The ruling on depositing zakāh funds in banks and the use of interest

The ruling on depositing zakāh funds in banks and the use of interest

Dr. Mohammad Akram Nadwi
Oxford

Question:
Assalam-o-Alaikum Sheikh, I hope you are well.
I studied at a boarding grammar school in Pakistan. Its alumni have formed an association worldwide, through which we raise funds, mainly from within our own community, to support financially needy students with their tuition fees as well as health expenses. The money collected is given as zakat or sadaqah.
The association has been saving these funds in a bank in Pakistan and earning interest on them, with the view that this would make the model sustainable. From this pool, tuition fees are sometimes paid, or the money is reinvested into the same account.
However, there is no clarity on whether the savings contain any portion of zakat, whether zakat collected in the last 15 years has been discharged, or whether it has become mixed in with these savings. I, along with a few others, have long objected to this method, as I believe the association should not be earning interest on donated money.
I would greatly value your guidance on two points:
1. Is fixing an amount to earn profit (interest) permissible (halal)?
2. Can children’s tuition fees be paid from this interest?
JazakAllahu khairan. Tashfeen

Answer:
Wa Alaikum as-Salaam wa Rahmatullahi wa Barakatuh,
Dear Brother Tashfeen, may Allah reward you for your concern and sincerity in safeguarding the sanctity of zakāh and ṣadaqah. Your questions are both weighty and significant, as they touch upon fundamental principles of our dīn regarding wealth, charity, and the grave prohibition of ribā (interest). It is only with clarity on these matters that one can fulfil the command of Allah ﷻ with sincerity and ensure that these sacred trusts reach those whom He has appointed as rightful recipients.

It must be stated with full clarity that ribā is strictly prohibited in Islam. It is not permissible to deposit zakāh or ṣadaqah funds in an interest-bearing account with the intention of gaining “sustainability” or profit. Zakāh and ṣadaqah are acts of obedience, whereas ribā is an act of disobedience. They are opposites by nature: ṣadaqah brings Allah’s blessing and mercy, while ribā invites His anger and curse. To mix these two is to attempt to join light with darkness, and that can never be acceptable in the eyes of the Sharī‘ah.

Allah ﷻ Himself has explained the categories of those entitled to receive zakāh in the Qur’an in unambiguous terms: “إِنَّمَا الصَّدَقَاتُ لِلْفُقَرَاءِ وَالْمَسَاكِينِ وَالْعَامِلِينَ عَلَيْهَا وَالْمُؤَلَّفَةِ قُلُوبُهُمْ وَفِي الرِّقَابِ وَالْغَارِمِينَ وَفِي سَبِيلِ اللَّهِ وَابْنِ السَّبِيلِ فَرِيضَةً مِّنَ اللَّهِ وَاللَّهُ عَلِيمٌ حَكِيمٌ” (التوبة: 60) “Zakah is only for the poor, the needy, those employed to collect it, those whose hearts are to be reconciled, freeing slaves, those in debt, in the path of Allah, and the wayfarer. This is a duty imposed by Allah, and Allah is All-Knowing, All-Wise.” The Messenger of Allah ﷺ explained the wisdom further when he said: “تُؤْخَذُ مِنْ أَغْنِيَائِهِمْ وَتُرَدُّ عَلَى فُقَرَائِهِمْ” (صحيح البخاري) “It is taken from their wealthy and returned to their poor.”

From these clear evidences, it is obvious that zakāh is not a wealth to be saved or invested, but a trust to be promptly distributed among the poor and needy so that their pressing requirements are met without delay. The purpose is to ease their hardship immediately, not to increase or store the wealth of those who distribute it.

As for the use of interest itself, it must be understood that it is not permissible to use ribā for any noble or pious cause. Interest is not clean wealth; rather, it is something accursed which cannot be turned into reward. If such money comes into one’s possession due to ignorance or circumstance, it must be separated from other funds and disposed of. This disposal is done by giving it to the most destitute of people, those from whom one expects no favour, gratitude, or benefit in return. It may be used to meet their basic needs, such as food or clothing, but one must not consider this an act of ṣadaqah, for ribā will never become ṣadaqah in the sight of Allah. It is only a means of cleansing one’s hands from impure wealth.

By contrast, zakāh money can indeed be used to pay the tuition fees of needy children, for education is among their genuine needs. Likewise, zakāh may be directed to the welfare of widows, orphans, the disabled, and poor families. In the case of Muslim schools, zakāh has been permitted under the category of fī sabīlillāh for the subsistence of poor students, modest support for teachers and employees who are needy, and other basic necessities of learning such as food, clothing, or essential accommodation. However, surplus zakāh must never be locked away, invested, or used for long-term projects such as land purchases or expansion of assets, for this contradicts the immediate purpose of zakāh as expressed in the Qur’an and Sunnah.

Thus, the way forward is that zakāh should only be distributed among its rightful recipients as mentioned by Allah ﷻ. No zakāh or ṣadaqah funds should ever be placed in interest-bearing accounts, as this is a mixing of two opposites. Any interest which has already accrued must be separated and handed to the poor without the intention of reward. Tuition fees for needy children can rightfully be paid from zakāh, but never from ribā.

Here it is worthy to pause and remember the great virtue of zakāh. It is an obligation, a purification, and a mercy for one’s wealth, and a means of uplifting the weakest in society. Allah has promised immense reward for those who discharge it sincerely. Ribā, on the other hand, is a sin of the gravest order, which brings corruption to wealth and society, and places one in opposition to the command of Allah. Where zakāh attracts the mercy of Allah, ribā draws His punishment.

My dear brother, may Allah accept your efforts, purify your intention, and grant your association the tawfīq to conduct its work in a manner that brings only blessing and never sin. May He protect us all from the evil of ribā and make us among those who give zakāh with sincerity, thereby attaining His mercy and forgiveness.

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