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Taking Loans from Islamic Banks: Allowed?



Reply Date

Feb 21, 2018


As-salamu `alaykum. My question is: some Islamic banks in my country lend personal loans to their customers and they charge fixed percentage as a profit rate. Is it permissible to take these loans and is it permissible to work for these types of banks? These banks give one month advance salary to those who have salary a/c and charge fixed amount as service charge. Is this permissible to pay service charge on advance salary?



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:

1- This kind of transaction is called tawrruq which is impermissible.

2- As for working in an Islamic bank, it is allowed on the condition that you avoid signing such transactions.

Responding to your question, Prof. Dr. Monzer Kahf, Professor of Islamic Finance and Economics at Qatar Faculty of Islamic Studies, stated,

Islamic banks lend people in a way called tawarruq; they buy a commodity from any market, sell it on credit to the customer and then sell it for cash in the market back to give him the cash. They claim that this is permissible.

The OIC (Organization of Islamic Conference) Fiqh Academy said clearly in a decision issued in 2009 that this is unlawful (haram) and pure riba. It is not permissible for any Muslim to take this kind of loan.

It is also wrong for the Islamic bank to do this, but it is not haram to work in an Islamic bank; just do not accept to do this kind of transaction. The same applies to the advance on salary.

Allah Almighty knows best.

Editor’s note: This fatwa is from Ask the Scholar’s archive and was originally published at an earlier date.

About Prof. Dr. Monzer Kahf

Dr. Monzer Kahf is a professor and consultant/trainer on Islamic banking, finance, Zakah, Awqaf, Islamic Inheritance, Islamic estate planning, Islamic family law, and other aspects of Islamic economics, finance, Islamic transactions (Mu'amalat). Dr. Monzer Kahf is currently Professor of Islamic Finance & Economics at the Faculty of Economics and Management, Istanbul Sabahattin Zaim University, Turkey

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