Interest is considered haram in Islam, which means it is forbidden and should be avoided at all costs. Whilst it is relatively easy to avoid charging interest (simply by not asking for it), in the modern-day, it is increasingly more difficult for Muslims to abstain from making interest payments. This is because things like loans and credit cards – which are typically seen as a necessity – automatically incur interest charges in the majority of instances.
It is also becoming more difficult to avoid accruing interest as most western banks automatically apply interest payments on money in an account, meaning many Muslims accrue it without meaning to.
In this instance, Muslims are left with interest money for which it is haram to spend on themselves, posing the question of what can be done to get rid of it and cleanse one’s wealth in a way that is halal.
Types of Interest
Interest money, also called Riba, comes in two forms:
- Riba al-Nasiyah – interest that is accrued on delayed payments e.g. Person A lends Person B £100 which is to be paid over the course of 10 months. As a penalty of the payment being spread over 10 months, Person A demands that Person B pays back the initial £100, as well as £10 in interest for the delayed payments.
- Riba al-Fadl – interest that is paid in the form of objects, materials or goods, e.g. Person A lends Person B their car with half a tank of fuel on the condition Person B re-fills the car so that it is returned with the same amount of fuel it started with. Person B returns the car with a full tank of fuel.
Why Interest is Haram
“O you who believe! Fear Allah and give up what remains [due to you] of interest, if you should be true believers.” (Qur’an 2:278)
There are a number of reasons why interest money is considered haram, with the primary reason being that it is exploitative. When a person borrows something from someone else, they are doing so because they are in need, and therefore if they cannot afford something in the first instance, they (in theory) cannot afford to pay back even more than they have borrowed. Oftentimes, the person in the privileged position profits from the person in need when they charge interest, and this is frowned upon.
Given the fact that much of Islam is embedded in charity, it is greedy for a person to charge interest.
Is Interest Ever Halal?
As mentioned, there are instances in which interest money cannot be avoided, and whilst this is recognised, interest money is still not halal. That being said, the attitude towards interest money will depend on the school of thought you follow.
For example, some Muslims take Riba being haram literally, and as such, will not own a home as mortgages are often paid back with interest. In the same manner, they will not take out loans or have credit cards because of the interest charges on defaulted payments.
In contrast, other Muslims will seek to own a home, and many have credit cards and take out loans as a safety net in case of an emergency.
There are ways to obtain an interest-free mortgage and not incur interest on money in a bank account in the UK by banking with an Islamic bank such as the Al Rayan and United Banks.
What Can Interest Money be Spent on?
In the instance you do incur interest money inadvertently, there is only one way you can spend it. For those wondering can you give interest money to charity in Islam, the answer is yes, but only as a general donation. Whilst Zakat is a type of charity, it is not permissible to use interest money for Zakat. This is because when a person gives Zakat, they are rewarded for their generosity, but when interest money is spent, no rewards are to be expected because it is haram in its nature and should only be spent to cleanse one’s wealth.
In summary, if you have accrued interest money, you may make a general donation with it. If you do not want to make a general donation with it, you may buy essential supplies such as water, food, medical aid kits or clothes for a person in need instead.
You cannot spend interest money on building a mosque or buying a Qur’an.
Can You Receive Interest Money?
In the same way that it is considered haram for a person to request interest, it is haram to receive it unless they have received it through charity. For example, a person in need who receives aid in the form of interest money will not be punished for it since the money will have been cleansed.
Donate Your Interest Money
If you have interest money and want to use it to make a donation to help a person in need, please consider giving it to Orphans in Need. Your donation will be gratefully received and used to support a person in need.