The Profit Obtained from an Islamic Bank

South Africa

15 Safar 1419

9 June 1998 

I have been asked to orally explain what is the rule of Shari'ah in case an Islamic Bank pays a specific amount of profit against an amount deposited in that Bank. 

I have to say in this issue that it seems to be illegitimate, apparently, as it is a profit, which has been obtained against no substitution, and such a profit is unlawful if the dealing takes place between two Muslims.  

However, if we investigate the matter carefully, we will assert categorically, that this profit is legitimate for a Muslim. It is very clear that the Bank never retains the deposited money, but it invests this money in business, so that it grows and this increasing money must be added to the capital deposit. Hence, we can consider this money as a part of the money belonging to the depositor. 

It is, therefore, legitimate to accept such a profit from an Islamic Bank as the depositor has invested the money in business, knowingly and willingly,, this way of business is called "Mudaraba" according to Shari'ah. It is legitimate provided that the profit is not specified. There is no objection if the percentage is specified. 

Mohammad Akhtar Raza Khan Qadiri Azhari