Loans & Services from Islamic Banks - Are they Truly Halal?
  • Question:

    Are loans and services from Islamic banks truly halal?

    Assalamu Alaikum wa rahmatullahi wa Barakatuh

    Thank you for your question.

    There are numerous Islamic financial institutions that are based on Islamically acceptable principles such as Murābaḥah (profit based sales) and Mudhārabah (profit sharing partnership) etc. Many are also supervised by third party scholarly committees who thoroughly review and approve guidelines, contracts and service stipulations.

    It is also noteworthy to mention that there are bad apples in every industry or sector of business and trade. There are various banking institutions that operate on the same principles of conventional ribā 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 Allāh has permitted trade and has forbidden usury. Allāh will deprive usury of all blessing, and will give increase for deeds of charity, for he does not love any ungrateful sinner" (Qur'ān 2: 275, 276)

    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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