Islamic Ruling on Investing in Interest-Based Banks

Author: Dr. Muhammad Zia-ur-Rahman Azmi (رحمه الله)

Is Investing in Interest-Based Banks Permissible?​

It is well known among Islamic scholars that investing money in interest-based banks for profit is strictly forbidden in Islam. Engaging in such investments is considered a major sin and tantamount to waging war against Allah and His Messenger ﷺ.

Allah ﷻ warns in the Quran:
"O you who believe! Fear Allah and give up what remains [due to you] of interest, if you should be believers."
[Surah Al-Baqarah: 278]

The Prophet ﷺ has cursed those involved in interest-based transactions, including:

• The one who consumes Riba,
• The one who gives it,
• The one who records it, and
• The two witnesses of the transaction.

He ﷺ said: "They are all equal in sin."
[Sahih Muslim, Hadith No. 1598/106]

In another Hadith, recorded in Sahih Al-Bukhari, it is narrated that the Prophet ﷺ cursed the one who consumes interest and the one who facilitates it, as well as the one who creates images (for idol worship or other prohibited purposes).
[Sahih Al-Bukhari, Hadith No. 2086]

Interest (Riba) is One of the Seven Deadly Sins​

Abu Hurairah (رضي الله عنه) narrated that the Prophet ﷺ said:

"Avoid the seven destructive sins."

The Companions asked: "O Messenger of Allah! What are they?"

He ﷺ replied:

1. Associating partners with Allah (Shirk)
2. Practicing witchcraft (Sihr)
3. Unlawfully killing an innocent soul
4. Consuming Riba (usury/interest)
5. Misappropriating the wealth of orphans
6. Fleeing from battle (when facing the enemy)
7. Slandering chaste, unaware, and believing women

[Sahih Al-Bukhari, Hadith No. 2766 | Sahih Muslim, Hadith No. 89/145]

Muslims Must Abandon Riba-Based Investments​

The prohibition of Riba is strongly emphasized in both the Quran and Hadith. Therefore, it is an obligation upon all Muslims to completely avoid any kind of financial dealings that involve interest-based banking and investments.

Similarly, Muslim rulers and governments are responsible for ensuring that banks and financial institutions operate without Riba, following Islamic financial laws.

Allah ﷻ warns about those who fail to prevent sin:
"The disbelievers among the Children of Israel were cursed by the tongue of Dawud and Isa (Jesus), son of Mary. That was because they disobeyed and used to transgress. They would not prevent one another from wrongdoing that they did. How wretched was what they used to do!"
[Surah Al-Ma'idah: 78-79]

Allah ﷻ also describes the qualities of true believers:
"The believing men and believing women are allies of one another. They enjoin what is right and forbid what is wrong, establish prayer, give Zakat, and obey Allah and His Messenger. It is they whom Allah will have mercy upon. Indeed, Allah is Almighty, All-Wise."
[Surah At-Tawbah: 71]

Conclusion & Advice to Muslims​

• It is strictly prohibited to invest in interest-based banks for financial gain.
• Muslims must avoid all forms of Riba-based transactions and investments.
• Muslim leaders and scholars should take an active role in implementing Islamic financial laws and prohibiting interest-based dealings.
• Muslims should follow the guidance of Islam, practicing righteousness and calling others to good while preventing evil.

We ask Allah ﷻ to grant all Muslims, whether leaders or citizens, scholars or laypeople, the ability to fully adhere to Islamic teachings, remain steadfast, and avoid anything that contradicts the Shari’ah.

[Shaykh Ibn Baz: Majmoo’ al-Fatawa wal-Maqalat, 19/131]