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FATWA ONBANKING
AND THE USE OF INTERESTRECEIVED ON BANK DEPOSITS
BY UMAR IBRAHIM VADILLOOctober 2006
FAWA
 
Fatwa on Banking
 
|
The Use of Interest Received on Bank Deposits
Umar Ibrahim Vadillo
2
 
Table of Contents
1. Introduction........................................................................3
 
2. The Issue.............................................................................7
 
3. Understanding Riba...........................................................10
 3.1 A world shaped by Riba....................................................103.2 What is Riba?.................................................................11
4. The Misunderstanding of Riba............................................20
 4.1. Religious reformism and capitalism...................................204.2 The Islamic Reformers.....................................................234.3 The followers of Reda......................................................274.4 The misunderstanding of Riba an-nasiah today....................284.5 Equating Riba to interest in a loan.....................................334.6 Islamic Banking..............................................................344.6.1 Islamic Banks are banks.............................................344.6.2 Murabaha: what it is and what it is not.........................384.6.3 How the Islamic Bank’s version of the contract of Murabahacame into being.................................................................414.6.4 The danger of making principles out of contracts............464.7 The Stages of the “Islamisation” process............................484.8 On the methodology of modernism....................................49
5. Understanding Paper Money..............................................54
 5.1 Paper money backed by gold and silver..............................545.2 Devaluation in paper money.............................................605.3 Paper money with no backing, but only State legal compulsion..........................................................................................61
6. The Islamic Mu’amalat.......................................................63
 6.1 The Islamic business contracts..........................................656.1.1 Shirkat (Partnership)..................................................676.1.2 Qirad (business loan).................................................73
7. Conclusion: What to do?....................................................76
 7.1 Practical Steps................................................................77
 
Fatwa on Banking
 
|
The Use of Interest Received on Bank Deposits
Umar Ibrahim Vadillo
3
 
1. Introduction
Riba (usury) has been clearly and explicitly prohibited in the Qur’anand Sunna. Allah and His Messenger, sallallahu alayhi wa sallam, havedeclared war on those who do not abstain from it.These are some of the relevant ayats regarding Riba. Allah says in theQur'an:
Allah obliteratesribabut He makes sadaqa grow in value!Allah does not love any persistently ungrateful wrong-doer.Qur'an (2, 275)O you who believe! Show fear of Allahand forgo any remainingribaif you are believers.Qur'an (2, 277)If you do not, know it means war from Allah and His Messenger.If you turn in repentance you may have your capital,without wronging and without being wronged.Qur'an (2, 278)O you who believe! Do not feed onriba,multiplied and then remultiplied.Show fear of Allahso that perhaps you may be successful.Qur'an (3,130)Those who practiceribawill not rise from the graveexcept as someone driven mad by Shaytan's touch.That is because they say, "Trade is the same asriba."But Allah has permitted trade and He has forbiddenriba.Anyone who receives a warning from his Lord and then desists,can keep what he received in the past and his affair is up to Allah.But any who return to it will be the Companions of the Fire,remaining in it timelessly, forever.Qur'an 2, 274
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