Fatwa: # 16686
Category: Business Matters
Country: Pakistan
Date: 7th May 2008

Title

Islamic Finance and views of Ulama regarding it

Question

my question is that some Muftis like Mufti Taqi Usmani has said that islamic Banking is JAIZ in islam . Please answer me briefly how it is JAIZ  and in what conditions? Some other Muftis like Mufti Zar Wali Khan said that it is not Jaiz in islam.

Answer

In the name of Allah, Most Gracious, Most Merciful

Assalaamu `alaykum waRahmatullahi Wabarakatuh

Modern economics and business have developed in such a way that most transactions revolve around banks and interest baring transactions. Muslims too had started involving themselves in such transactions. The contemporary Scholars of Islam introduced Islamic Banking as an alternative to conventional banking, in order to prevent Muslims from being involved in interest. They have engineered such mechanisms (heelas) in which the element of usury is not present and the transactions are in accordance to the rules of Shari’ah. However, great care should be taken in following the rules and conditions set by these scholars to avoid getting involved in an interest baring transaction.

There are many Islamic Banks in the world that take great care in following the rules and conditions set by the scholars. However, there are others that do not pay head to these conditions. As a result, there transactions are analogous to the conventional interest baring transactions. The scholars that permit Islamic Banking have based there permission on following the terms and conditions set by the scholars. The others, who say that it is not permissible, do so due to the carelessness many banks have shown in following the terms and conditions.

Therefore, a general ruling cannot be made in regards to Islamic Banking itself; but rulings can only be made regarding the transactions of the banks after studying their contracts and procedures very carefully.

Moreover, Islamic Banking prevalent worldwide is only a Shari’ah compliant version of the conventional financing products present in the world. It should be regarded as a temporary a step towards developing products based on pure Islamic ethics. Islam only permits the usage of heelah (mechanisms) in time of need. The Islamic scholars have considered keeping Muslims away from usury as a need and permitted the usage of heelah in Islamic Banking. Hence, the Muslims should not regard is as the Islamic method and be complacent, but keep striving towards creating products based on Islamic principles and ethics.

And Allah knows best

Wassalam

Ml. Abu Yahya,
Student Darul Iftaa

Checked and Approved by:

Mufti Ebrahim Desai
Darul Iftaa

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