Question : I cannot understand the fundamental difference when purchasing something between paying in installments and paying on credit with interest. When I purchase any items in installments, I pay a higher amount than the normal price, and this is termed as interest. When I pay on credit, I pay later with interest. So what is the difference?
Answer : The difference is that paying in installments is a purchase made for a specific agreed-upon price, albeit higher, over a set period; whereas buying on credit is a purchase of something for a fixed price, made through an interest-based loan, and as long as the loan is not fully repaid the interest will apply over and above the agreed-upon price. Therefore, paying in installments does not involve Riba as defined by the Sharia and is permissible, and paying on credit does involve Riba and is prohibited.
Question : I want to start a business to sell motorcycles, I will offer the option for the customers to buy in installments over a set period of months, and the total sum received in installments will be more than the cash price. Will the extra amount be considered as usury? What is the case if I allow the deferment of the payment to a later time, similarly for a higher price than the immediate cash price?
Answer : If the contract is based on delaying the payment of the price, even if the total installments amount to more than the cash price, it is valid and it is not considered as usury or interest. In addition, it is permissible to receive the total payment at the end of a designated period.
Question : What is the definition of Riba?
Answer : Riba is every interest that the lender stipulates the borrower to pay in addition to the original amount of the loan, even if it was little or decided after the loan contract took place.
Question : If I deposit an amount in a bank and in return, after some time, I get an amount which is larger than my originally deposited amount, will it be considered Riba/Usury? The value of the money originally deposited may also increase or decrease due to inflation or devaluation.
Answer : Yes, it is considered as Riba, since the permissible loan is when the borrower returns to the lender the same amount, without any conditional interest. There is no effect of the change in the market value of the borrowed amount or inflation in deciding the amount that should be returned back.
The said is true if the bank is owned by Muslims. If it is not, then it is permissible to receive interest from it.
Question : We require a new car, but we cannot afford to pay the whole amount together. There is an alternative way by which we pay in monthly installments, and once all payments are made the ownership of the car is given to us, but the total price paid in the end is more than the price of the car if paid in cash, and the difference is known as interest. Is buying a car in this way permissible?
Answer : It is permissible to buy a car in this way if the price was set and agreed upon at the time of the purchase, even though the total amount of the payments is more than the cash price at the time of the deal.
Question : Is learning and teaching about interest entries in accounting lessons, as a student or teacher, prohibited?
Answer : Such teaching or learning is permissible.
Question : The Company where I am working deducts 10% from my basic salary and puts it in a "Provident Fund". Once I leave or retire, it will give me double the amount deposited. Is it permissible to use such a service?
Answer : If the owners of the company are non-Muslims, then it is permissible to use this service. If they are Muslims, then it is not permissible.
Question : I want to know the Islamic rulings regarding the purchase of treasury bills, whether it is allowed or disallowed in Islam. Treasury bills are when you lend your money to the government and expect an addition (in terms of increase in the amount) at the end of a specified period?
Answer : It is permissible to make use of the treasury bills and one must not intent to make a deal with the government bank but rather intend to make use of this mechanism. When collecting the money, it should be on behalf of the religious ruler i.e. the just Mujtahid.
Question : What are the rulings regarding interest charged on loans to cushion against inflation and loss of value of currency and to cater for this inflation and loss of value?
Answer : It is not permissible to collect interest from private Muslim banks. It is permissible from banks owned by the government in the way explained in the previous question. (I think it needs to be repeated here, as each question is independent). It is also permissible to collect interest from non-Muslims.
In general, conventionally lending money is based on lending a specific numeric value, not the market value of the borrowed amount. This fact is established due to the fact that when paying back loans, the market value is not considered but only the numeric value of the borrowed amount – that was the subject of the loan contract – is considered.
Question : Can you explain your views on riba, in one question you mention it is okay to do business with the non Muslim bank with interest while haram from bank owned by Muslim. In quran it is clearly mentioned riba in any form is haram for Muslim.
Please clarify your position?
Answer : Taking interest from non Muslims is allowed. We can not explain such religious law nor do we know the reason behind it. It could be that non Muslims accept such dealing for themselves as they give and take interests in their dealings without hesitating or seeing anything wrong with such dealings.
Question : I need to buy a house, and there is a company which lends money and charges interest. Can I take a loan from them?
Answer : It is not permissible to take a loan with interest.