Resolution of the Islamic Fiqh Academy on the Ruling Concerning Interest-Based Banking Transactions: No. 10

In the name of Allah, the Most Gracious, the Most Merciful.
All praise belongs to Allah, Lord of the worlds; and may blessings and peace be upon our master Muhammad, the seal of the prophets, and upon his family and Companions.

To proceed:
The Council of the Islamic Fiqh Academy, affiliated to the Organization of the Islamic Conference, convened its second session in Jeddah from 10–16 Rabīʿ al-Thānī 1406 AH (22–28 December 1985 CE).

Having reviewed the various papers submitted on contemporary banking practices,
and after reflecting upon them and conducting focused deliberations that brought to light the harmful effects of those practices on the global economic order and its stability—especially in the countries of the developing world—

and having considered the devastation caused by this system as a result of turning away from the clear, comprehensive prohibition of ribā found in the Book of Allah, the Academy calls for repentance from it, for limiting dealings to the recovery of the principal sums of loans with no increase or decrease, whether large or small, and it reminds all of the severe warning of a devastating war from Allah and His Messenger against the usurers,

has resolved:

First: Any increment or interest added to a debt that has fallen due when the debtor is unable to pay and the term is extended in return for that increment, as well as any increment or interest stipulated on a loan at the very outset of the contract—both forms constitute ribā that is unequivocally forbidden by the Sharīʿah.

Second: The permissible alternative that guarantees financial liquidity and supports productive activity