Investment in the so-called ‘Islamic’ banks is a question which concerns many Muslims who write to us seeking the directive of the Shariah regarding the permissibility of investing in the deals offered by these banks. The blanket sanction which some Maulanas have accorded to investment in these banks have thrown Muslims into confusion.
The deals offered by these banks and their methods of operation make it clear that they are no better than the kuffaar riba banks. Muslims are misled by the Islamic terminology which is copiously employed by these banks to market their haraam products. Terms such as Mudhaarabah, Mushaarakah, Muraabahah, Ijaarah, etc., are the thin veneer under which the riba is concealed. Unwary and ignorant Muslims are given the impression that the investment deals offered by these banks all fit into the scope of the aforementioned Islamic contracts and agreements.
However, this claim of the Muslim bank entrepreneurs is akin to a non-Muslim bank asserting that its leasing contract is Ijaarah, its hire-purchase deal is Muraabahah, etc., etc. While it is correct for a non-Muslim bank to aver that its leasing transaction is Ijaarah and its hire-purchase deal is Muraabah, it is grossly false to claim that such ijaarah and muraabah products offered by the kuffaar banks conform to the Ijaarah and Muraabahah deals of the Shariah. In exactly the same way do the deals of the ‘Islamic’ banks conflict with the Shariah notwithstanding the correctness of the terms ijaarah, muraabahah, etc. applying literally to their haraam products.
To understand the proper Shar’i classification of the contracts and agreements of these ‘Islamic’ banks, it is necessary to examine their products, deals and contracts. This we shall, Insha’Allah, do in this discussion.[Maulana A S Desai, Mujlisul Ulama]