Question:

Hello, I am helping a newcomer Muslim to Canada who is very careful with her money. She is saving in an interest-free/chequing account. As she is struggling financially, and even though the current Canadian interest rates are very low:

1. Can she put money into an interest-bearing account? I have worked in the financial industry for many years and it was always my understanding that the interest on a deposit bank account is for the time value of money (effectively inflation) and a small amount of risk and very small amount for work of presumably a financial industry employee.
2. Despite her reduced financial means, she wants to help others. Could she put savings into an interest-bearing account and then donate the interest accumulated to a charitable organization?
3. The school she goes to told her about RESPs – registered education savings plans. An amount is put aside and the federal government will match the amount if the child goes on to university. Is there any form of investment she can make, or must her part be non-interest-bearing?

Thank you very much for your earliest possible answer.

JazakAllahu khairan  

Answer:

Bismillāhi Taʿālā

Assalāmu ʿalaykum waraḥmatullāhī wabrakātuh,

At the outset, I thank you for taking this initiative to help a fellow Canadian in the way she would love to be helped. The conventional financial environment presents many different challenges for Muslims. Nontheless, answers to your questions follow:

1. No, she may not put her money in an interest bearing saving account. Islamically any loan that generates a benefit will be termed as ribā’ (interest) and classified impermissible. You may read on the complete understanding of why interest is impermissible in Islam at (http://www.qafila.org/interest-mission-impossible/)
2. It is also impermissible to knowingly enter into an interest-bearing transaction. Rasulullah ﷺ has cursed an individual who engages in an interest-bearing transaction. As an offshoot, it is thus also impermissible to enter into such a transaction with an intention to dispose the interest received in charitable work.

It must be borne in mind that other answers on the website may suggest disposing any interest monies acquired into charitable works without an intention of reward. That ruling is for an individual  who acquires interest un-willingly, such that it just so happens that the person comes into acquisition of such money. Interest money is to be considered as filth, and hence no benefit is taken from it. It is disposed into charitable avenue, as a means of ridding oneself off it, and not as a matter of sadaqah (reward worthy charity)

Hence, it will not be permissible for her to knowingly put her money in an interest-bearing loan/deposit despite the intention(s) attached to the profits thereof.

3. RESP in general have different avenues of investments within it like cash, GICs, mutual funds and stocks etc. As an instrument of investment for future purposes, RESP is permissible. However, the holder of RESP must choose the avenues of RESP wisely. GICs, bonds and other interest bearing investments are completely off limit. Since there is a viable difference of opinion on the stocks and shares, she may opt for Shariah Compliant mutual funds, stocks and shares. The contribution which is matched by the government will be considered as a hiba (gift) from their side and permissible for the beneficiary to take.

And Allāh Taʿālā Knows best,

Wassalamu ʿalaykum,

Mufti Faisal al-Mahmudi