Establishing a Muslim bank and its income

Question

Question: (1) Here Muslim merchants wish to establish their own special Muslim bank for the purpose of transactions with Muslims only. Just as in the “Muslim Fund” (an interest-free Muslim loan society) in Deoband and elsewhere the price of one form is fixed for every hundred rupees, so that the one taking the money must first buy the form for a price — how would it be if, in the same way, the price of a form were fixed here in the Muslim bank?

Answer

(1) Taking an interest-free loan is correct even without a guarantee; buying a form for one rupee does not fall under interest. (2) What form would the income take? Interest is not taken there: however much money someone borrows from there, he will return just that much, and the form is given for one rupee — rather, something more will have to be spent.

Source: Fatawa Mahmudiyya

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