’s archives)