Using Bank Interest to Start a Business
Question:
I am presently living in Canada. My parents are in Pakistan. I finished my studies more than one year ago. Despite all the sincere efforts for more than year now, I have not been able to find a job due to the present economic slump. I intend to start my own business now. The way a business franchise is obtained in Canada is that the prospect franchisee provides some specific amount as down payment and rest is financed through a bank. The total amount varies from $200,000 to $400,000 depending upon the type of business and franchise one wishes to own.
I also intend to own any of such franchise so that I start earning some money as I don’t want to remain a burden on my parents anymore. I have extensively searched in Canada and there are no Islamic business banks which provide interest-free loans. In addition, I don’t know any wealthy individual who would provide me loan for a business.
My uncle has agreed to lend me the down payment required by the franchises. Once I start my business, I will pay him back the money borrowed. His financial situation is NOT such that he could give me a loan for the whole franchise.
My question is that is it permissible in such circumstances to get financing from a bank? If not, how do you expect Muslims living in Canada to do business? Since there is no other source of financing, Muslims like me will always remain 2nd class citizens and will not be able to have any effect on Muslim Ummah.
Answer:
Interest based dealings have been clearly prohibited in Shariah. The Qur’an and Hadith are quite clear on this. Therefore, receiving any interest-based financing from the bank will be unlawful.
As far as your business is concerned, if you can fined another person/persons like your uncle to give you a interest-free loan, then that would be ideal. If you can’t, then you will have to make do with something that is smaller.
Remember the words of Shaykh Muhammad Sa’id Ramadhan al-Bouti of Damascus, Syria:
“The necessity which allows usurious loans is the same necessity which allows eating the meat of a dead animal, pig and the like, in which case the one necessitated is exposed to perish from hunger, nakedness or losing lodging. Such is the necessity, which makes prohibitions lawful”.
One should always remember that to forego religious injunctions in order to accumulate worldly possessions is too higher of a price to pay. One must always adhere to the laws of Islam, even if that means facing hardships in this world. This world is temporary, and the hereafter is eternal. One’s main objective should be the pleasures of the hereafter and not this world.
As far as “having an effect on the Ummah” is concerned, if the service to Islam and Muslims is done with adherence to the laws of Shariah, then one will be rewarded. However, service to Islam and the Ummah through unlawful means is neither effective nor acceptable by Allah Almighty.
And Allah knows best
[Mufti] Muhammad ibn Adam
Darul Iftaa
Leicester , UK