By: Al-Monitor –
Recent fatwas remind Egyptian Muslims that receiving interest on a savings account is permitted, but profiteering from scarce supplies is not.
A recent interest rate hike by the Central Bank of Egypt (CBE) has sparked a public debate about whether returns on bank deposits are halal (lawful) or not, according to Islamic sharia law. Egypt’s Dar al-Ifta, the country’s authority for issuing fatwas (religious edicts based on sharia), has reiterated that yields on certificates of deposits (CDs) are halal.
The repercussions of the Russia-Ukraine conflict and the supply chain crisis have driven the religious authorities to issue another fatwa on March 22 clearly declaring that monopoly of food items and supplies for profiteering is prohibited according to sharia.
Such fatwas reflect the extent to which Islam influences the business culture in Egypt . A Quranic verse says “Allah hath permitted trade and forbidden usury” [Surat al-Baqarah 2:275], according to Yusuf Ali’s translation.
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As for interest rates on savings, Dar al-Ifta has specifically approved them, along with the Islamic Research Academy, affiliated with the prominent seat of Sunni Muslim learning Al-Azhar.
Sheikh Mohamed Abdel Samie, Secretary of Fatwa at Dar al-Ifta, said in a live broadcast on March 22 that sharia approves yields on CDs and bank interest rates. The fatwa came one day after the CBE’s Monetary Policy Committee raised overnight interest rates.
In a bid to lure more savings, two state-owned lenders — the National Bank of Egypt (NBE) and Banque Misr — issued a one-year certificate at 18%. Mahmoud Shaltout (1893-1963), grand imam of Al-Azhar between 1958 and 1963, was the first sheikh to state that savings deposits are sharia-compliant.
“Certainly, yields on investment certificates are halal. The ultimate goal of issuing these certificates is to increase savings and strengthen the economy,” sheikh Ashraf Saad Mahmoud, an Azhar scholar, told Al-Monitor.
“In the days of Prophet Mohamed, there were two common currencies: a golden dinar and a silver dirham. Riba or usury at that time was dealing in gold for gold at an increase. The same is true for dirhams. Now, the currencies we have are banknotes. This paper money is subject to what is known economically as the phenomenon of inflation. Bank interests are a sort of compensation for the decreasing value of cash over time,” sheikh Mahmoud explained.
“The purchasing power of modern currencies is changing too,” he said. “In the early 1970s, the United States put an end to the gold standard, unleashing inflationary waves all over the world. It became necessary to cover that inflation in a way that sustains the purchasing power of money on markets,” he said.
With the end of the gold standard, Mahmoud said, the price of a gram of gold rose from one Egyptian pound in the 1960s to 1,000 Egyptian pounds ($54).
And the fixed annual return that depositors receive, he said, “is not forbidden in Islam as this annual yield is an average rate for profits and losses during the year. If banks lose in one deal or project, they make profits in other business transactions.”
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