Wa `alaykum as-Salamu wa Rahmatullahi wa Barakatuh.
In the Name of Allah, Most Gracious, Most Merciful.
All praise and thanks are due to Allah, and peace and blessings be upon His Messenger.
In this fatwa:
2- As for the interest money you get from anywhere, you should give it to the need and the poor without waiting for any reward.
In his response to your question, Prof. Dr. Monzer Kahf, Professor of Islamic Finance and Economics at Qatar Faculty of Islamic Studies, states:
Dear brother in Islam, if you live in an area where an Islamic bank is accessible, you should use its facilities to open an account and other services unless it costs you much more than normally charged by other banks.
You cannot use it for any personal things, including payment of taxes or of interest you may have contracted with an interest-based institution.
The reason is that earned interest is not yours and the contract via which you earn interest is not valid from the Shari`ah point of view. This means that it is still owned by the bank that gave it to you. But we do not leave it to the bank because it is interest-ridden (we then would be helping it do more evil).
Allah Almighty knows best.
Editor’s note: This fatwa is from Ask the Scholar’s archive and was originally published at an earlier date.