Fatwa: # 17075
Category: Financial Transactions
Country: South Africa
Date: 27th August 2008

Title

I have read many fatwas that interest is Haraam and I have no doubt sabout it.

Question

This quesion is about interest. I have read many fatwas that interest is Haraam and I have no doubt sabout it. I was under the impression that interest paid by an individual is Haraam but if it is a Ltd company, because it i a separate entity in law in UK - and if the company pays interest for its business transactions, it is OK. Limited companies in UK are entities in their own rights. Please advise. Jazakallah

Answer

In the name of Allah, Most Gracious, Most Merciful

Assalaamu `alaykum waRahmatullahi Wabarakatoh

 
Contrary to the view of some present-day scholars, the concept of a juristic person is not recognized by the Sharī‘ah. Furthermore, even if it were recognized, the directors of the company as well as the remainder of the shareholders would be considered as partners and agents for the company. Therefore, it will not be permissible to pay interest, as the sin will be borne by all the directors and shareholders of such a company. It is quite evident that the fictitious entity, referred to as a juristic person in the legal jargon of the financial world, cannot think for itself or make any decisions; rather, the partners and directors investing therein make all the decisions and authorizations. Therefore, they will be sinful for paying or receiving the interest.

And Allah knows best

Wassalam

Ml. Yusuf bin Yaqub,
Student Darul Iftaa

Concurred by:

Ml. Ehzaz Ajmeri,
Student Darul Iftaa

Darul Iftaa

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