What is the ruling on usury (riba) in banking transactions, and how do we distinguish Islamic banks from interest-based (ribawi) ones?
If banks do not deal with Riba (usury/interest), then they are Islamic banks, and it is permissible to deal with them, with due diligence. If they do deal with it, then they are usury-based banks, and it is not permissible to deal with them.
To ascertain the true nature of banks, one should inquire about them, review their activities, and consult specialists.
As for Murabaha (cost-plus financing): if it adheres to Shariah (Islamic law) guidelines, then it is valid and permissible. Otherwise, it is a usurious transaction, and it is not permissible to deal with it.
Murabaha, linguistically, means increase. Technically, it is the sale of goods to another person at a price that includes a known profit margin above the original cost. It is a sale at the capital cost plus a known profit, and it is a condition that the transacting parties are aware of the capital cost.
Summary from Ftawy's records · added here
Reviewed by El Fatwa's sharia committee.
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- Ftawy
- Original fatwa ID
- 32745
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- . This is when the answer was added to El Fatwa, not the fatwa's date.
- Text
- Summary from Ftawy's records, reviewed by El Fatwa's sharia committee.
- Read the full ruling
- Read the full answer on Ftawy