Series of Answers by the Eminent Scholar Ata bin Khalil Abu al-Rashtah, Ameer of Hizb ut-Tahrir, to Questions from the Followers of his Facebook Page "Fiqhi"
To Abd al-Karim Zaid
Question:
Assalamu Alaikum wa Rahmatullahi wa Barakatuh,
Do Islamic banks operate according to Islamic Sharia in Tulkarm and the West Bank districts? Is it permissible to deposit money in them, or are they merely names to cover up riba-based (usurious) activities? How can we be sure of this?
Answer:
Wa Alaikum Assalam wa Rahmatullahi wa Barakatuh,
First: We have previously answered similar questions more than once, on 20/08/2010 and 05/03/2011. I will reiterate for you what is necessary for your question from those answers:
[Contracts in Islam are not complicated or unknown; rather, they are facilitated, known, and clearly explained in Sharia:
- The seller of any commodity must be its owner, then they offer it for sale; the buyer sees it, and if they accept, the contract is concluded; otherwise, the commodity remains with its owner. The invalidity of selling a commodity not owned by its seller is not permissible in Islam. Evidence for this includes:
عَنْ حَكِيمِ بْنِ حِزَامٍ قَالَ: «قُلْتُ: يَا رَسُولَ اللَّهِ يَأْتِينِي الرَّجُلُ يَسْأَلُنِي الْبَيْعَ لَيْسَ عِنْدِي مَا أَبِيعُهُ مِنْهُ، ثُمَّ أَبِيعُهُ مِنْ السُّوقِ»، فَقَالَ: «لَا تَبِعْ مَا لَيْسَ عِنْدَكَ»
"I said: O Messenger of Allah, a man comes to me asking for a sale of what I do not have, then I buy it from the market." He said: "Do not sell what you do not have." (Narrated by Ahmad)
And on the authority of Amr bin Shu'ayb from his father from his grandfather, he said: The Messenger of Allah ﷺ said:
لَا يَحِلُّ سَلَفٌ وَبَيْعٌ، وَلَا شَرْطَانِ فِي بَيْعٍ، وَلَا رِبْحُ مَا لَمْ تَضْمَنْ، وَلَا بَيْعُ مَا لَيْسَ عِنْدَكَ
"A loan and a sale are not lawful, nor are two conditions in one sale, nor is the profit of what is not guaranteed, nor is the sale of what you do not have." (Narrated by Abu Dawud)
- Similarly, if the Khalifah wanted to distribute public property to the people, or to distribute food from state property to them, and everyone knew their share, it is not permissible for anyone to sell their share in advance before receiving it from the state.
This is what the companions of the Messenger of Allah ﷺ practiced:
Malik narrated from Nafi' that Hakim bin Hizam bought food that Umar bin al-Khattab had ordered for the people. Hakim sold the food before taking full possession of it. This reached Umar bin al-Khattab, so he returned it to him and said: "Do not sell food you have bought until you have taken full possession of it."
Malik also narrated that he was informed that coupons (sukuk) were issued to the people in the time of Marwan bin al-Hakam for the food of Al-Jar. People traded those coupons among themselves before taking full possession of the food. Zaid bin Thabit and a man from the companions of the Messenger of Allah ﷺ went to Marwan bin al-Hakam and said: "Do you permit riba (usury) sales, O Marwan?" He said: "I seek refuge in Allah, what is that?" They said: "These coupons that people are trading and then selling before taking full possession of the food." So, Marwan sent the guards to follow them, seize them from the people's hands, and return them to their owners.
- However, institutions have appeared in Muslim lands that circumvent Sharia and call themselves "Islamic," such as the so-called "Islamic" banks. They deal in haram (prohibited) matters, but not in the same riba-based way that other banks do; rather, they follow another prohibited method:
a) If you go to an ordinary bank for a loan, it gives it to you with a specific usurious interest. If you go to a so-called "Islamic" bank and want a loan, it will not give it to you without an increase, because it is a bank—meaning it is not an institution that helps people for the sake of Allah; it wants an increase. But this increase is not explicit as in the ordinary bank because the bank's name is "Islamic"! It does not want to deal in riba, which is prohibited in a way that even the general public knows. Instead, it says to you: "Why do you want the loan?" You say: "To buy a car or a specific commodity... and I do not have the price." It says: "Fine, we will buy it and pay its price in cash, and we will sell it to you in installments with such-and-such increase." The agreement is concluded with you before the bank even buys it. That is, the sale between the bank and you in installments has been concluded, the contract signed, and it has become binding before the bank buys the commodity. Consequently, you are obliged to take it after the bank buys it. This means the sales contract was concluded before the bank owned it. You did not buy it after the bank owned it and offered it to you, allowing you to agree or disagree. Here, you cannot refuse it because it was originally bought for you and not for the bank. This is "selling what one does not possess" (bay' ma la yamlik), which is not permissible in Sharia. However, if the bank had a car showroom that it owned and offered to the people, selling to whoever wanted in installments, the sale would be valid. But the bank is not a merchant in the known sense; it is a bank that wants profit on the money it pays. Instead of taking a usurious increase that does not fit its "Islamic" name, it obtains it—and often more—through an un-Islamic transaction, which is selling what one does not possess, which is prohibited in Islam!
b) They call it Murabaha, but it is not so. Sharia-compliant Murabaha sale means you own the commodity and offer it for sale. The buyer comes and bargains with you on the price, and you say to him: "Give me a profit over what I bought it for, which was such-and-such." He agrees after you show him the price it cost you to buy it and he is satisfied with that. He then pays you this price and the profit upon which you both agreed. As you can see, the commodity is owned by the seller when it is offered to the buyer. It is clear that this is different from how the so-called "Islamic" bank or similar institutions operate.
c) Sometimes they call it a "promise" (wa'd) and not a "sale," which is a fallacy! This is an incorrect statement because a promise or mutual promising is not binding, but in the bank's transaction, it is binding; the agreement is concluded before the bank owns it. Therefore, the man cannot say to the bank, after the bank owns the car, "I do not want to buy." This cannot happen in the bank's transaction because the contract was completed before the purchase; it is binding and not just a promise. As for a promise to sell or buy, it is naturally non-binding.
A promise to buy is non-binding; rather, the contract with offer and acceptance is what is binding. This was completed between the bank and the man before the bank owned the car. What took place between them was a binding sales contract for the man. The sale actually and practically took place between the bank and the man before the bank took possession of the car. The evidence is that when the bank owns the car, the man cannot refuse the purchase. This contradicts the Sharia rulings that explained and clarified sale in Islam.
d) Sometimes they call it a purchase and not a sale, and that the man is an "orderer of purchase" (amir bi-shira), saying to the bank: "Buy me a car..." This is also a fallacious statement because this transaction in this form is an agency (wakalah). That is, the man appointed the bank as an agent to buy him a car for such-and-such amount, in exchange for a specific fee for the bank as a purchasing agent. But what happens is not like this, because the car is registered in the name of the bank; the bank is the one who buys it from the car showroom, and it sells it in installments to the man. It remains registered in the bank's name until the man pays its price called "installments." It is not registered in the man's name with the bank acting as his agent in the purchase for a specific fee. Rather, it is completely something else. It is not an agency from any aspect. If the man were financially capable and wanted to appoint the bank as an agent to buy him a car for such-and-such fee, he would not have resorted to the bank; instead, he would have gone to someone with better expertise in purchasing and a lower fee.
Therefore, what they call a sale in this manner is not permissible.
The conclusion is that this transaction is not permissible according to Sharia.
I liked someone's comment about Islamic banks; he said that ordinary banks attract the money of people who do not mind dealing with riba, so there remain the religious people who do not deal with riba and whose money remains outside ordinary banks. Thus, the so-called "Islamic" banks were the trap for the money of religious people, by these banks exploiting it in a way other than the riba that the general public knows is prohibited. They exploit it through un-Islamic transactions, but it is easy to convince the simple-minded that it is from Sharia by looking for a name for it in Sharia, like Murabaha for example. It is not as clear as riba; rather, many religious people may be ignorant of it and think it is permissible.] End quote.
Second: As for your question about placing money as an entrustment (amanah) with these banks... we answered a similar question on 14/10/2012, and this is its text:
[The "means to the haram is haram" rule applies to every action, whether it is an individual act performed by a person from one side or an act from two parties, i.e., a contract. The difference is that when you yourself perform the means that leads to the haram, you are responsible for this haram. When you are a party to a contract, the haram falls on the party that pursued the means leading to the haram, and if both parties pursued this path, the sin is upon both of them.
Placing your money as an entrustment—that is, a current account without usurious interest—in a bank: if you predominantly think that the bank will use your current account in riba, then it is not permissible for you to place this entrustment ("current account") with the bank. However, banks differentiate between entrustments with usurious interest and current accounts without usurious interest. The former, which is placed with interest, is used in riba without a doubt. As for the current account, it might be used, and it might be from your current account or from someone else's, because the current account is subject to withdrawal at any time the owner wants. Therefore, it is more like placing an entrustment with a fasiq (transgressor). If you are compelled to do that, there is nothing upon you, and the sin is upon him if he uses the entrustment improperly as long as you did not know about that or consent to it. Likewise, if you know the bank uses your current account in riba, then it is not permissible.
Naturally, it is better not to place it in the bank or with a fasiq.
But all of this is if the bank is correctly established, such as being a sole proprietorship, state property, an Islamic company, or a joint-stock company established among its owners... and not a joint-stock company (sharikat musahamah) with a void contract. Otherwise, dealing with it is not permissible in all cases.] End quote.
Your brother, Ata bin Khalil Abu al-Rashtah
01 Muharram 1443 AH Corresponding to 09/08/2021 CE
Link to the answer from the Ameer's page (may Allah protect him) on Facebook
Link to the answer from the Ameer's page (may Allah protect him) on the Web