Source: Fatawa of the Scholars of Hadith, Kitab al-Salah, Volume 1
Some scholars, such as Maulana Taqi Usmani, have issued fatwas permitting it,
while others, including Maulana Saleemullah Khan, have declared it impermissible.
After analyzing the arguments of both sides, the stronger and more widely held opinion among scholars is that
contemporary Islamic banking contradicts Islamic commercial principles and cannot be deemed Islamic.
Scholars who designed the concept of Islamic banking emphasized that its core foundation should be based on Musharakah (partnership) and Mudarabah (investment partnership).
Murabaha (cost-plus sale) and Ijarah (leasing) were permitted conditionally and temporarily.
However, in practice, banks have completely relied on Murabaha and Ijarah, abandoning the foundational models.
✔ Second Evidence:
Even Mufti Taqi Usmani, a key proponent of Islamic banking, has expressed disappointment with the current implementation.
He remarked: “The wheel of contemporary Islamic banking has begun to turn in reverse.”
✔ Third Evidence:
Common people and economists familiar with both conventional and Islamic banking systems fail to see any real difference between them.
This strongly suggests that, in practice, Islamic banking mirrors conventional banking methods.
To give it an Islamic appearance, scholars have modified classical jurisprudential terms and based the structure on weak scholarly opinions,
which contradicts the core principles of Shari‘ah.
✔ Misuse of Murabaha and Ijarah:
Contracts like Murabaha and Ijarah, though valid in Islamic finance, are often manipulated as loopholes, deviating from their true Shari‘ah framework.
✔ Profit Distribution in Mudarabah:
Profit-sharing in Mudarabah contracts is often conducted on assumed or estimated returns, not actual profit,
which violates Islamic guidelines.
✔ Diminishing Musharakah:
This financial model, Shirkah Mutanaqisah, is considered impermissible by many scholars due to multiple Shari‘ah violations,
yet it is commonly used in Islamic banks.
"Contemporary Islamic banking is unequivocally non-Shari‘ah-compliant and un-Islamic.
Any transactions carried out with these banks under the assumption that they are Islamic are impermissible and carry the same ruling as conventional interest-based banks."
except that it is mistakenly perceived as Islamic.
Scholars consider it more dangerous than conventional banking,
because engaging in prohibited activities knowingly is a lesser sin,
whereas doing so under the belief that it is lawful is a greater sin.
They should repent from past dealings and make sincere istighfar, for Allah is most forgiving to those who turn to Him.
❖ Question:
Is modern Islamic banking truly lawful and valid? What is its basis in Islamic law?❖ Answer:
There is a difference of opinion among scholars regarding the permissibility of contemporary Islamic banking.Some scholars, such as Maulana Taqi Usmani, have issued fatwas permitting it,
while others, including Maulana Saleemullah Khan, have declared it impermissible.
After analyzing the arguments of both sides, the stronger and more widely held opinion among scholars is that
contemporary Islamic banking contradicts Islamic commercial principles and cannot be deemed Islamic.
❖ Reasons Why Contemporary Islamic Banking Is Not Truly Islamic:
① Practical Inconsistencies:
✔ First Evidence:Scholars who designed the concept of Islamic banking emphasized that its core foundation should be based on Musharakah (partnership) and Mudarabah (investment partnership).
Murabaha (cost-plus sale) and Ijarah (leasing) were permitted conditionally and temporarily.
However, in practice, banks have completely relied on Murabaha and Ijarah, abandoning the foundational models.
✔ Second Evidence:
Even Mufti Taqi Usmani, a key proponent of Islamic banking, has expressed disappointment with the current implementation.
He remarked: “The wheel of contemporary Islamic banking has begun to turn in reverse.”
✔ Third Evidence:
Common people and economists familiar with both conventional and Islamic banking systems fail to see any real difference between them.
This strongly suggests that, in practice, Islamic banking mirrors conventional banking methods.
② Weak Jurisprudential Foundations:
✔ Alteration of Legal Terminology:To give it an Islamic appearance, scholars have modified classical jurisprudential terms and based the structure on weak scholarly opinions,
which contradicts the core principles of Shari‘ah.
✔ Misuse of Murabaha and Ijarah:
Contracts like Murabaha and Ijarah, though valid in Islamic finance, are often manipulated as loopholes, deviating from their true Shari‘ah framework.
✔ Profit Distribution in Mudarabah:
Profit-sharing in Mudarabah contracts is often conducted on assumed or estimated returns, not actual profit,
which violates Islamic guidelines.
✔ Diminishing Musharakah:
This financial model, Shirkah Mutanaqisah, is considered impermissible by many scholars due to multiple Shari‘ah violations,
yet it is commonly used in Islamic banks.
❖ Scholarly Consensus:
The majority of contemporary scholars have issued a clear and unanimous fatwa:"Contemporary Islamic banking is unequivocally non-Shari‘ah-compliant and un-Islamic.
Any transactions carried out with these banks under the assumption that they are Islamic are impermissible and carry the same ruling as conventional interest-based banks."
❖ Conclusion:
This detailed review makes it clear that contemporary Islamic banking is essentially no different from conventional banking,except that it is mistakenly perceived as Islamic.
Scholars consider it more dangerous than conventional banking,
because engaging in prohibited activities knowingly is a lesser sin,
whereas doing so under the belief that it is lawful is a greater sin.
❖ Advice to Muslims:
Muslims must avoid contemporary Islamic banking, just as they should avoid other haram and un-Islamic practices.They should repent from past dealings and make sincere istighfar, for Allah is most forgiving to those who turn to Him.
