Investment of savings

Q294 :Now that we are certain that bank interest is forbidden in Islam, the question arises: how can a Muslim invest his savings? If he lives in a country where there is no Islamic banking facility, the alternatives available to him are either to use a deposit account which earns interest or entrust some businessman who will be happy to use this money in his trade. However, this method is not very satisfactory, especially with the increase in the number or bankruptcies and fraudulent dealings among such people. Could you or other Islamic scholars show us any halal, or permissible way of making use of our savings?

A294 : I admit at the outset that this is a thorny question, for which I have no ready answer. I certainly appreciate the desire of every person who has made some savings to invest them in a permissible way which ensures some good returns, at least to offset the loss he is bound to incur as a result of inflation. It is a certainty that money which is left in a current bank account loses part of its value as a result of inflation and higher prices. Hence, the need is pressing for a good investment at least to ensure that such saved money retains its value. The problem of investors is again a very real one. The number of bankruptcies and fraudulent dealings is sufficient to make anyone who has earned his wages through hard work very reluctant to entrust those savings with any investment company. The situation has not been helped by certain governments which have dealt a blow to the very concept of using people's savings in order to start profit making projects which help the economy of the country. They have advanced reasons for their action but their reasons remain dubious. Therefore, the original question of how to invest remains without a satisfactory answer. But I should take issue with you regarding the way you have phrased your question. It is not the business of a scholar to show you a way to invest your money in an Islamically acceptable way. There may be none available. It is wrong to assume that a scholar can provide you with one. It is the responsibility of an Islamic government to provide opportunities to its subjects to invest their money without contravening the teachings of Islam. If the government does not take care of such important matters, the Muslim community in general should do something about it. If they do not, then they are neglecting an important area and negligence may lead some of their numbers to commit a sin. It is sufficient that some people in the community should provide a practical answer. This is what the pioneers of Islamic banking have tried. If some such projects have failed, others have succeeded. Moreover, the very Islamic concept of such investment is based on a sharing of profit and loss. Besides, the failure was not entirely their own responsibility. There were pressures from usurious financial institutions in the capitalist world as well as internal pressures from forces which do not like to see an Islamic economy flourishing. That should not deter people from trying again. The only practical way that I can suggest is to try to find a businessman whom you can trust to be honest and God-fearing. You enter into a partnership with him on profit and loss sharing basis. Alternatively, you can join others who are in a similar situation and buy something for future sale which is highly unlikely to make a loss, such as real property. The other alternative is the opportunity provided by the Islamic banks. If there is none in your home country, you may be able to open an account with a bank in a free trading country.

Our Dialogue ( Source : Arab News - Jeddah )