Saving accounts. RIBA???

Society Religion & Philosophy
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Is it halal or haram to open a saving account. Which gives profit after a chosen time period.???

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Re: Saving accounts. RIBA???

If the under lying basis of a saving account is that of loan then it is completly haram to have any return on such account as excess on any loan is interest ( kul o qarz jarr nafa wa hoa riba)

If the underlying contract is shariah compliant and the bank/financial institution have halal financing income and good shariah monitoring mechansim under a scholar then it is halal.

Wallah o Alllam

3

Re: Saving accounts. RIBA???

ditto............

though the current islamic banking mechanism is not ideal still its meets many of shariah requirement. so one may deposit its amount in islamic banks.

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Re: Saving accounts. RIBA???

im just curious how there can be no interest in businesses running in arabia, or Pakistan or any islamic country for that matter. Im not talkin about savings accounts but rather buying of bonds and then receiving interest on it annually or bi annually. We all know about time value of money, that a dollar today is worth more than a dollar in the future. So , how exactly is it possible for businesses to continue running on profits without the interest element in it?

Maybe they issue non-interest bearing bonds? , in which case, theres still interest hidden in the payment.

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Re: Saving accounts. RIBA???

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6

Peace Mr.Popat

I sort of agree with this and don't agree at the same time. The part I don't agree with is the explanation of the value of currency. This can change without an interest based system. This can vary depending on GDP of a given economy. However, the part I agree with is that Muslim countries (mostly) are not free from Rib'a. When or if they borrow from IMF or World Bank then yes interest has to be paid on it.

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Re: Saving accounts. RIBA???

this is not to challenge your religious believes in any way - and can possibly asked of many other things, not just interest - If God frowns upon interest then how come people and businesses that are very much based on interest accumulation have thrived and prospered for centuries? I mean most forms of what religion calls sin can be seen to leading to physical and mental disturbance of the perpetrator sooner or later. But that has not happened to people and businesses based on interest!

Therefore my theory is that either there is a large scale confusion between interest and super-interest; or I am missing some nuance here?

8

Thank you everyone but all the different n doubtful answers have confused me even more now. I have a lac or 2 lac amount with me, if I open a savings account with this money I will b getting profit on it anually or monthly. Is that profit Riba? May be I can get a clear answer now.
JazakAllah!

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Peace Arusha

High Interest savings accounts are based on Rib'a ... that is what 'interest' means.

The simple rule to rib'a is if you get more in return of the same kind of material because of the 'time' you lent it, or

... it can also mean getting more of an inferior product for a small amount of superior product of the same kind without using money as a medium.

Halal trade profit is buying either bulk and selling smaller amounts with a mark-up or to buy a product in an area where it is abundant and therefore cheap and selling it in an area where it is scarce and hence it's value is higher. Notice ... there is no time element in this.

When you compare the two conditions the halal version requires that you have put some effort in to getting the profit and requires that you know about the nature of the product or service. Also, that there is no confusion in the buying and selling price since it is a contract. Contracts must be firm and must be understood to be binding. Things usually depreciate in value however interest makes you pay more for it in time. The standard of exchange is also important. That is why we have things like the gold index and oil price, because these are standards that everyone understands. In reality even dealing in currency especially between currencies is not really allowed, but we cannot avoid doing that type of rib'a.

Since by putting a value in a bank, which provides you a larger amount due to the time you left it in there, then this value is considered rib'a. Whether you should take it or not is not for us to say. That is purely your choice!

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Re: Saving accounts. RIBA???

while you get 'interest' the interest is less than inflation rate.
so the face value of the money does not matter as much as purchasing power.
you put $100 in savings and at the end of the year its $101, big deal, because of inflation $100 of a year ago needed to be $103 to have the same purchasing power.

how does that factor in this discussion :)

11

^^ Excellent Point by X2... Currency gets devalued almost to half after a decade...

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Re: Saving accounts. RIBA???

^ Well in this discussion ... it is considered a double rib'a. One that the devaluation is affected by inflation rate which is related to interest on a national level and then there is a rib'a of localised interest based on the saving per unit time. Two rib'as don't cancel to make it acceptable.

Some people say that if x or y takes interest so to take it back is monetarily cancelling the effect. This is not an acceptable Islamic argument.

Also, in this discussion we were talking about high interest savings accoutns not just any old account and usually in these the interest 'given' is slightly higher than national devaluation.

Interest (as a concept) can't be supported nor interest in (real terms) ... however in some cases we have no choice ... and that is where we become those covered in the 'dust' of rib'a.

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Re: Saving accounts. RIBA???

i was more looking at your point here

because there is no value..u are actually worse off than you were when you put that money in the savings acct. so since there is no value, how can it be considered ribaa?

now to your next point, right so in that case unless there is no inflation in a country, interest free accts are meaningless because you are still involved in ribaa at a national level.

two ribas dont cancel each other, fine
but eliminating one ribaa does not mean you are now riba free.

now someone may come and say well we cant control ribaa at national level but can eliminate it at personal level..
fine. but it does not make you ribaa free.

so now, if we dont count accts that earn more than inflation rate and just look at those that are less than inflation rate, what does that do. Out of no action or no choice of mine, national inflation is devaluing my savings, and my savings 'interest' rate is less than inflation, so I am not really earning anything.

I am getting impacted by interest whether my acct pays more than inflation, pays less than inflation or pays nothing.

14

You are right and I am in the same position. The only way to be proper about this is to convert all your savings into gold but then you will be charged by the bank for having a vault.

LOL

I don't know what you should do ... Some people argue if it is the way the system works then it is better to forsake on grounds of interest than to make gains on the same grounds ... Allahu'Alim

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Re: Saving accounts. RIBA???

but vault charge is a fee so allowed :D
I can always store your gold for you brotha man, just send it over

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Re: Saving accounts. RIBA???

watching one of moulana Ishaq's videos, he said anything which basically makes money from money is riba. there must be a process, to manufacture something, to sell something etc etc. but he also said that its use is so widespread, we as individuals can bank money, as long as we do not believe in the system. so certainly interest rate chasing is best avoided. he didnt outright allow banking as we know it with a fatwa or anything but just said what can you do but pray and hope

connected to this issue, he also said charging excessive prices for anything is simply haram

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Re: Saving accounts. RIBA???

I think we all need to understand something at a fundamental level. Why the heck would any institution (banks ofcourse here) safeguard your money and provide you with the means to access it and spend it FOR FREE. Why would anyone take that responsibility or risk for free. It doesn't cost us anything to open checking or savings accounts. Its because money in either account is used by the bank to circulate money in the economy. If you truly do not want this then get a locker and pay for the services to the bank. How can we expect the banks to go about safeguarding and keeping our money for us without making a profit on it for their operating expenses. They just share some of the profit with us which is termed interest. Even in checking accounts with no interest you are still getting interest in the form of the services provided with the account i.e. debit cards and checks etc.

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Re: Saving accounts. RIBA???

^ i second that.

People may not wanna call it interest, but really, thats what it is. Interest can be received in many forms, and we also pay interest in many forms.

call apple an orange or peach, the taste of it will keep it an apple.

19

yep, thanks for the reply.

What do you say about mortgages? the amount of monthly payments people make as mortgage also has an element of interest in it. Is it acceptable to buy a house knowing that you're paying interest in ur mortgage?
Thanks.

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I think it's haram but with savings accounts u can usually ask the bank to just not give u any interest, my mum does this.. or I guess the next best thing would be give it to charity, but that still might be haram..