Taking interest to make up for loss of money’s real value

Question

Praise be to Allah.

Firstly:

Undoubtedly the ever-rising cost of living means that keeping
money will cause it to lose some of its buying power. Hence you should look
for Islamically acceptable ways of investing it.

Based on the risks involved in investment and the loss of
trust in investment companies among many people, some of them have resorted
to putting their money in riba-based banks and taking interest. This stems
either from ignorance of the fact that this is haraam, or from preferring
this world over the Hereafter. Putting money in riba-based banks is gravely
haraam, because it is riba, for which the one who consumes it, the one who
pays it, the one who writes it down and the two who witness it are all
cursed. It is the riba for which Allaah has issued a declaration of war and
divine wrath for the one who does it.

Allaah says (interpretation of the meaning):

“O you who believe! Fear Allaah and give up what remains
(due to you) from Ribaa (from now onward) if you are (really) believers.

279. And if you do not do it, then take a notice of war
from Allaah and His Messenger but if you repent, you shall have your capital
sums. Deal not unjustly (by asking more than your capital sums), and you
shall not be dealt with unjustly (by receiving less than your capital sums)”

[al-Baqarah 2:278-279]

Muslim (1598) narrated that Jaabir (may Allaah be pleased
with him)said: The Messenger of Allaah (peace and blessings of Allaah
be upon him) cursed the one who consumes riba and the one who pays it, the
one who writes it down and the two who witness it, and he said: they are all
the same.

And he (peace and blessings of Allaah be upon him) said:
“A dirham of riba that a man consumes knowingly is worse before Allaah than
committing zina thirty-six times.” Narrated by Ahmad and al-Tabaraani;
classed as saheeh by al-Albaani in Saheeh al-Jaami’ no. 3375.

In fact depositing one’s money in these banks is a loan with
interest. The lender is the customer and the borrower is the bank, because a
loan means giving the money then taking something else in return. Calling
that a deposit (wadee’ah) is an obvious misnomer, because the wadee’ah is
kept as is and is not disposed of, such as putting money in a safety vault
box for example, where the money itself remains and does not change. But the
bank disposes of the money as one who owns it, with the commitment to back a
similar amount, and this is a loan. If it comes with a commitment to pay
interest, then it is a riba-based loan on which there is scholarly consensus
that it is haraam.

Imam Ibn Qudaamah (may Allaah have mercy on him) said:
“Every loan in which it is stipulated that
something extra must be paid back is haraam, with no difference of scholarly
opinion. Ibn al-Mundhir said: [the scholars] are unanimously agreed that if
the lender stipulates that the borrower must pay extra or give him a gift,
and he lends him money on that basis, then accepting the extra payment is
riba. It was narrated from Ubayy ibn Ka’b, Ibn ‘Abbaas and Ibn Mas’ood that
they forbade every loan that brings benefits. End quote from
al-Mughni (6/436).

Ibn ‘Abd al-Barr said: Every
additional amount given in return for a loan or favour that benefits the
lender is riba, even if it is just a handful of animal feed. That is haraam
if it is stipulated. End quote. End quote from
al-Kaafi (2/359).

A loss in the buying power of money does not make it
permissible to stipulate interest which is the essence of riba. Rather the
loan should be repaid as is even if its value has decreased.

It says in Mawsoo’ah Fataawa al-Azhar, in a fatwa of
Shaykh Jaad al-Haqq, the former Shaykh of al-Azhar (may Allaah have mercy on
him) concerning the issue under discussion, which we will quote for the
benefit of readers:

Question: The questioner was given some investment
certificates of group (b) by his father as a marriage gift, and they are
still in his possession.

He is entitled to cash them in now and they have profits from
the time he kept them.

His question is: Are they halaal with their profits?

Please note that the cash value now with the profits is less
than their value at the time when they were bought and given.

He replied: The fuqaha’ of sharee’ah defined riba as being
anything that is added to wealth without anything in return.

Allaah has forbidden riba in many verses of the Holy Qur’aan,
the last of which to be revealed, according to a saheeh report narrated from
Ibn ‘Abbaas (may Allaah be pleased with him), is the passage in which
Allaah, may He be glorified and exalted, says (interpretation of the
meaning):

“Those who consume Riba will not stand (on the Day of
Resurrection) except like the standing of a person beaten by Shaytaan
(Satan) leading him to insanity. That is because they say: ‘Trading is only
like Riba,’ whereas Allaah has permitted trading and forbidden Riba. So
whosoever receives an admonition from his Lord and stops consuming Riba,
shall not be punished for the past; his case is for Allaah (to judge); but
whoever returns (to Riba), such are the dwellers of the Fire — they will
abide therein.

276. Allaah will destroy Riba and will give increase for
Sadaqaat (deeds of charity, alms). And Allaah likes not the disbelievers,
sinners.”

[al-Baqarah 2:275-276]

It is also forbidden in the hadeeth which was narrated by
al-Bukhaari, Muslim and others from Abu Sa’eed al-Khudri (may Allaah be
pleased with him) who said: The Messenger of Allaah (peace and
blessings of Allaah be upon him) said: “Gold for gold, silver for silver,
wheat for wheat, barley for barley, dates for dates, salt for salt, like for
like, hand to hand, and whoever gives more or asks for more has engaged in
riba; the taker and the giver are both the same.”

Because these texts imply that riba includes all additions to
the money borrowed or deposited on the basis of a precondition for nothing
in return, the Muslims are unanimously agreed that it is haraam, following
the texts of the Qur’aan and the Sunnah.

Because the investment certificates of group (b) bring a
specified amount of interest, that is stipulated in advance in terms of time
and amount, they come under the heading of riba that is forbidden in
sharee’ah on the basis of these texts, as it is a loan with interest that is
stipulated in advance in terms of time and amount.

As for what is mentioned in the question about these purchase
certificates and their profits being less than their value at the time when
they were given to the questioner or at the time when they were bought, this
is not a valid justification for regarding this interest as permissible.
Imam al-Isbejaabi narrated in Sharh al-Tahhaawi that the fuqaha’ were
unanimously agreed that if money is not taken out of circulation, but its
value increases and decreases, the borrower must give what he took in terms
of amount so long as the type of money is specified (Risaalat Tanbeeh
al-Ruqood ‘ala Masaa’il al-Muqood min Rakhs wa Ghala’ wa Kasaad wa Inqitaa’
by al-‘Allaamah Ibn ‘Aabideen (vol. 2, Majmoo’ al-Rasaa’il p.
58-67).

As this is the case, the nominal value of these certificates
is permissible, as it originally most likely came as a gift from halaal
earnings, as we assume that the believers are of good character and
conduct.

As for the interest that was earned in accordance with the
system, it is riba which is haraam because it was specified, and it is not
permissible for the Muslim to benefit from this interest because it is
haraam earnings. He may take it and dispose of it in any charitable way such
as building mosques or hospitals or giving it to a poor or needy person in
the ways indicated by the Sunnah of the Messenger of Allaah (peace and
blessings of Allaah be upon him) with regard to disposal of haraam earnings,
so as to free the Muslim of any responsibility before Allaah.

It is narrated in a hadeeth that Abu Barzah al-Aslami (may
Allaah be pleased with him) said: The Messenger of Allaah (peace and
blessings of Allaah be upon him) said: “The feet of the slave will not move
on the Day of Resurrection until he is asked about his life and how he spent
it, his knowledge and what he did with it, his wealth and how he earned it
and how he spent it, and his body and what he did with it.” And Allaah, may
He be glorified, knows best. End quote.

Hence we say to our brother: You should either look for
Islamically-acceptable ways of investing the money, even if that is buying
goods which usually keep their value, such as land and gold and the like,
or by being patient and seeking reward, and putting up with the loss in
value that results from keeping money.

Secondly:

It is not permissible to put money in a riba-based bank
except for the purpose of protecting it if there is the fear that it may be
stolen. In that case it should be put in a current account, not in a savings
account, so as to do the lesser of two evils. If interest is paid on it,
then you must get rid of it by giving it to the poor and needy or spending
it in the public interest, and it is not permissible for the owner of the
money to benefit from any of it.

We ask Allaah to help and guide us and you.

And Allaah knows best.