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The most downloaded article

The article addresses one of the most debated query in Islamic history asking for the justification of allowing “mark-up” in a deferred sale but not allowing “interest” in loan, i.e., in other words of present context it asks what is the difference in Murabaha Financing (cost plus) and Lending on Interest (principal or loan plus)?

The question in its intelligence is logical and so the criticism, it should be answered realistically that shall win through commonsensical arguments of differentiation and distinction. Essentially, it is a conceptual difficulty deep-rooted in the misunderstanding of Riba, not resolved satisfactorily within “who said what analysis” approach and shall be answered with economic and natural reasoning.

More to the point while answering the question, I have given a logical premise for the definition of “economic activity” and a pragmatic new concept for the classification of “economic activities”.

Onward from July 2008 when this article Murabaha Financing VS Lending on Interest was posted in "My Articles / Downloads" section, it has remained the number one article downloaded each month from the present list of items on my site. In the previous month of August 2010, this article was downloaded 861 times.

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paying intersest on providant fund loan

ASSALAAM O ALAIKUM SIR.THIS IS WAQAS FROM LAHORE PAKISTAN.SIR I AM WORKING IN A GOVRNMENT ORGANIZATION.MOST OF THE TIMES THE ORGANIZATION DOESNT PAY OUR SALARIES ON TIME. SOME OF OUR EMPLOYEES TAKE PROVIDANT FUND LOAN ON SOME PERCENTAGE OF INTEREST.
SIR PLEASE LET ME KNOW OS IT HALAL?

Murabaha Financing VS Lending

I have read the article Murabaha Financing VS Lending on Interest recently. It was a wonderful read. I am happy to know that it is the most downloaded article here. Keep doing the good work for Islam. Thank you.
Microsoft problems

intrest on employees general provident fund

sir ,as a government employee it is compulsury to keep some amount in employees general provident fund after completion of one callender year govt issues a statement that 8%intrest is added in your account on the deposited amount as the intrest will it be treated as ribah .
example to make answer simple
in year 2010 my total subiscription is rs 50000
rate of intrest @10% for 2010 amount is rs 5000
total rs 55000
my total subiscription for year 2011 is rs 50000
total subiscriptiont till year ending 2011 is rs
55000&50000 i;e 105000 AND 8%intrest 113400
my question is i have only deposited 100000 rs government is giving me back addational 13400 rs is this amount ribah[intrest] is it acceptable under islamic laws [sahriah]

Provident fund issue

Please accept my regrets for being late in replying because of some personal reasons, coming to your question now, my understanding says:

If government has taken your money as investment (no matter if this investment is loan based or equity based) and this fact is established in your agreement with the government which means it is not necessary for the government to return you the same amount as it deducted from your salary – it can be MORE in case of loan based investment and can be MORE or LESS in case of equity based investment, the only condition for MORE is that it shall be a real profit i.e., if the government adds 8% to your amount at the end of the year, then this 8% shall be a part of actual legitimate profit that the government makes and that is not Riba, however if this 8% is not coming from legitimate profit then by definition – it is Riba.

The answer to your question can be YES or NO that depends on factors mentioned above; you shall study and find it out in above context.

Buying home with bank vs. Islamic co-op

Assalamu alaikom, there is an Islamic co-op available which provides financing towards the purchase of a home. After examining the cost of the loan after 16 years 10 months, we would be paying $290,000 for a $170,000 loan, which is much higher than the bank. Amongst its terms, the co-op is also entitled to a 10 or 20% percentage of capital gain/ loss if the home were to be sold before the end of the term, and finally there is a $10 proceesing fee charged per month. Please share your thoughts.

Issue of riba, not yet settled

Jazaak Allah
for directing to the ruling (Muslim: Book 10: Hadith 3881).

It will be very kind of you, if you could further clarify #2 and #3.

#2 you mentioned
>if you find a solution/deal confirming to your Islamic beliefs from a conventional bank (most probably that would be similar to one offered by an Islamic Bank, mark-up or profit instead of interest).

SubhanAllah, the deal offered is indeed a conventional mortgage, with interest. My intention was to seek clarification if it is allowed (as it is the only way to purchase a house in this country and infact I save 300 euros, if I switch from renting to mortgage, which I can give in charity)

#3 you mentioned
>firstly the issue of riba not yet settled

Can you throw more light on it please? What issue of riba is not settled? Does it mean a student can take interest based student loan?

I am aware that you are not in a position to issue fatwas. There are diverse (and sometimes, contradicting) fatwas by Imams in relation to permissibility of interest based loans (as last resort) in situations (described in #2 and #3) that a muslim is confused. I sincerely wish to know what a muslim should do in such situations. It will immensely help if you or any knowledgeable readers of your blog can share their thoughts in this regard (with supporting Quran verses or Hadeeth, if possible).

Jazaak Allah

Why riba is not settled issue

Al Salam Alaikoum!

Briefly, I will try to address your points as under:

  1. Islamic Banking and Finance functions on rules defined in the “contract of Sarf” in Fiqh (Islamic Law), these rules practically forbid fixed term loan contracts, only Qard Hasan is allowed which is not time-bound. For example, as per present Islamic Law you are not permitted to ask your friend / colleague in your office to lend you 100 bucks with a promise to return him on the first of next month when you will get your pay, this is not allowed in Islamic Law.
  2. This is not only unrealistic, unnatural and unbelievable position but also it is contradicting with Quran (02:282) since a debt of fixed term (dayn, as described in the verse) can be established either from a loan or deferred payment sale and Quran does not distinguish or specify or exclude any mode of debt, there is also no explicit Shariah evidence exist to verify the Sarf rules based on perceptive interpretation of one hadith. I am not going in details of how this contradiction could come up in the first place when the Quranic command was already there, can’t cover it here but hopefully plan to give my particular point of view in a separate write-up, insha’ALLAH.
  3. My well thought-out concluded position is that Islamically loans with fixed term do have one valid form for contracts even for commercial purposes.
  4. Next comes the issue of interest/riba in such fixed term loan contracts, I have defined riba after all such considerations where the demarcation whether a loan contract contain riba/interest in it or not will be defined by the “forced” factor that is based on reality (mean real course of the contract and the situation of debtor) and not artificial imposition of extra liability.
  5. So I believe that I can enter in to a mortgage contract devised on loan method, the additional amount charged on top of loan whether you call it interest, mark-up, or profit is not prohibited since actual sale is happening first and secondly such additional amount as put-on here are already allowed in Fiqh/Islam in case of deferred payment sale where price is increased.
  6. It is my belief and my sincere arguments therefore I am not confused but yes I agree with you that generally confusion persist due to the tussle between faith and fear.
  7. You are asking what issue of Riba is not settled – the one mentioned above, i.e., loans are not allowed in present Islamic Law. Firstly, loans must be allowed in Islamic Law since the Fiqh position is in conflict with Quran and it must be corrected. Secondly, Riba naturally will have to be redefined after this correction in Islamic Law.
  8. If loan contracts are allowed in Islamic Law and Riba is redefined, only then students’ loan would be possible by law and that loan would certainly have a different form than the present conventional banking loan practices, it means - even then no such form of loan contract i.e., "loan + banking interest" would be allowed islamically, considering the reality and the non-existence of the "forced" conditions would be must in islamic loan forms of the future.

Paying Interest

Assalaam Aalaikum.
A very informative site. One clarification though, is the permissibility of paying interest.

Allah(swt) has forbidden taking riba/interest (2:278, 2:279). However, is there a ruling, which forbids its paying.

For example, if one lives (say in Germany) with family and pays a monthly rent of 700 euros for the house. However if he buys the house, the bank charges 400 euros interest on mortgage, which is 300 euros cheaper. The 300 euros can be used to give charity to poor or can be paid to the bank (as installments) to buy back the house. OR if one wants to study. The university fee is 20000 euros. Either take loan from the bank at 3percent simple interest, to be paid back after 5 years or do not join the university and remain unemployed.

Jazaak Allah

Ruling on Paying of Interest

Al Salam Alaikoum!

I will make three part of your posting to respond accordingly:

#1:
Paying Interest : Since you are asking for a ruling that forbids paying of interest, here is one hadith that clearly answers your question:

Jabir said that Allah's Messenger (may peace be upon him) cursed the accepter of interest and its payer, and one who records it, and the two witnesses, and he said: They are all equal. Reference - Muslim :: Book 10 : Hadith 3881 - Link Here

#2:
Buying house against mortgage : Islam is not only for Islamic Banks but for all muslims, if you find a solution/deal confirming to your Islamic beliefs from a conventional bank (most probably that would be similar to one offered by an Islamic Bank, mark-up or profit instead of interest) then there is no reason why you can’t avail that one. In the contracts of sales, rents, this is quite possible. In my view, the only concern here is the charging of interest on late payments either in the name of interest or fine that Islamic Banks charges and claim to give it to charities which is not justified even for the good work of charity, this can’t be enforced as principle.

#3:
Loans for Education : this is an acute issue, can’t be answered because of two primary reasons, firstly the issue of riba not yet settled and secondly the implementation of Islamic doctrine in whole where education shall become the responsibility of the government.

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