Loan with Profit from Islamic Bank: Riba?
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Loan with Profit from Islamic Bank: Riba?

Questioner

Salim

Reply Date

Sep 13, 2017

Question

As-salamu `alaykum. I would like to know: In Islamic banks where they say they follow the Islamic rules and regulations but in reality what made me shock is when they give loans, they charge the fixed rate as an interest but the name changes to profit instead of saying interest. Could you, please, explain how I can know that a bank follows the Islamic rules and regulations properly? Thank you.

Mufti

Answer


Loan with Profit from Islamic Bank

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:

Islamic banks don’t give loans with either interest or profit. It’s therefore one’s duty to check whether or not his or dealings with banks are Shari`ah-compliant.


In his response to your question, Prof. Dr. Monzer Kahf, Professor of Islamic Finance and Economics at Qatar Faculty of Islamic Studies, states:

Islamic banks do not give loans; in Islamic finance banks buy goods and assets and sell them to you on credit. They make profit from the difference between the buy and sell prices.

Some Islamic banks in Malaysia give what they call “personal finance”. They use a trick of buy and sell between the customer and the bank and claim it is not riba. This is called either tawarruq or “bay` al`inah”; it is purely riba hidden in the name of sale and profit which is haram.

Allah Almighty knows best.




About Prof. Dr. Monzer Kahf

Professor of Islamic Finance and Economics at Qatar Faculty of Islamic Studies

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