Definition of Interest
Question :

What is the definition of Riba?

Answer :

Riba is the interest that the lender stipulates the borrower to pay in addition to the original amount of the loan, even if it is a small amount or decided after the loan contract took place.

Paying in Installments and Paying with Interest
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 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.

Getting Interests from Banks
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?

Answer :

Yes, it is considered as Riba and thus prohibited, since the permissible loan is when the borrower returns to the lender the same amount, without any stipulated interest. This applies if the bank is owned by Muslims. If it is not, then it is permissible to receive interest from it.

Purchasing in Installments
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, while we take possession of the car, 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.

Learning and Teaching Interest
Question :

Is learning and teaching about interest entries in accounting lessons, as a student or teacher, prohibited?

Answer :

Such teaching or learning is permissible.

Provident Fund
Question :

The company I am working in is providing the service of "Provident Fund". As per company policy it deducts 10% from my basic salary. When I retire, it will give back double the amount. Is it permissible to sign up for this?

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.

Treasury Bills
Question :

What is the Islamic ruling on treasury bills?
Treasury bills are given when you lend money to the government and expect it to be returned with interest at the end of a specified period.

Answer :

It is permissible to make use of the treasury bills, and one must not intend to make a deal with the government, 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 Marja.

Interest Charged on Loans
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 :

Conventionally, lending is based on a specific numerical value of a currency, not the market rate of that value. For example, if $100 is borrowed, $100 is to be returned, despite any increase or decrease of the value of the dollar or any inflation. Therefore, any interest charge on a loan to cushion against inflation and loss of value is regarded as interest and the rulings pertaining to interest applies.
It is not permissible to take interest from private Muslim banks. It is permissible from banks owned by the government, but one must not intend to have a contractual relationship, and when the interest money is received, one should receive it on behalf of the Marjia. It is also permissible to receive interest from non-Muslim banks.

Taking Interst from Non-Muslims
Question :

You mentioned that it is permissible to take interest from non-Muslim banks, while it is not permissible to do so with Muslim banks. On the other hand, interest is forbidden in the Quran absolutely. How can this be explained?

Answer :

Almighty Allah has made it prohibited to deal with interest in general, but the traditions of the Prophet and the Ahlulbait (peace be upon them all) can explain certain exemptions to this general ruling. It has been reported in these narrations that there is no prohibition in dealing with interest between a husband and his wife and between a father and his son, and it is permissible to take interest from non-Muslims.
The real reason behind such rulings have not been explained in the narrations. The wisdom behind the latter exception could be that non-Muslims accept such dealings for themselves, as they give and take interest in their dealings without hesitation or seeing anything wrong with it.

Buying a House
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.

Interest
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.

Car on Lease
Question :

Is it permitted by Islam to have a car on lease from a bank in a Muslim country? We pay in monthly installments for several years, and end up paying more than the original price of the car if we were to pay it in cash. At the end of this process, we are given ownership of the car. Is this considered to be interest and is it allowed in Islam?

Answer :

The said deal is permissible. It does not involve interest.