Subject : Ruling on Usurious Transactions Undertaken by a Financial Director

Fatwa Number : 3002

Date : 21-10-2014

Classified : Current Financial Issues

Fatwa Type : Search Fatawaa

Question :

What is the Islamic ruling on the banking transactions undertaken by a financial director, or any staff member from the financial department of the company regardless of his job title. You should take into consideration that the key activity of that company isn`t in the banking domain, and some people keep trying to finance their assets and businesses through usurious loans instead of dealing with Islamic banks because the terms stipulated by non-Islamic banks are better. This causes the owners of the company to turn to usurious banks directly, and so the financial director of the company couldn`t convince them to turn to Islamic banks. The problem of the financial director lies in the fact that he is the financial representative of the company and is obliged to explain any event that has a financial impact on the company`s data such as recording the various banking transactions. I will brief you on the banking transactions encountered by the financial director as a part of his job assignments: 1- Negotiating the interest rates of loans (In the company where I work the central administration has a specific section for this purpose, and it may, sometimes, take part in these negotiations. 2- Signing these loans after reaching an agreement with the bank in question. 3- Deducting documentary letters of credit at the banks (The bank pays the value of the future documentary letters in cash for a commission). 4- Recording the bank`s interests. 5- Transfering the salaries of staff members to banks on monthly basis. 6- Signing forms that facilitate receiving loans by staff members based on their will as the financial director has no authority to ban any of them from obtaining a usurious loan. 7-Signing documents pertaining to the collection of the company`s funds through the bank in return for a commission (collect policy, collect cheque). 8-Signing documents pertaining to paying the value of the company`s purchases to their suppliers, be they transfers, or credits.

The Answer :

All perfect praise be to Allah. Blessings and peace be upon Prophet Mohammad.

Islam has forbidden every act that helps directly in committing what is unlawful. Allah Says in the Holy Quran (What means): “Help ye one another in righteousness and piety, but help ye not one another in sin and rancour: fear Allah. for Allah is strict in punishment.” {Al-Maidah/2}. Helping someone in Riba (usury) is more prohibited than helping him in committing other acts of sin. On the authority of Jabir: “The Messenger of Allah (PBUH) cursed the one who accepts Ar-Riba (the usury), the one who pays it, the one who records it, and the two persons who stand witness to it, and he said:” All of them are equally sinful.” {Muslim}.

It is well known to everyone that the loans offered by usurious banks are from the Riba.Ibn Qodamah said: “ Each loan repaid with an increase is undisputedly unlawful.” {Al-Moghni 4/240}.

Therefore, it is impermissible to carry out any act which directly helps in concluding usurious contracts such as: negotiating, signing usurious loans, facilitating usurious transactions…etc.

As regards acts that don`t directly help in Riba such as approving the transfer of staff salaries, being compelled to approve a usurious loan due to occupying a certain position..etc, then there is no harm for an employee to keep his position.

We advise each financial director to carry out the tasks entrusted to him within the framework of Islamic Law as perfect as possible, and not cooperate in sin and aggression. Allah The Almighty Says (What means): “ to O ye who believe! if ye fear God, He will grant you a criterion (to judge between right and wrong), remove from you (all) evil (that may afflict) you, and forgive you: for God is the Lord of grace unbounded." {Al-Anfal/29}.

We stress that it is an obligation to forbid inequity and extend advice to decision makers to resort to Islamic banks, and avoid Riba. And Allah knows best.

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