Interest (riba)

Islam forbids both receiving and paying interest (riba). Many of us can end up accumulating interest through our bank accounts even if we don’t want it, so what should we do with it?

Since it is not permissible to use riba for one’s own benefit, we should donate it to charity. Although there is no religious reward for doing so, it at least disposes of the haram funds in a Shariah-compliant way.

In Islam, riba is interest gained or paid on transactions or savings. This includes:

• Any interest earned from savings accounts, individual savings accounts (ISAs) and other savings investments
• Interest earned by lending money, property or goods
• Payments of interest for credit card fees, loans or mortgages.

To donate riba to charity, you would be required to donate the amount of interest earned e.g. the money accumulated as savings interest.

There is no difference. ‘Riba’ is the Arabic word which is used in an Islamic context.
As with all Islamic affairs, we recommend consulting an Islamic expert on finance about any concerns or questions you may have.

Allah (SWT) tells us in the holy Qur’an to not engage in interest-based transactions/investments:

“O you who believe! Fear Allah and give up what remains [due to you] of interest, if you are true believers.” (2:278)

High levels of interest can lead to debt and financial insecurity, exploiting people on low incomes and without a financial safety net.

Islam instead encourages non-interest based giving, charity and long-term investments for the benefit of others such as sadaqah jariyah and waqf projects.

Zakat also ensures a social security net for people in need. 

Riba is generally considered one of the major sins in Islam and is explicitly discouraged in the Qur’an.

Ideally, we should not invest or engage in interest-based activities. However, this may not always be possible.

In this case, you can keep note of any interest earned and donate the money to charity in a Shariah-compliant way (for halal purposes).

Here at Islamic Relief, your donations help us save and change lives and are implemented in Shariah-compliant projects.