Turaths & Todays: Muamalat Essentials

(Class #5, Summary of the class)

Riba (الربا)

In this session, we will revisit the topic of Riba. Riba is a significant issue in Islamic jurisprudence due to its far-reaching implications in everyday life. It is challenging to avoid Riba entirely, as it is deeply embedded in many aspects of modern financial systems and everyday transactions.

Therefore, a clear and thorough understanding of riba is essential so that we can remain cautious and strive to avoid it in accordance with Shariah principles.

The Prohibition of Riba in the Qur’an Occurred in Four Stages:

1.During the Meccan period:

وَمَا آتَيْتُم مِّن رِّبًا لِّيَرْبُوَ فِي أَمْوَالِ النَّاسِ فَلَا يَرْبُو عِندَ اللَّهِ ۖ وَمَا آتَيْتُم مِّن زَكاةٍ تُرِيدُونَ وَجْهَ اللَّهِ فَأُوْلَٰئِكَ هُمُ الْمُضْعِفُونَ

“Whatever loans you give, only seeking interest at the expense of people’s wealth will not increase with Allah. But whatever charity you give, only seeking the pleasure of Allah, it is they whose reward will be multiplied.”^[1]

• This verse introduces the concept that wealth gained through riba does not increase in the sight of Allah, highlighting its spiritual futility. It does not directly address the ruling on riba, but rather encourages giving in charity.

2. Early Medinan period:

وَأَخْذِهِمُ الرِّبَا وَقَدْ نُهُوا عَنْهُ وَأَكْلِهِمْ أَمْوَالَ النَّاسِ بِالْبَاطِلِ ۚ وَأَعْتَدْنَا لِلْكَافِرِينَ مِنْهُمْ عَذَابًا أَلِيمًا

“Taking interest despite its prohibition, and consuming people’s wealth unjustly. We have prepared for the disbelievers among them a painful punishment.”^[2]

• This verse was revealed in connection with what the Prophet Muhammad ﷺ said regarding the Bani Israil. The Qur’an states that they engaged in usury. Although it was not yet explicitly prohibited, Allah disapproved of such conduct. This verse represents the earliest legal condemnation of the practice of usury.

3. Around the 2nd or 3rd year after Hijrah:

يَا أَيُّهَا الَّذِينَ آمَنُوا لَا تَأْكُلُوا الرِّبَا أَضْعَافًا مُّضَاعَفَةً ۛ وَاتَّقُوا اللَّهَ لَعَلَّكُمْ تُفْلِحُونَ

“O believers! Do not consume interest, multiplying it many times over. And be mindful of Allah, so you may prosper.”^[3]

• Muslims are explicitly warned not to consume riba, especially in multiplied amounts, and are urged to be mindful of Allah.

4. Later Medinan period:

الَّذِينَ يَأْكُلُونَ الرِّبَا لَا يَقُومُونَ إِلَّا كَمَا يَقُومُ الَّذِي يَتَخَبَّطُهُ الشَّيْطَانُ مِنَ الْمَسِّ ۚ ذَٰلِكَ بِأَنَّهُمْ قَالُوا إِنَّمَا الْبَيْعُ مِثْلُ الرِّبَا ۗ وَأَحَلَّ اللَّهُ الْبَيْعَ وَحَرَّمَ الرِّبَا ۚ فَمَنْ جَاءَهُ مَوْعِظَةٌ مِّن رَّبِّهِ فَانتَهَىٰ فَلَهُ مَا سَلَفَ وَأَمْرُهُ إِلَى اللَّهِ ۖ وَمَنْ عَادَ فَأُوْلَٰئِكَ أَصْحَابُ النَّارِ ۖ هُمْ فِيهَا خَالِدُونَ

“Those who consume interest will stand on Judgment Day like those driven to madness by Satan’s touch. That is because they say, “Trade is no different than interest.” But Allah has permitted trading and forbidden interest. Whoever refrains—after having received warning from their Lord—may keep their previous gains, and their case is left to Allah. As for those who persist, it is they who will be the residents of the Fire. They will be there forever.”^[4]

• Provides the most detailed and final prohibition, clearly distinguishing between trade and riba, warning of war from Allah and His Messenger against those who persist, and urging believers to give up any outstanding riba.

Highlighting another verse, subsequent to the previous verse:

فَإِن لَّمْ تَفْعَلُوا۟ فَأْذَنُوا۟ بِحَرْبٍۢ مِّنَ ٱللَّهِ وَرَسُولِهِۦ ۖ وَإِن تُبْتُمْ فَلَكُمْ رُءُوسُ أَمْوَٰلِكُمْ لَا تَظْلِمُونَ وَلَا تُظْلَمُونَ

“If you do not, then beware of a war with Allah and His Messenger! But if you repent, you may retain your principal—neither inflicting nor suffering harm.”^[5]

• This is another important premise. For example, when we purchase a number of shares or stocks without knowing whether they are Shariah-compliant, and it later becomes clear that they are not and involve riba, then we are required to dispose of them. We are only entitled to reclaim the original capital invested. For instance, if we invested £1,000 and the value increases to £1,500, we are permitted to retain only the original £1,000, while the £500 profit must be given to charity. This highlights the need for caution, as this Qur’anic verse draws significant attention to the matter; otherwise, we must be prepared for a declaration of war from Allah and His Messenger.

The Prohibition of Riba in the Sunnah (Hadith)

لَعَنَ رَسُولُ اللَّهِ صَلَّى اللهُ عَلَيْهِ وَسَلَّمَ آكِلَ الرِّبَا وَمُوكِلَهُ وَكَاتِبَهُ وَشَاهِدَيْهِ وَقَالَ: هُمْ سَوَاءٌ (رواه مسلم)

The Messenger of Allah (peace be upon him) cursed the one who consumes riba (usury), the one who pays it, the one who records it, and the two witnesses to it. He said: “They are all the same (in sin).” (Narrated by Muslim).^[6]

عَنْ أَبِي هُرَيْرَةَ رضي الله عنه عن النبي صلى الله عليه وسلّم قَالَ: قَالَ رَسُولُ اللَّهِ صَلَّى اللَّهُ عَلَيْهِ وَسَلَّمَ: “اجْتَنِبُوا السَّبْعَ الْمُوبِقَاتِ”. قَالُوا: يَا رَسُولَ اللَّهِ، وَمَا هُنَّ؟ قَالَ: “الشِّرْكُ بِاللَّهِ، وَالسِّحْرُ، وَقَتْلُ النَّفْسِ الَّتِي حَرَّمَ اللَّهُ إِلَّا بِالْحَقِّ، وَأَكْلُ الرِّبَا، وَأَكْلُ مَالِ الْيَتِيمِ، وَالتَّوَلِّي يَوْمَ الزَّحْفِ، وَقَذْفُ الْمُحْصَنَاتِ الْغَافِلَاتِ الْمُؤْمِنَاتِ” (متفق عليه)

Narrated Abu Hurairah: The Messenger of Allah (peace be upon him) said: “Avoid the seven destructive sins.” They said, “O Messenger of Allah, what are they?” He replied: “Associating others with Allah (shirk), sorcery, killing a soul which Allah has forbidden except in truth, consuming riba (usury), consuming the wealth of orphans, fleeing from the battlefield, and accusing chaste, unsuspecting, believing women of adultery.”^[7]

The “Hikmah” or rationale behind the prohibition of Riba

We often say that we strive to be Mu’min—true believers. However, to truly have Iman in Allah, one must also believe in all the pillars of faith (arkan al-iman), including belief in divine revelation (wahy).

This belief forms the foundation for why we are committed to enjoining what is good (in the form of ibadah) and abstaining from what is prohibited. There are two primary reasons for this adherence:

1. Ta‘abbudiyyah – This refers to the aspect of worship that is based on submission to Allah’s command, even if the wisdom (hikmah) behind it is not fully understood. We obey because we believe in Allah and in His revelation. Through this obedience, we may eventually come to understand the wisdom and lessons behind the laws revealed by Allah.
2. ‘Illah – This refers to the effective cause or reasoning behind a ruling. Scholars of Usul al-Fiqh(principles of Islamic jurisprudence) explore the ‘illah behind specific rulings to perform qiyas (analogical deduction) for matters not explicitly mentioned in the Qur’an or Sunnah. In this case, understanding the ‘illah allows for a rational extension of the ruling to similar situations.

For centuries, there has been an argument about whether a transaction involving riba (usury or interest) is permissible if it is based on mutual agreement and does not harm either party, provided both parties willingly accept the terms.

However, the majority opinion holds that riba is absolutely forbidden (haram), and this prohibition is clearly stated in the Qur’an.

In Islam, goods, the economy, and wealth must be circulated, especially when it comes to trade, services, and the production of goods. There must be benefits to others, meaning the promotion of economic well-being for the community.

On the other hand, modern economic theory, particularly capitalism, views money as a factor of production, essentially treating money as a commodity used to produce more wealth.

In Islam, however, money is not considered a commodity. Instead, it functions as a medium of exchange and a measure of value. Money is used to exchange goods and fulfil needs, so that it can bring real benefits to people. It serves as a tool for transaction and valuation, rather than something to be traded or commodified for profit.

There is a Fiqh principle/legal maxim which states:

“الغُنْمُ بِالغُرْمِ”

The meaning:

The responsibilities and losses that arise from something belong to the person who benefits from it legally (according to Shariah). In other words, whoever gains benefit from something must also bear its associated risks or damages.

In any business venture, one must invest effort, time, and skills to produce something that generates wealth. Money, on its own, cannot compound or grow without such inputs.

In Islam, if one invests money, it is obligatory to withdraw it annually and pay zakat on it. This reflects the Islamic principle of encouraging the circulation of wealth, promoting trade, and ensuring that money continuously moves and grows within the economy.

Some Rationale from the prohibition of Riba:

1) The economic implications of riba on the economy.

• Transfer of wealth without any economic exchange
• Unproductive gain
• Affects equitable business growth negatively

2) The fundamental nature of “money”, “loan”, and
”profit” is to be devoid of Riba.

• Function of money: medium of exchange, unit of account and store of value – not a factor of production
• Loan: An act of selflessness, not an exploitation. Profit: To be gained with real effort and sharing/bearing of risks

Resolution No. 21 (9/3), on Shariah Rulings on Paper Money and the Changing Value of Currency, can be seen in the previous session (Class #3).

Three major scholarly opinions regarding the status of fiat money under Islamic jurisprudence:

1. Fiat money is not Ribawi: According to this view, fiat money does not share the same legal status as gold and silver. Therefore, it is not classified as a ribawi item, and the rulings related to riba (usury) do not apply to it.
2. Fiat Money Inherits the Ruling of Gold and Silver (Majority Opinion):
   Most contemporary scholars maintain that fiat currency functions as a medium of exchange and inherits the rulings of gold and silver. Consequently, it is considered a ribawi item, and all rulings related to riba—including conditions for currency exchange (ṣarf)—fully apply. This view also includes the obligation of Zakat on fiat currency, treated similarly to gold and silver.
3. Fiat money itself is Riba (Minority View): A small group of scholars argues that fiat money is inherently haram (forbidden) and equates it directly with riba. In this view, the process of creating fiat money—primarily through central or commercial banks—is fundamentally ribawi, and the institutions operating on this basis are considered impermissible in Islam.

Historical Background of Islamic Banking

• Islamic banking originated in Mit Ghamr, Egypt, in 1963 with the establishment of Mit Ghamr Savings Bank.
• The Islamic Development Bank in Saudi Arabia was established in 1974.
• Dubai Islamic Bank in Dubai in 1975.
• Kuwait Finance Bank in 1977.
• Bank Islam Malaysia Berhad was established in 1984.

These development validates the possibilities of free-interest banking.

Banking Operations (Conventional)

A person comes to the bank to deposit their money, and the bank gives interest (riba) as a reward for placing the money there. The bank then loans out the funds collected from many customers to individuals, companies, or invests in money market instruments. The bank hopes to recover the money it has loaned, along with interest or returns from these loans and investments. If the individual, company, or investment performs well, the bank receives the expected interest or profit. However, if the performance falls short, the bank has already set aside a provision to cover potential losses.

From all these operations, a significant issue arises — the presence of elements that are not compliant with Shariah, such as riba paid to depositors, and the possibility that loaned funds may be used for prohibited activities like alcohol, gambling, or other non-halal businesses.

Question:

What if we have a credit card, and we use it up to the due date? Is it permissible in Islam?

Answer:

If we use a credit card and pay the full amount before the due date, then no interest is charged. In this case, many scholars consider it permissible because there is no actual riba (interest) involved in the transaction.

However, the issue lies not only in the payment behaviour, but also in the contract (agreement) with the bank. When we agree to use a conventional credit card, we are agreeing to a contract that includes interest charges if we fail to make timely or full payments. This means we are accepting a condition involving riba, even if we don’t intend to let it happen. This element of receiving a riba-based clause is problematic from a Shariah perspective.

In Singapore, there may be no available Islamic (Shariah-compliant) credit cards, so people have no alternative. In such situations, some scholars allow the use of conventional credit cards with strict conditions, such as:

• Always pay the full balance before the due date to avoid interest.
• Avoiding any haram (forbidden) transactions.
• Treating the card as a necessity or using it under the principle of darurah (necessity).

Islamic Banking Operations

1.Deposits and Returns:

• When customers deposit money into an Islamic bank, any return provided is given as a form of hibah (gift).
• The bank cannot promise, guarantee, or state in the contract that it will pay interest or profit.
• If, after several months, the bank does not provide any return, customers cannot legally contest it, because there was no profit guarantee.

2. Savings under Qard Accounts:

• In accounts structured under qard (loan) contracts, depositors do not receive any profit.
• However, they benefit from services such as ATM access, online banking, safe custody, and, in some cases, basic takaful (insurance)

3. How Banks Use Deposited Funds:

• Once Islamic banks receive deposits from individuals or institutions, they do not offer conventional loans.
• Instead, they provide Shariah-compliant financing for various purposes — such as home purchases, business needs, or other asset-based transactions.
• These are structured using Shariah contracts, such as Murabaha (cost-plus sale), Ijara (leasing), or Musharakah (partnership).

4. Profit and Risk Sharing:

• Banks attempt to generate returns from these financing activities, and when they perform well, profits may be distributed to customers as hibah.
• During difficult times, losses are generally borne by the bank, not by depositors — unless the deposit is part of a business venture contract (such as Mudarabah), in which case risk sharing is agreed upon upfront.

How do Islamic banks differ and address the issue in the conventional banking system?

The contracts used in Islamic banking are based on principles that are permissible under Shariah. Each contract comes with its own specific implications and legal consequences. One key feature is that returns are not guaranteed, unlike in conventional banking. This is because Islamic finance is based on the principles of risk-sharing and fairness, rather than fixed interest. Additionally, the business activities or purposes for which financing is provided must be permissible (halal), meaning they cannot involve activities such as alcohol, gambling, or other practices prohibited in Islam.

Deposit Product (Qard or Mudharabah)

Illustration. Mudharabah involves a partnership where the bank acts either as the investor (Shahibul Mal) or as the entrepreneur (Mudharib). In this case, the bank is the Mudharib.

Example:

• A customer (Shahibul Mal) deposits SGD 100,000 into an Islamic bank under a Mudharabah savings/investment account.
• The bank (Mudharib) uses this money to invest in Shariah-compliant business activities, such as halal retail, real estate, or trade financing.
• After 1 year, the investment generates a profit of SGD 50,000.
• Based on an agreed profit-sharing ratio of 60% for the customer and 40% for the bank, the profits are distributed:
  • Customer receives SGD 30,000
  • The bank earns SGD 20,000
• If the investment suffers a loss (not caused by negligence or misconduct), the customer absorbs the capital loss, and the bank incurs the loss of its effort and time.

Financing Product (Pure Sale – Murabahah)

Illustration. In a Murabahah contract, this is considered a normal sale in which both the customer and the seller are aware of the agreed-upon profit margin. It is a form of Bai’ al-Amanah (trust-based sale), where the seller must disclose the original cost and the profit added.

Murabahah is a cost-plus-profit sale. The seller (bank) discloses the cost of the item and adds a known profit margin.

Example:

• A customer wants to buy a laptop worth SGD 2,000.
• The Islamic bank agrees to buy the computer from the supplier
• The bank purchases it at SGD 2,000 (the cost price).
• The bank sells it to the customer for SGD 2,400, payable in 12 monthly instalments of SGD 200.
• The customer agrees because they can’t pay upfront, but they are aware of the profit margin, which is SGD 400.

Key feature: The bank takes ownership and risk temporarily before selling. The profit margin is pre-agreed and disclosed.

Question:
In a Murabahah contract, does the risk lie with the bank? Specifically, in terms of the amount owed to them? For example, if the customer goes bankrupt, is there nothing the bank can do?

When someone takes a loan, they can usually offer something as collateral. This is what our Prophet ﷺ did when he took a loan—he gave his armor as rahn (collateral) to the individual who lent him the money.

For instance, if a borrower provides collateral as security for a loan and later is unable to repay it, the lender can seize and sell the collateral. The proceeds can be used to cover the outstanding debt. However, any excess amount from the sale must be returned to the borrower.

Financing Product (Ijarah)

In Singapore, Maybank offers Islamic higher purchase. So, we can purchase vehicles using this offer.

Illustration. Ijarah is a Shariah-compliant lease agreement, where the lessor (the owner) leases an asset to the lessee (the user) for a fixed period and price, without transferring ownership. The lessee pays rent for the benefit of using the asset, not for the asset itself.

Example: Car Lease through an Islamic Bank

• Ahmed wants to use a car but cannot afford to buy one outright.
• An Islamic bank purchases the car (e.g., a Toyota Camry worth SGD 50,000) and retains ownership of the vehicle.
• The bank leases the car to Ahmed under an Ijarah contract for 5 years, charging SGD 900 per month.
• During the lease period:
  • Ahmed uses the car but does not own it.
  • The bank, as the owner, is responsible for major maintenance and insurance.
  • Ahmed is responsible for routine maintenance and proper use.
• At the end of the lease, depending on the agreement:
  • Ahmed returns the car, or
  • The bank may offer him the option to purchase the car at a nominal price (Ijarah Muntahia Bittamlik).

Key Features:

• Ownership stays with the bank during the lease.
• The lease payment is for usage, not for ownership.
• It must be free from interest (riba) and follow all Shariah principles.

Where do CPF monies go to? Is it halal or not?

“CPF monies invested by the CPF Board in Special Singapore Government Securities (SGSS), that are issued and guaranteed by the Singapore Government.”

“the proceeds from SSGS are pooled with the rest of the government’s funds, such as government surplus, and proceeds from land sales. The co-mingled funds are invested by the government’s fund manager, GIC, for long term returns.”^[8]

When we contribute money to CPF, it is allocated into different accounts, such as the Ordinary Account and the Special Account. The CPF Board then invests these funds by purchasing bonds issued by the Singapore Government, which are managed by the Government of Singapore Investment Corporation (GIC).

Over time, CPF pays returns to members based on the interest rates set for each account. The Ordinary Account typically offers a return of 2.5%, while the Special Account provides a higher return of around 4%, reflecting its longer-term and more stable nature.

This concept is unique, as the British originally introduced it during their colonial rule in Singapore to help manage retirement savings.

Similarly, in Malaysia, there is the Employees Provident Fund (EPF). The returns given to contributors are based on actual investment performance.

About a decade ago, EPF introduced an Islamic scheme, where the funds contributed to the Shariah-compliant EPF account are invested only in Shariah-compliant instruments and transactions.

Illustration of How CPF Investments Work in Singapore

1. Singapore Citizens
   → Contribute a portion of their salaries to their CPF (Central Provident Fund) accounts.
2. CPF Board
   → Manages CPF savings but does not invest them directly in the stock market or real estate.
   → Instead, CPF funds are used to purchase Special Singapore Government Securities (SSGS).
3. SSGS (Special Government Bonds)
   → These are non-tradable bonds issued by the Singapore Government, bought only by the CPF Board.
   → Provide a fixed, guaranteed return (e.g., 2.5%–6%) based on the CPF scheme.
   → Fully backed by the Government of Singapore.
4. Proceeds from SSGS
   → The money raised by issuing SSGS is pooled together with other government funds, such as:
   • Budget surpluses
   • Proceeds from land sales
5. GIC (Government of Singapore Investment Corporation)
   → Manages the pooled funds (including SSGS proceeds) and invests globally for long-term returns, such as in:
   • Global equities
   • Bonds
   • Real estate
   • Infrastructure
6. Objective
   → Achieve long-term returns to grow Singapore’s national reserves.
   → CPF members are not directly exposed to investment risk.
   → The government uses investment returns to meet obligations (like paying SSGS), and the CPF Board pays fixed interest to members.

The fatwa issued by MUIS regarding the subject of interest in CPF accounts can be viewed and accessed through the following link: https://www.muis.gov.sg/resources/khutbah-and-religious-advice/fatwa/fatwa-interest-in-cpf-account–english

Deliberation on CPF and Shariah Compliance

Issue:
There is a concern regarding the bonds issued by the Singapore Government, purchased using CPF contributions. The 2.5% return credited to CPF accounts is not conditional on market performance, which raises some discussion points from a Shariah perspective.

However, rather than jump to controversial conclusions, it’s more constructive to discuss how to harmonise this with Islamic principles.

Following Shariah Guidance in Singapore

As Muslims residing in Singapore, we refer to the Mufti and the Fatwa Committee for guidance on religious matters. These are not individuals acting alone —qualified scholars issue fatwas through collective deliberation and proper Shariah methodology.

This is similar to the approach of Imam Malik, who, when asked by the ruler of his time to have his opinion enforced, refused out of respect for other scholarly opinions, showing humility and balance in jurisprudence.

On the Nature of CPF Returns

According to Singapore’s Fatwa Committee:

• The CPF scheme is not considered a loan, but a form of gift (hibah) from the government to its citizens.
• The returns paid (e.g., 2.5%) are therefore not considered riba (interest), since they are not conditional and do not come from a debtor-creditor contract.
• However, the committee did not elaborate in detail on the sources of the government’s investment returns or the exact halal/haram breakdown, but judged the payment based on its form (hibah).

Can We Say It’s Halal or Haram?

It is not correct to outright declare something haram unless we are certain of its ruling, and the same goes for declaring something halal. When it comes to government investments through GIC, the underlying assets include:

• Private equity
• Real estate
• Developed market equities
• Emerging market equities

There is a real possibility that these funds are invested in halal-compliant assets.

At the end of the day:

1. GIC returns funds to the Singapore Government
2. The Government repays the CPF Board
3. CPF pays the fixed returns to depositors

Therefore, even if we cannot trace every cent to a halal investment, it’s very likely that a significant portion comes from halal sources, and these returns are distributed equally to Muslims and non-Muslims alike.

Final Thought:

While some individual scholars may say it’s impermissible, the official fatwa views it as a hibah (gift), not a loan with interest. In matters of uncertainty, it is best to follow qualified authorities and refrain from making judgments on issues about which we are unsure, especially in complex financial structures like CPF.

Hence, the view is well-accepted, and inshaAllah it is safe (salim) and permissible to follow. In the absence of a clear prohibition and with the presence of an official fatwa, it is something we can act upon with confidence.

There is a well-known legal maxim in Islamic jurisprudence:

المَعْرُوفُ عُرْفًا كَالمَشْرُوطِ شَرْطًا

“What is commonly known and accepted in practice is like a condition in a contract.”

This principle reminds us that custom and public understanding carry weight in Shariah, especially when they do not contradict clear Islamic rulings.

Manage Our Personal Finance

• Islamic banking provides Shariah-compliant solutions tailored to your banking needs.
• Utilise its services, network, and infrastructure effectively and responsibly.
• Limit your Islamic financing/loans strictly to what is necessary (needs, not wants).
• Always remember: banks earn profit from retail customers, not the other way around.
• As a retail customer, you should not rely on banking products or core banking activities to build wealth. Seek other ethical and productive avenues for long-term financial growth.

Parameters for Darurah (Necessity)

According to Dr. Wahbah Al-Zuhayli^[9], the concept of darurah (necessity) in Islamic jurisprudence allows for exceptions to specific prohibitions, but under strict conditions:

1.The necessity must be present now, not based on a future possibility or fear.

2. The necessity must involve a clear situation where a person is forced to do something normally impermissible in Shariah, and no halal alternatives are available.

3. There must be a valid excuse, such as:

• Protection of life
• Preservation of health
• Safeguarding family, etc.

4. Even in a state of necessity, the action must not contradict the core principles of Islam, e.g., it cannot involve:

• Murder
• Fornication
• Theft or pillaging, etc.

5. The use of something haram must be limited only to the extent necessary to remove or lift the harm. It must not exceed the bounds of need.

Question:

If I receive interest (riba), can I use it to pay off a loan that itself involves interest?

Answer:

While it is true that any interest money received must be disposed of (as it is not halal for personal use), it cannot be used for something that personally benefits you, such as paying off your loan, even if that loan involves interest.

Instead, the correct way to deal with this impermissible income is to channel it to charity, but with certain conditions:

• It should be distributed to those in need, such as the poor and the destitute.
• It cannot be donated to causes that directly benefit you.
• The principle is to purify your wealth by giving away that which is impure, without expecting reward, since the money itself was earned through impermissible means.

At the end of the day, Islamic finance solutions must strive to be:

• Competitive
• Accessible
• Attractive to the general public

They should provide real, practical solutions for Muslims that align with the commands of Allah (SWT). At the same time, pricing and features should remain comparable to conventional offerings, so that Muslims can transition smoothly without feeling financially penalised.

 

[1] Al-Qur’an, Surah Ar-Rum (30:39).

[2] Al-Qur’an, Surah An-Nisaa’ (4:161).

[3] Al-Qur’an, Surah Ali Imron (3:130).

[4] Al-Qur’an, Surah Al-Baqarah (2:275).

[5] Al-Quran, Surah Al-Baqarah (2:279)

[6] Muslim ibn al-Hajjaj, Sahih Muslim, Hadith no. 1598

[7] Muhammad ibn Isma‘il al-Bukhari, Sahih al-Bukhari, Hadith no. 2766; Muslim ibn al-Hajjaj, Sahih Muslim, Hadith no. 89.

[8] www.mov.gov.sg and www.cpf.gov.sg

[9] Dr. Wahbah Al-Zuhayli, Fiqhu Al-Islam Wa Adillatuhu

https://islamicfinance.sg/summary-class-4/