Ruling of Bank Deposit

Ruling of Bank Deposit

Definition of Bank Deposit

Author: Ustadz Said Yai Ardiansyah, MA

One of the products issued by bank is deposit. Deposit is a kind of saving that can not be withdrawn until the certain period of time agreed ends, with the benefit of obtaining percentage of profit from the deposited money. If it is drawn before the its due time, then the bank will charge the owner with some fines.

The example is as follows:

Joko wanted to save his money in deposit account. He deposited IDR 50 millions of his money in 3 months period. The interest rate of deposit is 5% per year, thus, in each month, he received = IDR  50 millions x 5 % : 12 months =IDR 208.333,33. Next, the sum is charged with income tax of 20%, hence, in three months, Joko received IDR 208.333,33 x 3 months = IDR 625.000,00 before taxed.

Joko needn’t to worry about the money he deposited, since it certainly yields profit albeit small. Even though the bank goes bankrupt, or suffers from losses, it still has to pay the profit/interest of his money.

There is also a similar product issued by Shari’a Monetary Institutions, which they labeled as mudharaba or profit share. They said that money that is used as capital in mechanism of mudharaba will be used in lawful businesses, thus, it will yield some profits to be shared monthly. They have set the percentage of profit based on the amount of capital given. They claimed that the percentage could be changed based on condition of the bank, but people could still obtain profit even though the bank is suffering from losses or the business helped by the capital is.

If it is so, then how are we supposed to understand such condition? Is this profit is lawful, or is it contain usury? And if it is usury, what is the best solution to avoid it?

Understanding Usury

Before we discuss the matter further, I need to emphasize that we shouldn’t be affected by differences in terms or names issued by the financial institutions; rather, we should look at the essence of the transaction thus we’ll be able to judge every matter accordingly.

We should also understand that what meant by usury, or more specifically, nasi’a usury, is obtaining profit from the borrowed money (debt).

Allah has prohibited usury in absolute way, whether the addition/profit is large or small, and whether it is as surplus money or advantage or service. Allah the Glorified and exalted decreed,

وَأَحَلَّ اللَّهُ الْبَيْعَ وَحَرَّمَ الرِّبا

even though Allah has made buying and selling lawful and interest unlawful.

(Chapter Al-Baqarah/The Cow: 275)

The Messenger of Allah – peace and prayer of Allah be upon him- also said,

وَرِبَا الْجَاهِلِيَّةِ مَوْضُوعٌ وَأَوَّلُ رِبًا أَضَعُ رِبَانَا رِبَا عَبَّاسِ بْنِ عَبْدِ الْمُطَّلِبِ فَإِنَّهُ مَوْضُوعٌ كُلُّهُ

“…And usury of the ignorance is omitted. The first one that I omit from our usuries is the usury committed by ‘Abbas Ibn Abdil Muththalib. Indeed, all of it is omitted.” (Narrated by Muslim, no. 1218)

Al Imam Ash Shafi’i -may Allah have mercy on him- explained:

وَكَانَ مِنْ رِبَا الجَاهِلِيَّةِ أَنْ يَكُوْنَ لِلرَّجُلِ عَلَى الرَّجُلِ الدَّيْنُ فَيَحِلُّ الدَّيْنُ ، فَيَقُوْلُ لَهُ صَاحِبُ الدَّيْنِ : تَقْضِيْ أَوْ تربي ، فَإِنْ أَخَّرَهُ زَادَ عَليْه وَأَخَّرَه

“Among the forms of usury of the ignorance is when a person is indebted to othes, then when its due time arrived, the creditor said, ‘Will you pay, or will you add (adding usury)?’. If the debtor wants to postpone it, then he should add it.” (See: Ma’rifatu As-Sunan Wal-Atsar lil-Baihaqi VIII/29 no. 3395]

Zaid Ibn Aslam -may Allah have mercy on him- once said:

كَانَ الرِّبَا فِى الْجَاهِلِيَّةِ أَنْ يَكُونَ لِلرَّجُلِ عَلَى الرَّجُلِ الْحَقُّ إِلَى أَجْلٍ فَإِذَا حَلَّ الْحَقُّ قَالَ أَتَقْضِى أَمْ تُرْبِى فَإِنْ قَضَاهُ أَخَذَ وَإِلاَّ زَادَهُ فِى حَقِّهِ وَزَادَهُ الآخَرُ فِى الأَجَلِ.

“In the past, during the time of the ignorants, a person has a right that other owed him of. When its due time came, he would say, ‘Will you pay it or you add it (adding usury)?’. If he pays it, then he takes his right, and if he doesn’t, then that person who owed should add it and thus the due time lengthened.” (See: Muwaththa’ by Al- Imam Malik. Chapter Maa Jaa-a fir-Riba fid-Dain, II/672 no. 1353]

Principles in Understanding Usury

The scholars have constructed principles of jurisprudence in order to recognize all kinds of usury; it states that:

كُلُّ قَرْضٍ جَرَّ نَفْعًا فَهُوَ رِبَا

“Every debt that yields profit (for the creditor) is an usury”.

This is a vital principle in recognizing all kinds of usury these days.

Ruling of Bank Deposit

If we examine the previously mentioned case carefully, we’ll see that the bank deposit and what-so-called mudharaba in shari’a institutions are still containing elements of usury in it, thus it is prohibited to have it. Since in reality, anyone who deposits his money in a bank, and receives profit from it, will still receive that profit, and there’s no risk of loss even if the bank itself is in loss.

What if the profit is less than 10%, is it allowed to have it or not?

Some people think that it is allowed to deposit money in bank, reasoning that if the profit is small, it is alright to obtain it. And some said that if the profit is less than 10%, it is alright to have it. How to counter this argument?

We say that there are indeed people who believed so; however, they comprehend the verse below wrongly:

يَا أَيُّهَا الَّذِينَ آمَنُوا لَا تَأْكُلُوا الرِّبَا أَضْعَافًا مُضَاعَفَةً وَاتَّقُوا اللَّهَ لَعَلَّكُمْ تُفْلِحُونَ (130)

“Believers! Do not devour interest, doubled and redoubled, and be mindful of Allah so that you may attain true success,” (Chapter Ali ‘Imran: 130)

They said that the prohibited usury is the multiplied in profit, whereas if it is not, then there’s no harm in it. They mistook the meaning of the said verse because probably, they didn’t know that prohibition of usury was released in four gradual steps, which are:

First step: Allah the Exalted declared,

وَمَا آتَيْتُمْ مِنْ رِبًا لِيَرْبُوَ فِي أَمْوَالِ النَّاسِ فَلَا يَرْبُو عِنْدَ اللَّهِ وَمَا آتَيْتُمْ مِنْ زَكَاةٍ تُرِيدُونَ وَجْهَ اللَّهِ فَأُولَئِكَ هُمُ الْمُضْعِفُونَ (39)

“Whatever you pay as interest so that it may increase the wealth of people does not increase in the sight of Allah.  As for the Zakah that you give, seeking with it Allah’s good pleasure, that is multiplied manifold.”(Chapter Ar-Rum/The Romans: 39)

In this verse, Allah quipped the devourer of usury.

Second step: Allah the Exalted decreed:

فَبِظُلْمٍ مِنَ الَّذِينَ هَادُوا حَرَّمْنَا عَلَيْهِمْ طَيِّبَاتٍ أُحِلَّتْ لَهُمْ وَبِصَدِّهِمْ عَنْ سَبِيلِ اللَّهِ كَثِيرًا (160) وَأَخْذِهِمُ الرِّبَا وَقَدْ نُهُوا عَنْهُ وَأَكْلِهِمْ أَمْوَالَ النَّاسِ بِالْبَاطِلِ وَأَعْتَدْنَا لِلْكَافِرِينَ مِنْهُمْ عَذَابًا أَلِيمًا (161)

“(160) Thus, We forbade them many clean things which had earlier been made lawful for them  for the wrong-doing of those who became Jews, for their barring many from the Way of Allah, (161) and for their taking interest which had been prohibited to them, and for their consuming the wealth of others wrongfully. As for the unbelievers among them, We have prepared a painful chastisement.” (Chapter An-Nisa’/The Women: 160-161)

In this verse, Allah explained that usury is prohibited to the Jews, but they still did it. And it is not yet explained that whether it is prohibited for the muslims either.

Third step: Allah the Exalted decreed:

يَا أَيُّهَا الَّذِينَ آمَنُوا لَا تَأْكُلُوا الرِّبَا أَضْعَافًا مُضَاعَفَةً وَاتَّقُوا اللَّهَ لَعَلَّكُمْ تُفْلِحُونَ (130)

“Believers! Do not devour interest, doubled and redoubled, and be mindful of Allah so that you may attain true success,” (Chapter Ali ‘Imran: 130)

In this verse, Allah began to prohibit usury, but it only mentioned about the multiplied usury, thus some companions assumed that a small amount of usury is alright.

Fourth step: Allah the Exalted decree:

الَّذِينَ يَأْكُلُونَ الرِّبَا لَا يَقُومُونَ إِلَّا كَمَا يَقُومُ الَّذِي يَتَخَبَّطُهُ الشَّيْطَانُ مِنَ الْمَسِّ ذَلِكَ بِأَنَّهُمْ قَالُوا إِنَّمَا الْبَيْعُ مِثْلُ الرِّبَا وَأَحَلَّ اللَّهُ الْبَيْعَ وَحَرَّمَ الرِّبَا فَمَنْ جَاءَهُ مَوْعِظَةٌ مِنْ رَبِّهِ فَانْتَهَى فَلَهُ مَا سَلَفَ وَأَمْرُهُ إِلَى اللَّهِ وَمَنْ عَادَ فَأُولَئِكَ أَصْحَابُ النَّارِ هُمْ فِيهَا خَالِدُونَ (275) يَمْحَقُ اللَّهُ الرِّبَا وَيُرْبِي الصَّدَقَاتِ وَاللَّهُ لَا يُحِبُّ كُلَّ كَفَّارٍ أَثِيمٍ (276) إِنَّ الَّذِينَ آمَنُوا وَعَمِلُوا الصَّالِحَاتِ وَأَقَامُوا الصَّلَاةَ وَآتَوُا الزَّكَاةَ لَهُمْ أَجْرُهُمْ عِنْدَ رَبِّهِمْ وَلَا خَوْفٌ عَلَيْهِمْ وَلَا هُمْ يَحْزَنُونَ (277) يَا أَيُّهَا الَّذِينَ آمَنُوا اتَّقُوا اللَّهَ وَذَرُوا مَا بَقِيَ مِنَ الرِّبَا إِنْ كُنْتُمْ مُؤْمِنِينَ (278) فَإِنْ لَمْ تَفْعَلُوا فَأْذَنُوا بِحَرْبٍ مِنَ اللَّهِ وَرَسُولِهِ وَإِنْ تُبْتُمْ فَلَكُمْ رُءُوسُ أَمْوَالِكُمْ لَا تَظْلِمُونَ وَلَا تُظْلَمُونَ (279)

“ (275) As for those who devour interest, they behave as the one whom Satan has confounded with his touch.  Seized in this state they say: “Buying and selling is but a kind of interest,”  even though Allah has made buying and selling lawful, and interest unlawful. Hence, he who receives this admonition from his Lord, and then gives up (dealing in interest), may keep his previous gains, and it will be for Allah to judge him.  As for those who revert to it, they are the people of the Fire, and in it shall they abide.

(276) Allah deprives interest of all blessing, whereas He blesses charity with growth. Allah loves none who is ungrateful and persists in sin.

(277) Truly the reward of those who believe and do righteous deeds and establish Prayer and pay Zakah is with their Lord; they have no reason to entertain any fear or grief.

(278) Believers! Have fear of Allah and give up all outstanding interest if you do truly believe.

(279) But if you fail to do so, then be warned of war from Allah and His Messenger.  If you repent even now, you have the right of the return of your capital; neither will you do wrong nor will you be wronged. “(Chapter al Baqarah/The Cow:275-279)

By comprehending these steps, one could understand why, in the end, Allah the Glorified and Exalted prohibited usury in absolute way, whether it is large or small in amount. (See: Fiqh sunnah 3/174 and At-Tadarruj fi Tahriim Ar-Riba (]

Also, it is evidently explained in the previous hadith that usury is omitted as a whole and the first usury to be omitted is the usury of ‘Abbas -may Allah be pleased with him-. The hadith is a part of the Prophet’s speech -may peace and prayer of Allah be upon him- at the field of Arafa. Thus, prohibition of usury as a whole is the last step before his death.

But then, what is the solution in shari’a?

In Islam, investment in order to gain profit is already regulated, and it is named mudharaba (profit sharing) [The real mudharaba, not the version of some of the shari’a financial institutions, -ed]. In mudharaba, there are capital owner (shahibul mal), businessman (mudharib), capital (ra’sul mal), and profit sharing (ribh).

The profit sharing is a percentage taken from the profit and not from the capital; for example, the share is. 40% for the capital owner and for the businessman/manager, 60%, or 55% for the capital owner and 45% for the businessman/manager, depends on the agreement between the two party at the beginning of the contract.

If any losses shall happened, then the manager doesn’t get anything and the capital owner losses his money. This is what the financial institutions lack of. If any clash happened, it could be solved by examining the trustworthiness of the businessman. If the businessman have been trustworthy in running his business yet the loss still happened, then the capital owner is not allowed to sue him. But if the businessman isn’t trustworthy in spending the capital, such as spending it for his private need, or spending it out of agreement, then the capital owner may sue him to gain his money back.

This is the right solution in shari’a, rather than using bank deposit, the best solution is to use the money as business capital; moreover, if we count it more precisely, th profit gained from mudharaba is larger than from bank deposit.

Haven’t the Shari’a (Islamic) Banks Applied this kind of Mudharaba in Their Practices?

No they haven’t, because in reality, they are still unable to be usury-free. One of the reasons is because they aren’t given the right to seek profit other than the saving and lending method.

If they are able or allowed to be an independent institution that have various lawful businesses, and people (their clients) could invest their capital in it, by agreeing to bear the losses if the business suffer from losses, and obtain profit as percentage from profit instead of capital, then this practice could be a solution for such cases.

May this short article benefit us all.


  • Al-Asybah wa An-Nazhair ‘ala Madzhabi Abi Hanifah An-Nu’man. Beirut: Dar Al-Kutub Al-‘Ilmiyah.
  • Al-Farqu Baina Al-Bai’ Wa Ar-Riba. by Shalih bin Fauzan Al-Fauzan. Ar-Riyadh: Dar Al-Qasim.
  • Al-Mudharabah fi Asy-Syari’atil-Islamiyah. by ‘Abdullah bin Hamd bin ‘Utsman Al-Khuwaithir. Ar-Riyadh: Dar Kanuz Isybilia.
  • Fiqh As-Sunnah. by Sayyid Sabiq. Beirut: Muassasah Ar-Risalah.
  • Muwaththa’ by Al-Imam Malik. Mesir: Dar Ihya’ At-Turats Al-‘Arabi.
  • etc, as cited in footnotes.

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