Grand Ayatollah Shirazi remarks on loans given by banks under Sharia-based titles

The daily scholarly meeting of Grand Ayatollah Seyyed Sadegh al-Hosseini al-Shirazi was held on Sunday, the 27th of Rabi al-Thani. In this session, like the previous meetings, the supreme religious authority answered the questions of the attendees about various jurisprudential issues.

In relation to loans given to customers at varying interest rates, the Marja said: “If such loans are based on elements of usury, they are definitely not permissible. It is narrated from Amirul Momineen, peace be upon him, who quotes the Holy Prophet, peace be upon him and his family, cursing five groups that are related to usury: taker of usury, seller of usurious property, payer of usury, one who calculates usury, and witness of a usury contract.”

His Eminence continued: If these loans are paid by banks under the title of “Mudharabah” or other Shariah-based contracts, and the conditions of Mudharabah are really met, then there is no problem, even if they are essentially a form of Mudharabah. However, if the banks only use the title Mudharabah, but its conditions are not fulfilled, the agreement will be considered usury.

He went on to say: It is not permissible to pay usury to a non-believer, but it is permissible to take usury from a ‘harbi’ kafir, according to the predominant opinion. But there are authentic hadiths which indicate that taking usury from a non-believer, even if they are not ‘harbi’ (or, in active war with Muslims), is absolutely permissible, be that a covenantor, a polytheist, or people of the book. Some fuqaha have subscribed to this opinion and I believe it is probably right.