Housing Loans from Islamic Banking Institutes
  • Question:

    What is the situation of Islamic banking institutes providing housing loans on Shariah base. I have heard some scholars call it a "back door riba" as they claim that a banking institute cannot survive without a system based on interest. Please advise. JazakAllah khair.

    Assalamu Alaikum wa rahmatullahi wa Barakatuh

    Thank you for your question. May Allah Almighty bless you tremendously for your concern on financial matters.

    There are numerous Islamic financial institutions that are based on Islamically acceptable principles such as Murabhah (profit based sales) and Mudharabah (profit sharing partnership) etc. Many are also supervised by third party scholarly committees who thoroughly review and approve guidelines, contracts and service stipulations. That being said, one cannot make a blanket statement vilifying every Islamic financial institution. It would be helpful if you could be kind enough to provide names of some of the scholars or their written statements regarding what you have heard from them.

    It is also noteworthy to mention that there are bad apples in every industry or sector of business and trade. Yes, there are various banking institutions that operate on the same principles of conventional riba based policies. They merely change the name 'interest' into 'profit'. Services and products of such institutions would certainly be regarded as islamically unacceptable.

    "Those who devour usury will not stand except as stands one whom the Satan by his touch has driven to madness. That is because they say, "trade is like usury", but Allah has permitted trade and has forbidden usury. Allah will deprive usury of all blessing, and will give increase for deeds of charity, for he does not love any ungrateful sinner" (Qur'an 2: 275, 276)

    My advice would be to opt for an Islamic financial institution that is reliable, established, not necessarily to make money, rather to serve the needs of the community. Such an institution should be monitored by well-known sincere Islamic scholars.

    May Allah Almighty make your task easy and bless your transactions with purity and abundance.

    And Allah knows best.

    Answered by Shaykh Yusuf Badat
    Hadith of the Day Imam
    Imam of the Islamic Foundation of Toronto and Director of Mathabah Institute
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