If a person uses illegitimately earned money as capital and starts a legitimate earning, what is the decree about the new earning? Are the goods that are taken and trade that is made completely haram?
Submitted by on Tue, 18/05/2021 - 10:20
Dear Brother / Sister,
Decision is made based on the income of money:
1. It is haram to make a deal based on interest.
2. Interest to be given or taken is haram.
3. Decision is made whether the money is haram or halal based on the place and income of the earning.
4. However, doubt exists in money earned through illegitimate (haram) ways in any case. Therefore, it is not said that all loans borrowed based on interest are haram but haram mixes with them since they are borrowed based on interest.
5. Committing sins, even if knowingly, does not prevent repenting. The fact that the door of repentance is open should not lead us to sins.
Goods and money become haram to the extent that haram mixes with them. Thus, if the whole income is haram, the whole of it is haram; if some part of it is haram, that part is haram.
A capital mixed with interest is one thing and a capital that consists of interest income only is another thing. The whole capital does not become haram when a person receives a loan from the bank. The whole capital formed from only the interest income of the money in the bank is haram. Even if the capital formed by using credit is not completely haram, it mixes with haram. It is difficult to say anything definite about its proportion.
It is not permissible to make a deal based on interest in any case. It is not permissible to make a deal based on interest, whether in order to start a business or due to financial difficulties.
It is not permissible to make a deal based on interest whether the rate is equal to the rate of inflation or less than it.
To sum up, it is haram to make a transaction based on interest. Not the whole house or workplace purchased with interest loan is haram. It cannot be regarded completely halal either. Therefore, money as much as the interest rate paid for the house or workplace purchased with interest loan should be given to charitable institutions or to the poor. For example, if you bought a $ 100,000 house for $ 120,000 on loan, it would be appropriate to give $ 20,000 (the amount as much as the interest) you paid to the poor or charitable institutions. It is also necessary to repent and ask for forgiveness.
If a person starts a business with a capital that is completely haram, most of which is haram or a little of which is haram, what is the decree about the new earning? What is the decree about each of the three cases separately?
The result is the same for all three forms of haram capital. It is necessary to calculate and remove the existing haram capital, return it to their owners if there are any, or to give it away to the poor.
As a matter of fact, according to the information given by Imam al-Haramayn and Imam Ghazali regarding the issue, there are two important views about the state of a person who does business with a haram capital he has usurped and earns money from it repeatedly. According to the soundest view, all transaction done by that person are wrong. According to the other view, that person can remove the amount of haram capital and use the remaining new earnings as his halal property. (Nawawi, al-Majmu, 9 / 260-261)
The following statement of Imam Ghazali regarding the issue sheds light on our topic:
“If a person makes a profit by buying and selling things repeatedly with a usurped/haram capital he has and if he obtains goods without saying that he will pay from haram capital and then pays from that haram capital later, the goods he buys become his own goods and they are halal because when he buys the goods, he does not determine any money in return for them; the goods he obtains become his debt, not the return for haram capital. However, it is doubtful. It is more appropriate to keep away from it in terms of taqwa but it is not said that it is haram if it is used. "(Ghazali, Ihya, II / 129)
It is haram to get involved in a transaction based on interest. However, if you earn money by selling halal products without getting involved in haram during your own trade, your earnings are halal. If the part of earning that is not haram reaches the amount of nisab, you have to give zakah from it. Since zakah is not given from haram money, what a person who is sensitive to halal and haram should do is to distribute the haram money he has to the needy without expecting any thawabs. In other words, the interest income you have should be given to the poor or charitable institutions without expecting any reward in return and you should repent for that transaction with interest. It is not permissible to continue doing the same business knowingly by consenting to haram because no haram passes through a halal way.
The religion of Islam prohibits all kinds of interest. In this regard, there is no difference between making interest contracts with real persons and interest contracts with legal persons.
It is not religiously permissible to use interest income. However, those who have financial difficulties can use that money due to obligation.
It is not permissible to use the interest obtained from the money invested in institutions and organizations that make transactions with interest; zakah cannot be given for them. However, zakah of the capital must be given.
Questions on Islam
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- Is it permissible to work in a bank in a non-Muslim country?
- There are so many banks that claim to be "Islamic", that is "Interest Free" banking. Could you explain please which banks are preferable?
- Is life insurance haram?
- What should economic systems, principles and basic rules be like according to Islam?