Islamic Transactions with Conventional Bank: OK?

09 October, 2017
Q As-salamu `alaykum. My question is about banking; if a conventional banking sets up a new Shari`ah banking, can we join/involve with bank? We don't know the sourcing of the capital of a new Shari`ah bank, for example ABC Bank & Shari`ah ABC Bank.

Answer

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:

It is permissible to have transactions with an Islamic branch or window of a conventional bank.


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

It is permissible to have transactions with an Islamic branch or window of a conventional bank. You do not ask the question, “Where did you get your capital?” at all, as this is not any of your business.

Your concern is restricted only to the relationship between you and the bank only and you have no right to interfere in what the bank does with other persons and institutions.

If you are in Malaysia, Singapore or any country which has Islamic banking regulations, the central bank does not allow a conventional bank to have an Islamic branch or window without appropriate accounting and regulations which include having independent accounts for the Islamic transaction, especially if the bank accepts deposits in accordance with the Shari`ah.

If you are in other countries, you need to be sure that the contracts offered are Shari`ah-compliant in reality. 

This is done by being sure that its Shari`ah advisors are of adequate knowledge and reputation. There are conventional banks which offer only financing but do not accept investment deposits in accordance with the Shari`ah.

It is permissible to obtain financing from them because you can take a Shari`ah-compliant finance from anyone. They need separate accounts when they distribute profits to their depositor.

Allah Almighty knows best.

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