Islamic Investment Schemes in South Africa: Shariah Compliant?
Question:
Assalamu Alaykum. What is the permissibilty of Islamic investment schemes/aid at major South African Banks such as fixed deposits and savings accounts or financial aid services. JazakAllah Khair.
Answer:
In the Name of Allah, the Most Gracious, the Most Merciful.
As-salāmu ‘alaykum wa-rahmatullāhi wa-barakātuh.
Answer:
In the Name of Allah, the Most Gracious, the Most Merciful.
As-salāmu ‘alaykum wa-rahmatullāhi wa-barakātuh.
We apologize for the belated response.
Your question refers.
We applaud you for your sincere intention (Niyyah) in ensuring your financial dealings are shariah compliant. May Allah Subhanahu Wa Ta’ala grant you the means to earn a shariah compliant income. Ameen.
With regards to your specific query, there are a number of Islamic investment schemes such as fixed deposits, investment certificates and savings accounts offered by Islamic financial institutions in South Africa.
There are a number of considerations before considering the shariah compliance of such products including ensuring the concept is Shariah compliant, the terms and conditions are compliant and the products are audited and reviewed for shariah compliance.
In general, most investment savings and deposits are premised on the basis of Mudarabah/Islamic sweat equity partnership and hence all the rules and laws of Mudarabah will be applicable. Therefore the Islamic banks serve as the Mudarib/sweat equity partner while you as the depositor serves as the Rabb al-Maal/depositor/investor. Essentially all the capital and profits cannot be guaranteed. The bank generally engages in a parallel Mudarabah with clients for financing or the investment in capital market instruments with issuers. An indicative rate which is uncapped is permitted. However a fixed rate of return with guaranteed capital is not permitted as that is merely an interest on a loan. (Kitab al-Mudarabah, Hidayah, Vol.2, Pg. 282)
The treasury function at the back office level should also be shariah compliant and the funds should not be mixed up with conventional funds (Khultah) as that would render the entire solution impermissible. In other words, the funds received by the bank should only be invested in shariah compliant instruments strictly speaking.
Nevertheless, kindly forward us the specific terms and conditions for our specific Shariah ruling on the products in reference.
And Allah Ta’āla Knows Best
(Mufti) Ismail Desai
Chairman of Shariah Board and Fatwa Committee,
Darul Iftaa, Durban, South Africa
DISCLAIMER: The views and opinions expressed in this answer belong only to the author and do not in any way represent or reflect the views of any organizations to which he may be affiliated with. The opinions and educational information proffered in this communication are based on the jurisprudential understanding and available knowledge of the author. Given that contemporary issues and interpretations of contemporary issues are subjective in nature, another scholar may reach different juristic inferences and conclusions to those as expressed by the author. Whilst every effort has been taken to ensure total academic integrity and honesty, the author is open to corrective measures based on sound academics and juristic inferences. The Shari’ah ruling given herein is based specifically on the specific scenario in question. The author bears no responsibility towards any party that acts or does not act on this answer and is exempted from any and all forms of loss or damage. This answer may not be used as evidence in any court of law without prior written consent from the author. Any or all links provided in our emails, answers and articles are restricted to the specific material being cited. Such referencing should not be taken as an endorsement of other contents of that website.
(Announcement: The Darul Iftaa under the auspices of the Mufti Ebrahim Desai Foundation is managed by Mufti Ismail Desai Saheb, son of Hazrat Mufti Ebrahim Desai Saheb RA. Mufti Ismail Desai will continue his academic career by conducting an intensive one year specialist programme in Islamic Finance, Banking and economics (MA) and Iftaa training programme for Ulema and Shariah graduates. Mufti Ismail Desai Saheb will also be conducting various programmes for the public on Islamic Finance, Ishaahi Majlis and general Islamic Q&A. Alhamdulillah the Darul Iftaa currently has over 50 students from over 32 countries globally. The Darul Iftaa will be conducting programmes on Islamic Finance, Business and Economics in various cities/countries. The programme is conducted free of charge and you can request an event by contacting us directly at www.shariahbusiness.com. You can contact the Mufti Ebrahim Desai Foundation for any details on Hazrat Mufti Ebrahim Desai RA at www.muftiebrahimdesai.com. We will keep you updated on our programmes and events via our email data base and other media channels)
and Allah Ta'ala Knows Best
Mufti Ismail Desai
Darul Iftaa
Durban, South Africa
Disclaimer The views and opinions expressed in this answer belong only to the author and do not in any way represent or reflect the views of any organizations to which he may be affiliated with. The opinions and educational information proffered in this communication are based on the jurisprudential understanding and available knowledge of the author. Given that contemporary issues and interpretations of contemporary issues are subjective in nature, another scholar may reach different juristic inferences and conclusions to those as expressed by the author. Whilst every effort has been taken to ensure total academic integrity and honesty, the author is open to corrective measures based on sound academics and juristic inferences. The Shari’ah ruling given herein is based specifically on the specific scenario in question. The author bears no responsibility towards any party that acts or does not act on this answer and is exempted from any and all forms of loss or damage. This answer may not be used as evidence in any court of law without prior written consent from the author. Any or all links provided in our emails, answers and articles are restricted to the specific material being cited. Such referencing should not be taken as an endorsement of other contents of that website.
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