When we speak of interest, we need to understand that we are approaching an area which is strictly forbidden, namely, usury. If you review the Qur'anic statements and the Hadiths that speak of usury you realize that the emphasis God and His messenger have given to this subject is too strong to ignore.

Suffice it is to say that it is only in connection with usury that God has warned those who persist in practicing it of a war which is certain to be declared on them by God Himself and by His messenger. We have been adequately warned.

As far as usury is concerned, there is simply no legitimate use of any money earned through any usurious practice. The question here is whether the same ruling applies to interest. Perhaps it is more accurate to say that interest is not exactly the same thing as usury. We are not talking here about synonyms. However, there are enough similarities between the two to consider interest within the same context as usury and to warn every Muslim against accepting any transaction that gives him interest on his account. To take that interest for one's own benefit is not appropriate for a Muslim to do.

Similarly, the utilization of interest for any purpose which brings direct benefit to the individual concerned is not right. We should steer away from that as far as we can. Since people do get involved in transactions that give them interest on their money, it is pertinent to ask whether there is any legitimate use for such money.

Until very recently, scholars used to say that bank interest has no lawful use and they advised people not even to take it. But this is a much too cautious verdict. As scholars continued to discuss the subject and as their understanding of the intricacies of the banking system widened, they have increasingly tended to advise people to put the money generated as interest to a charitable use, first in a project that would benefit the community generally, as in the case of schools or public services the community urgently needs.

Now, however we say that interest money could be given to those who are very poor, particularly in areas which suffer famine or food shortages. Do not, however, use interest for a purpose which brings a direct benefit to you personally or to members of your family, particularly those whom you must look after.

Taking that into consideration I cannot see a way which makes the payment of dowry or tax with money generated by interest as a legitimate transaction. Here there is a direct benefit to the person concerned. If he is liable to pay tax to his Muslim government and he uses interest money for that purpose, he is personally the direct beneficiary of that transaction. It is just like saying to a person: You cannot take interest and put it in your wallet, but you can put it into your bank account or you can pay your bills with it. That is nothing less than a crude way to get round the established rules.

Using interest to offset the drop in money value caused by inflation has more merit. Here we are talking about trying to maintain the real value of what a person has. Suppose the rate of inflation in a particular country runs at 20% per annum. This means that if you have 1000 Riyals today and keep it with you, then a year from now you can only buy with it what you can buy now for only 800 Riyals. If you put it in a deposit account which gives you interest at 12%, then at the end of one year, you end up with 1120 Riyals, which is a larger amount than what you started with, but in real terms you have incurred a loss because you will still need a little extra to be able to buy the same goods you can buy now for your original amount. The question is whether it is permissible to do that or not.

This is a very difficult question and scholars have not come up with a definitive ruling on this point. I personally do not wish to give one, but at the same time I will not object to anyone doing that. I have indeed discussed this very point with a highly religious professor of economics who happens to take a strong view of interest and its uses. His advice, with which I certainly concur, is that it is better to deposit the money in an Islamic bank which gives returns on a profit-and-loss-sharing basis. However, the reluctance of people to go into that type of transaction is understandable. I hope I have given you enough to go by.

I am afraid that is my limit. It is at the end entirely up to you to consider the matter carefully and determine the course you wish to follow.

The Prophet, peace be upon him, advises us to consult our hearts after we have studied a matter carefully. We cannot do better than acting on his advice. I have another point of advice to the reader who asks about the dowry demanded by the bridegroom. This is certainly a practice that Islam does not sanction. Islam requires a Muslim man to pay a dower to his bride which becomes her property in the full sense of the word. But in certain communities the reverse is true.

It is not for me to redefine interest. That is a task for economists. What is forbidden in Islam is that which is known in Arabic as "riba", which we often translate as usury. I realize that interest given or charged by banks is not exactly the same as usury, but there is sufficient similarity to make Muslim scholars consider interest as forbidden. Riba, or usury means the excess a lender receives over and above the principle amount he advances to a borrower. At the time when the Islamic message was vouchsafed to the Prophet Muhammad, peace be upon him, people used to borrow money for a specific term. When the time is due and the borrower does not have funds to settle his debt, he would go to the lender and ask him to put back the repayment date in return for an increase in the amount to be repaid. That is strictly forbidden.

You will agree that there is a great similarity between this process and what happens when you borrow money from a bank. If the loan is to be repaid over a longer period, then what is actually repaid is larger than what would have been the case if the principal amount was repaid over a short period. Banks speak of "debt servicing" and the term is interest from the Islamic point of view. However, not many religious scholars have had the type of thorough knowledge of the banking system in order to reconsider the commonly known rulings which pronounce interest as forbidden, because it is a type of riba or usury. A couple of years ago, the Mufti of Egypt appealed for a redefinition of banking terms. This should be done by bankers and economists who should come forward and tell us in simple language what is involved in every sort of banking transaction. When they do it, religious scholars will be able to make a more scholarly and well considered ruling about every type of transaction.

In fact, governments in many Muslim countries prefer to operate an economic system which is bound to create great difficulties between those at the top and those at the bottom of the social ladder. By so doing, governments deprive their people of the great benefits that the Islamic system can provide. Moreover, we see the usurious banking system operating in the majority of Muslim countries. This leads to an even greater gulf between the rich and the poor. Therefore, in the absence of the Islamic system, any scheme which does not contravene Islamic principles and is designed to help the poor in the community is encouraged and commendable.

If we consider this scheme which this group of Indian Muslims are planning to do, the only point that may be taken against it is that its source of funds is the interest paid by banks on the deposits of these Muslims.

However, this objection should not be given more weight than it deserves. Those people do need to use the services of their banks. They do not put their money in bank accounts in order that they should earn interest. They do not wish to take the interest for themselves as they believe that they may not receive it for their own benefit. The banks offer this interest out of their own accord, in return for benefiting by the use they can make of the money deposited in them. Therefore, the interest given should be used for something that benefits the Muslim community, but not the owners of the money deposited with the banks.

If this interest money is not taken, but left instead to the banks, then the banks may use it for something that could harm Islam or the Muslim community. Therefore, it must not be left to those banks. [It may be argued that the money should not be put in interest bearing accounts. It could be placed in current accounts against which the banks do not pay any interest. Such deposits will provide the banks with interest-free deposits;. thus helping the bank with their anti-Islamic or anti-Muslim objectives.] Nor is it permissible to destroy it on its receipt, because then we are destroying something that could be put to a beneficial use. This is not permitted in Islam.

The third alternative of adding the interest to one's own money is also not appropriate, because scholars maintain that interest is forbidden to take for oneself. The only permissible alternative is to take the interest and use it for something that benefits the community.

There are numerous schemes that could be thought of in this connection. This group of people have come up with this scheme in order to alleviate the hardship of some of the members of their community. These are the very poor who are forced when going through a difficult period to get an advance from a pawnbroker who charges them an exorbitant rate of interest. This is most likely to end in their total loss of the item given as security to the pawnbroker. They do need that article most certainly, but they are forced to abandon it and get for it a very petty price. If this hardship can be alleviated through the use of the interest given by banks, then it is infinitely better if the economy of the community is organized in such a way that it does not need to resort to such schemes. But until this happens, the Muslim community may think of the ways and means available to it in order to lessen hardship or improve its members' circumstances.

This scheme involves taking security for loans, which is again permissible. However, I would like to advise those people that they should spare no efforts in trying to help those who need help. Thus, if a person gets an advance from them and he is unable to pay it back, then they should be given an extension of the loan period. Only when it is absolutely clear that the borrower cannot meet his obligation, then selling the security could be considered as an option. Since those people do not intend to charge any security for any balance that remains outstanding after deducting the amount of the loan, then there is nothing wrong with their scheme. May God bless them and guide them to benefit their community as best as they can.