Fatwa ID: 06994
Answered by: Alimah Jannatun Nessa
Question:
First, I wanted to know if its halal to subscribe to a student loan at 1% interest + insurance.
Is that type of loan halal or haram?
Secondly, I have a question regarding my professional orientation.
I am going to do an Internship in Mergers and acquisitions, in fact this job is just advising companies on valuation and managing processes for a company wanting to buy another. Here we don’t lend any money but the company we are advising can borrow money to do the acquisition. Is that work haram or halal.
Lastly, another path I can choose is investment in a fund. The unique problem here. Is that the fund we are working for is borrowing money to do acquisitions and thanks to that leverage money and increase its return on investment.
I will be very grateful to have an answer to clarify my situation.
In the name of Allah, the Most Gracious, the Most Merciful
Answer:
In Islam, loans are a favour and a charitable deed, and cannot be used to exploit the financial weakness of people. Therefore, any amount of interest on a loan is haram whether that may be a small or large amount, whether it is fixed or changes.
Secondly, if the company you want to work for lends money on interest then it is not permissible to work here.
Lastly, there are four conditions for investing in shares according to Mufti Taqi Usmani:
- The main business does not go against Sharia. Therefore, it is not permissible to acquire shares of companies that provide financial services on interest, like conventional banks and mortgages etc.
- If the main business is halal but they deposit their surplus amounts in an interest bearing account or borrow money on interest then the shareholder must express his disapproval against such dealings.
- If some haram income (interest) is included in the income of the company, the haram proportion of the dividend paid to the shareholder must be given to charity.
- The shares of a company are negotiable only if the company owns some illiquid assets. If all the assets are in liquid form, they cannot be purchased or sold except at par value, because in this case the share represents money only which cannot be traded in except at par value.
Only Allah (عز و جل) knows best.
Written by Alimah Jannatun Nessa
Checked and approved by Mufti Mohammed Tosir Miah
Darul Ifta Birmingham
[Mufti Taqi Usmani, Introduction to Islamic Finance, page 143]
[Radd ul Mukhtar, volume 7, page 394-395, Daar al kutub al ilmiyyah]
وفي الخلاصة: القرض بالشرط حرام، والشرط لغو بأن يقرض على ان يكتب به الى بلد كذا ليوفي دينه. وفي الأشباه: كل قرض جر نفعا حرام.
