Islamic banks with interests

1-9-2003 | IslamWeb

Question:

I want to open account in Islamic bank, with an interest, is it contradicting with the Islam (profit sharing is lawful interest is not) rules?

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Answer:

Praise be to Allah, the Lord of the Worlds; and may His blessings and peace be upon our Prophet Muhammad and upon all his Family and Companions. If the bank you are enquiring about, functions within the limits of Shariah, then you may open your account in such a bank whether it is a current, saving or an investment account. Any investment whether done through banks, or else becomes lawful provided it meets the following conditions. 1. The investment should be limited only to lawful matters. 2. There should be no assurance of the invested capital, instead both parties (bank and the investor) should share the profit and the loss as long as the party that holds the capital (bank) does not misuse the amount or neglect its duty. 3. It should be fixed beforehand that only the profit (whatever it may be) is to be distributed between the two parties according to the percentage of profit they had agreed upon. For instance if the agreement was that the bank will give ten percent of the total profit then the person will take only that percentage regardless of the amount of the profit. On the other hand, if they agree that the bank will take ten percent of the capital, then this is forbidden. Allah knows best.