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III. Fatwas by the Council of Islamic Fiqh Academy - Organization of the Islamic Conference (O.I.C.).

In the name of Allah, the Compassionate, the Merciful, Praise be to Allah, Lord of the worlds, and blessings and peace be upon our Prophet, the last of the prophets, and on his relatives and his companions.

Resolution concerning bank interest and dealing with Islamic banks.

The Council of Islamic Fiqh Academy, formed by the O.I.C., held its second conference in Jeddah from 10 to 16 Rabi' Thani, 1406 A.H./22-28 December, 1985 A.D.

Having reviewed various studies concerning modern concerning modern banking methods, and after seriously investigating and discussing what was submitted in order to stress the negative impact these methods have on the stability of the world economic system, especially the stability of third world states, and after contemplating the damage this system has caused as a result of failing to apply what is clearly stated in Allah's Book as to the absolute prohibition of usury, and in calling for repentance from this, and for its limitation to the retrieval of both large and small loans, and after contemplating what is mentioned as a threat of a total war by Allah and His Prophet on usurers, this conference has resolved that:

    First: All increments (or interest) in return for the postponement of paying a debt on its due date even though the borrower is unable to repay it on time, and all increments (or interest) on the loan from the date it was first made, are considered legally prohibited.
    Second: The alternative, which guarantees financial liquidity and helps economic activity in a form that is acceptable to Islam, is to transact according to Islamic law, particularly after what has been published by concerned organizations on the various aspects of operations which are actually implemented by Islamic banks.
    Third: The Council has decided to call upon Islamic governments to encourage the existing Islamic banks, enabling their establishment in all Islamic countries to answer the needs of Muslims, so that a Muslim does not have to live in a state of contradiction between actual conditions and the tenets of this creed. Allah, the Almighty, knows best.


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