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Islamic Banks Get a ‘Libor’ of Their Own | WSJ.COM




Cross-posted from The Wall Street Journal

A group of 16 banks resolved a quandary that has dogged the $1 trillion Islamic financing market for nearly three decades: how to represent rates on interbank funding when Islamic principles prohibit firms from charging interest.



The banks—working with industry associations and data provider Thomson Reuters—created a reference rate called the Islamic Interbank Benchmark Rate, or IIBR, which was put into use for the first time Tuesday. The banks say the solution, which complies with Islamic moral codes, known as Shariah, lies in considering money flowing between banks as investments that depend on the performance of underlying assets, rather than as interest-bearing loans.

Scholars and bankers involved in the project say it is an industry milestone akin to the first globally issued Islamic corporate bond in 2001, or the first Islamic sovereign bond in 2002. They say the rate brings transparency to the Islamic financing process and could encourage broader use of Islamic banks.

“The establishment of the IIBR marks an important milestone in the maturation of Islamic money markets by providing an international reference rate for interbank transactions,” said Nasser Saidi, chairman of the Islamic Benchmark Committee and chief economist at the Dubai International Financial Centre, in a statement.

Islamic banks aren’t allowed to earn or pay interest, yet have been using an international interest-rate benchmark—the London interbank offered rate, or Libor—since 1986. While Libor isn’t compliant with Shariah, religious leaders permitted its use because there was no alternative benchmark based on socially ethical investing.

Rather than measuring interest on loans as Libor does, IIBR uses expected profits from short-term money and a forecasted return on the assets of the bank receiving funds. Both are considered investments rather than loans, and therefore interest-free.


Associated Press

Chief economist of the Dubai International Financial Centre, building above, calls the Shariah rate a ‘milestone’

Sheikh Yusuf Talal Delorenzo, chairman of Thomson Reuters’s Shariah committee, said the significance of IIBR is that it allows firms participating “to see the interbank market in their own terms.”

“Earnings are lawful,” he said. “What is unlawful is earnings from interest.”

Hassan Demirhan, director in the treasury department at the Islamic Development Bank, added that the introduction of an “indigenous Islamic benchmark” will prove to be a “major milestone in the growth and sustainability of the industry.”

IIBR on everything from overnight to one-year funding will be determined from rates the member banks contribute each day. The data will go through a type of cleaning called a “fixing,” where the top and bottom rates are removed and an average of the middle eight contributions is taken.

The results are blessed by a panel of Islamic banks and approved by a committee of Shariah scholars. Also involved in the launch were the Islamic Development Bank, the Accounting and Auditing Organization for Islamic Financial Institutions, the Bahrain Association of Banks and the Association of Islamic Banking Institutions Malaysia.

As of Nov. 16, the theoretical overnight IIBR would have been 0.1%, which was slightly below overnight Libor of 0.14%. Libor was cheaper over one year, however, at 0.91% versus 1.01% for IIBR.

Such differences could encourage corporate borrowers to use Islamic banks when IIBR is lower than Libor, on the theory that banks could pass savings on to customers.

“It will facilitate liquidity into the Islamic banks,” said Rushdi Siddiqui, global head of Islamic finance at Thomson Reuters in New York, who helped launched the first Islamic equity index in 1999 for Dow Jones.

Islamic banks have attracted liquidity from outside investors interested in diversification, said Mr. Siddiqui, and this will provide those funding sources with “a transparent, visible benchmark” that will encourage increased funding flows, helping to finance a wave of infrastructure projects in the region.

The development of a Shariah-compliant benchmark rate also comes amid regulatory investigations into the way the Libor rate is fixed by investment banks. Regulators have opted not to specifically endorse IIBR over other benchmarks, preferring to remain neutral, but they are aware of its creation and have supported it.

Write to Katy Burne at

Aly is an entrepreneur who was born and raised in Karachi, Pakistan where he currently resides. He has been associated with many diverse fields such as Textiles, Minerals & Ores, Feeds and Agri-Commodities. Known on Social Media as DiscoMaulvi, he serves in operational and advisory roles for several Islamic organizations such as LiveDeen, AlKauthar Karachi, Mercy Mission Pakistan, and Azãn. He is also a co-founder and trustee of Ihsaas Trust, a shariah-compliant finance provider for micro-entrepreneurs. Aly joined the team of MM in 2011 as a blogger/writer and is currently the Team Lead for the Comments Team and a former member of the Executive Shurah. He is easily accessible via Twitter or through his Public Page on Facebook where you can learn more about him. You can also visit his (mostly defunct) personal blog From The Pulpit ... Sermons of DiscoMaulvi and comment so he still feels like a Blogger. :)



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    December 12, 2011 at 8:44 AM

    a long overdue step

  2. Avatar

    Teaching Kids the Holy Quran using toys

    December 12, 2011 at 3:09 PM

    There is no such thing as an “Islamic Bond” – a bond by definition is an interest bearing financial instrument. Such “sukooks” are nothing but a deception perpetrated by so-called Islamic banks on gullible Muslims. These, and other corruption such as this IIBR (you can call it whatever it’s modelled after LIBOR) are bidahs or innovations that are not termed as such because all these scholars are also being paid by the banks.

    Islamic banking is really easy and straightforward and you do not need all these fancy Arabic names to make it halal. You have a property you wish to buy, but cannot afford. You buy it and pay in installments. The seller can charge a high price for it because it’s not being paid all at once, but once the deal is done, it’s done. Unlike what most “Islamic” banks offer today. (Lease-to-own – what a scam!)

    — Mezba

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      December 22, 2011 at 5:33 PM

      Paying more for something because you are paying in installments. Sounds like interest to me.

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        December 23, 2011 at 5:26 PM

        No it doesn’t – think about it.

        Price is fixed, amount you owe is fixed, and amount you pay per month does not depend on what is happening in the world (i.e. the LIBOR rate or the Bank of Canada interest rate etc.). Every month the amount you owe goes down as you pay.

        This doesn’t happen with interest. Every month, if you just pay the interest owed on the loan, the total that is due back does not decrease by a single cent, regardless of how much you have paid till then.

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          December 23, 2011 at 7:05 PM

          You can get a fixed interest rate loan, where the interest rate does not adjust periodically based upon an index like LIBOR. You do not have to get an adjustable rate loan.

          I see where the principal would not decrease if one were only making the interest payments, but most loans require the debtor to pay more than just the interest component every month.

          Amortization is a useful tool for allocating regular equal monthly payments between an interest component and a principal component. You pay the same amount every month, but, each month, as the principal balance decreases, the amount going to interest decreases proportionally. Amortization does mean that principal is paid down slowly at first, but that is made up for toward the second half of the repayment period, as the principal balance starts to decrease every month at an accelerating rate.

          If a seller cannot charge interest on unpaid principal, then he will probably just charge a higher price to compensate. In the end, the purchaser will probably end up paying more.

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            December 24, 2011 at 9:32 AM

            You can get a fixed interest rate loan, where the interest rate does not adjust periodically based upon an index like LIBOR. You do not have to get an adjustable rate loan.
            If the total amount to be paid to the borrower is written in a contract agreement and this does not change anyway then it would be close to what is the Islamic loan ideal.

            If a seller cannot charge interest on unpaid principal, then he will probably just charge a higher price to compensate.

            That is correct. And that is usually how it’s supposed to operate under Islamic business principles. But once the price is agreed upon, it’s fixed. And this is where most Islamic banks fail – they try to charge interest by calling it something else, and have it variable, and so on and so forth.

            BBC article: Is Islamic finance the answer?

            BBC article: How Shariah Compliant is Islamic Banking?

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        December 23, 2011 at 6:15 PM

        On the surface, it may, but there are distinct differences. The amount paid in the installments is the principle, meaning, even if I increase my payment, the payoff amount remains fixed. The final amount paid to the owner of the product is agreed upon in advance and not a function of interest accrued on remaining principle.


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          December 24, 2011 at 3:06 AM

          a ver importnat part of this deal is the transfer of ownership of the item or goods which are the being traded. this coiuld be true in cases where the items are small and the payment tenure is say one year.(it is called mudharaba)

          in cases of property since the amounts involved are huge and the re payment may take some years or a number of years a different method is applied. in this case all repayments cover a part of the profit/rental which is to be shared between the financer and the user/occupier and repurchases of the share of the other person (bank).

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            December 24, 2011 at 9:34 AM

            In case of most “Islamic” rent to own schemes, the bank will take none of the risks and all of the benefits of ownership. Is “Islamic in name, but not Islamic in spirit” good enough for most Muslims?

            I have an article for you.

            BBC article: How Shariah Compliant is Islamic Banking?

  3. Avatar

    Teaching Kids the Holy Quran using toys

    December 12, 2011 at 3:13 PM

    If it squeals like a pig, walks like a pig, talks like a pig, it’s still a pig. And it’s haram. This is why Muslims themselves don’t trust these so-called Islamic banks.

    Islamic banks become a joke when they try to do what simple CAN NOT be done under Islamic law. Lend someone X amount of money and more than X amount back. They fall over themselves trying to call this ‘extra’ anything.

    – Mezba

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      December 12, 2011 at 6:15 PM

      Indeed; “”the Shariah rate ” LOL!

      Would be intersting to know how these products actually work…

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      December 13, 2011 at 9:33 AM

      i think you have not studied the islamic banking and the various products being offered by these banks.
      the real problem lies in our being not able to comprehend the difference. secondly since we are tuned to the conventional banking system we try to compare the shariah products with the products being offered by other banks and then come to the conclusions as stated by you.

      the scholars have really put in lot of efforts in difining the rules for islamic banking business.
      i swould request you to consider studinging what is shariah compliant business process and the see how these institutions are working.

      • Avatar

        Teaching Kids the Holy Quran using toys

        December 13, 2011 at 10:08 AM

        I have an MBA and an accounting degree and I have studied most of these schemes, especially as they are being offered in Canada. I would advise you stop viewing anything endorsed by scholars as automatically legit and examine the issues with an open mind.

        If all interest is haram, as the scholars themselves say, they can NEVER justify sukook or this so called Shariah compliant LIBOR rate.

        As I said before, Islamic financing is very easy to understand. And how come no one invented these things 1400 years ago?

        – Mezba

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          December 20, 2011 at 1:47 AM


          I’m sure there are some Islamic Banks that are just preying on gullible Muslims, but your blanket remark has far reaching implications. Namely, all Islamic Banks trying to provide and interest alternative are doing it wrong.

          I’m specifically curious about the your remark regarding lease to own. Is it not that the bank and the customer by a property together (let’s say 60% 40%) then the bank leases it’s portion to the customer who pays a fixed rate to buy it over a period of time. Eventually, the customer owns 100% percent of the property.

          Interest is treating money as a commodity as oppose to a medium of exchange. if the rates are based on investments…then I don’t see the issue. Please explain or if you have any articles about the topic throw them up inshalah.


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            December 22, 2011 at 11:11 AM

            The problems with so-called “Islamic” banking are many, too many to list in a comment. I wrote a post about it long time ago, so I will link to it here in answer to your comment.


            The main problem with lease to own is that the risk and cost of ownership are not split evenly between the two owners (bank and homeowner). And not just that, there is a “reevaluation” every 5 years because ‘market has changed’ and somehow this reevaluation rate is equal to present interest mortgage rate at a conventional bank.

  4. Avatar


    December 22, 2011 at 5:30 PM

    Six in one hand; a half dozen in the other.

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Highly Educated, Willingly Domesticated

Laura El Alam



Doctor.  Engineer.  Certified Nurse-Midwife. Writer and Literary Critic.  Lab Technician. Parliamentary Assistant. These highly-trained, respected careers are the culmination of years of intense study, training, and self-discipline.  Most people, upon achieving these esteemed positions, would happily dedicate the rest of their working years to putting their knowledge and expertise to use. They would gradually gain more experience, earn greater pay, and amass professional perks.  Most likely they would also, over time, assume leadership roles, earn awards, or become sought-after experts in their field.

What kind of person has all this at her fingertips, but decides to give it up?  Who would trade in years of grueling study and professional striving for an undervalued position that requires no degree whatsoever What type of professional would be willing to forgo a significant salary to instead work for free, indefinitely, with no chance whatsoever of a paycheck, recognition, benefits, or promotion?  

Who else, but a mother?  

While certainly not all mothers choose to give up their careers in order to raise their children, there is a subset of women who do. Stay-at-home-moms (SAHMs) may spend the majority of their days performing unglamorous tasks like washing dishes, changing diapers, and reading storybooks to squirming toddlers, but behind the humble job title are dynamic, educated, and capable women. They may currently have a burp cloth in one hand and a sippy cup in the other, but chances are, SAHMs have a mind and capabilities that reach far beyond the apparent scope of their household duties.  

What motivates a capable and ambitious woman to give up her career and stay home to raise children? Is she coerced into it, or does she choose it willingly? What is her driving force, if not money, status, or respect?  I had many questions for these women -my sisters in Islam and my stay-at-home “colleagues”- and some of their answers surprised me.  

For this article I interviewed seven highly-educated Muslim moms who chose to put successful careers on hold, at least temporarily, to raise their children. Between them, they hold PhDs, MDs, and Masters degrees. While the pervasive stereotype about Muslim women is that they are oppressed and backward, these high-achieving females are no anomaly. In fact, according to her article in USA Today, Dalia Mogahed points out that, “Muslim American women are among the most educated faith group in the country and outpace their male counterparts in higher education.”  Across the pond, The Guardian reports that more young Muslim women have been gaining degrees at British universities than Muslim men, even though they have been underrepresented for decades.”    


Ambitions and dreams

Every single one of the women I interviewed grew up in a household with parents who highly emphasized their daughters’ education. In fact, all of them were encouraged -either gently or more insistently- to pursue “top” careers in medicine, engineering, or science. Perhaps unsurprisingly, most of the women I interviewed were at the head of their classes at university.

In their school years, before marriage, all of the women I spoke with considered their career to be their main priority; motherhood seemed far-off and undefined. “When in uni,” explains Neveen, an endodontist who eventually put her career on hold to be a SAHM and homeschooler, “I never, ever thought I’d homeschool (nor did I believe in it), nor did I ever think I’d be a SAHM. I was very career-oriented. I was top of my class in dental school and in residency.”

“I absolutely thought I would be a career woman,” agrees Nicole, a mom of three in California who holds a Masters degree in Middle East Studies. “I never considered staying at home with the kids, because they were totally out of my mind frame at the time.”

“I expected that after graduation I would follow a research-based career,” adds Layla*, another SAHM in California who holds a PhD in Computer Engineering. “I never thought I’d stay at home because I believed it was fine for kids to be in daycare. I also thought SAHMs were losing their potential and missing out on so much they could otherwise accomplish in their lives.”

As young women, many assumed that if they ever chose to start a family, they would have assistants, nannies, or domestic helpers to lighten their load. Several of them believed they would put their future children, if any, in daycare. However, the reality of motherhood made each of these women change her mind.  

“My child was highly attached to me,” explains Sazida, an Assistant to a Member of Parliament in England, “and I could not envision him being looked after by anyone else despite generous offers from relatives.”  

“After I had my first child all I wanted to do was be able to care for her myself,” concurs Melissa, a Certified Nurse Midwife from New York.  


Other Motivations

It turns out that maternal instincts were not the only factor that made women choose to drop out of the workforce. Dedication to Islam played an enormous part in their decision-making.

“After having my first child,” explains Layla, “I decided that he was far more precious than working. He is a gift that Allah subḥānahu wa ta'āla (glorified and exalted be He) gave me to protect and care for.”

“After I became Muslim,” shares Nicole, “My goals changed, and I hoped to marry and have children. I do think it was beneficial for my children to have a parent always there to depend on,” she adds. “I feel like I was the anchor in the family for them, and I hope to continue that role.”

“What’s important to me,” asserts Neveen, “Is to raise my kids as good Muslims who love -and are proud of- their life and deen.”

Another reason many highly educated women choose to stay at home is because they have the opportunity to homeschool some or all of their children.  Remarkably, out of the seven women who answered questions for this article, five reported that they chose to homeschool at least one child for a few or more years.  

“I really enjoy my homeschooling journey with my kids and I get to know them better, alhamdullilah,” states Layla.

The opportunity to nurture, educate, and raise their children with love and Islamic values is the primary reason why these talented women were willing to put their successful careers on hold. “Hopefully Allah subḥānahu wa ta'āla (glorified and exalted be He) will reward us in Jannah,” muses Layla.



Although none of the women I interviewed regrets her choice to be a SAHM, they all agree that it is a challenging job that is actually harder than their former career.  

One obstacle they must overcome is the negative perception others have about successful women who make the choice to put their career on hold.  “I soon learnt that casual clothes, a toddler, and a buggy don’t give you the same respect as suits and heels,” says Sazida.

One would expect, given their faith’s emphasis on the dignity of mothers, that Muslim SAHMs would enjoy the support of their family and friends.  Unfortunately, this is not always the case.

One mom explains, “My in-laws offered to look after my child, and my father-in-law couldn’t understand why I wanted to stay at home when there was perfectly good childcare that they were offering. After two and three years passed, he got more and more disheartened that I was not earning and complained about the lost potential income.”

“My non-Muslim mother told me that I wasting my education,” confides Nicole. “She did not support me staying home, though I think she appreciated that I was there for my children and have a good relationship with them.  She was a SAHM as well, so I am not sure where that was coming from, actually.”

Melissa’s mom was similarly skeptical of her daughter’s decision. “My mother didn’t love me being fully dependent on my husband,” she admits.  

“I was not at all supported by my family or friends,” laments Radhia, a Lab Technician with a BS in Microbiology with a Chemistry minor.

Other than being doubted and blamed for their choice, there are other challenges that SAHMs face. Accustomed to mental stimulation, exciting challenges, professional accomplishments, and adult interaction, many former career women find staying at home to raise youngsters to be monotonous and lonely. The nannies, assistants, cleaners, and other workers they had envisioned often never materialized, since hiring these helpers was usually too expensive. Husbands who spent the day working as the family’s sole breadwinner, were usually too tired to help with household duties.  A few women admitted that they felt guilty asking for help in the home when their husband was already exhausted from work. To exacerbate the problem, most of the women I interviewed lived far from family, so they could not rely on the help one normally gets from parents and siblings. That means the bulk of the childcare and housework fell onto their laps alone.  

“The main challenges for me,” states Nicole, “were boredom, and finding good friends to spend time with who had similar interests. I was also very stressed because the raising of the children, the housework, the food, and overall upkeep of our lives were my responsibility, and I found that to be a heavy burden.”

“I think the feelings of vulnerability and insecurity about whether I was a good enough mother and housewife was difficult,” shares Melissa. “All my sense of worth was wrapped up in the kids and home, and if something went wrong I felt like a failure.”

“It was not as easy as I thought it would be,” confesses Radhia. “It was overwhelming at times, and I did miss working. Emotionally and physically, it was very draining.”

“Staying home has been harder than I expected,” adds Summer*, a Writer and Literary Critic from Boston. “I didn’t realize how willful children could be. I thought they’d just do what I said. I’m still trying to get used to the individuality! It’s harder than my job was, only because of the emotional load, and the fact that the effort you put in doesn’t guarantee the results you hope for.”


Money Matters

Giving up their salary also put women in a state of financial dependency, which can be a bitter pill to swallow for women who are used to having their own resources.  

“I felt very dependent on my husband, financially,” says Radhia.

“Alhamdulillah, my husband does not refuse if I ask him to buy anything,” explains Layla. “However, I felt like I was losing my power of deciding to buy something for someone else. For example, if I want to buy a gift for my mother or my sister, he never refuses when I ask him, but still I feel internally it is harder for me.”

“Alhamdulillah my husband’s personality is not one that would control my financial decisions/spending,” shares Neveen. “Otherwise I would never have chosen to be a SAHM.”

“Giving up my career limited my power to make financial decisions,” asserts Summer. “I could still spend what I wanted, but I had to ask permission, because my husband knew when ‘we’ were getting paid, and how much. He paid the bills, which I didn’t even look at.”

“Asking permission,” Summer adds, “is very annoying.”

Re-entering the workforce was difficult for some women, while not for others.  The total time spent at home generally affected whether women could easily jump back into their profession, or not.  Some of the moms felt their skills had not gotten rusty at all during their hiatus at home, while others felt it was nearly impossible to make up, professionally, for missed time.  


Words of Wisdom

Although all of the women I interviewed firmly believe that their time at home with their children is well-spent, they do have advice for their sisters who are currently SAHMs, or considering the position.  

“If I could go back and speak to myself as a new mum, I would tell myself to chill the heck out and just enjoy being a new mum,” says Sazida.

Melissa offers, “I wish people understood how talented you have to be to run a home successfully. It’s a ton of work and it requires you to be able to do everything from snuggle and nurture, to manage the money, budget, plan precisely, be a good hostess, handle problems around the home, manage time, and meet goals all while trying to look cute.

“I would always recommend that women have their own bank account and money on the side,” advises Nicole. “You never know when you are going to need it.”

“Once their kids are in school,” adds Radhia, “I would suggest SAHMs start something from home, or take on part time work, or courses, if necessary.”

“For moms choosing to stay at home,” Layla suggests, “I would say try to work part-time if your time permits, and if you have a passion for working. Trust that Allah subḥānahu wa ta'āla (glorified and exalted be He) will protect you, no matter what. Remember, you are investing in your kids, and that is far more important than thinking ‘I need to keep money in my pocket.’”


Support, don’t judge

As a Muslim ummah, our job is to support one another as brothers and sisters.  It seems people forget this oftentimes, and erroneously believe that we are entitled to gossip, speculate, and sit in judgement of each other, instead.  In our lives we will all undoubtedly encounter women who choose to continue their careers, and those who put them on hold, and those who decide to give them up completely. Before we dare draw conclusions about anyone, we must keep in mind that only Allah subḥānahu wa ta'āla (glorified and exalted be He) knows a person’s entire story, her motivations, and her intentions. Only He subḥānahu wa ta'āla (glorified and exalted be He) is allowed to judge.  

We must also remember that some women, for a variety of reasons, do not have the luxury of choosing to stay at home. They must work to the pay the bills. Allah subḥānahu wa ta'āla (glorified and exalted be He) knows their intentions and will reward their sacrifices as well.


It is my hope that this article will not cause more division amongst us, but rather raise awareness of the beautiful sacrifices that many talented and intelligent women willingly make for the sake of their children, and even more so, for the sake of Allah subḥānahu wa ta'āla (glorified and exalted be He).  They are the unsung heroes of our ummah, performing an undervalued job that is actually of utmost importance to the future of the world.


*Name has been changed



For the past decade, writer Laura El Alam has been a regular contributor to SISTERS Magazine, Al Jumuah, and About Islam. Her articles frequently tackle issues like Muslim American identity, women’s rights in Islam, support of converts/reverts, and racism. A graduate of Grinnell College, she currently lives in Massachusetts with her husband and five children. Laura recently started a Facebook page, The Common Sense Convert, to support Muslim women, particularly those who are new to the deen.

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OpEd: Breaking Leases Into Pieces

Abu Awad



Ali ibn Talib raḍyAllāhu 'anhu (may Allāh be pleased with him)once said, “Know the truth and you’ll know who’s speaking the truth.” 

I am based in Canada and was recently having coffee with friends. In the course of the conversation, a friend (who I consider knowledgeable) said that it’s okay to pay interest on a leased car because interest doesn’t apply to lease contracts. This completely caught me off guard, because it made no logical sense that interest would become halal based solely on the nature of the contract.

I asked him how this can be true and his response was that the lease contract is signed with the dealer and the interest transaction is between the dealer and the financing company so it has nothing to do with the buyer. Again, this baffled me because I regularly lease cars and this is an incorrect statement: The lease agreement is signed with a third party financing company who is charging you directly for the interest they pay the car dealership. Therefore, any lease contract that has interest associated with it is haram. This is the same as saying your landlord can charge you interest for his mortgage on a rental contract and this would make it halal. I tried to argue this case and explain to my friend that what he was saying was found on false assumptions and one should seriously look into this matter before treating riba in such a light manner.

Upon going home that night, I pulled out all my lease contracts (negotiated to 0% mind you) and sent them over to my friend. They clearly showed that a bill of sale is signed with the dealer, which is an initial commitment to purchase but the actual lease agreement is signed with a third party financing company which is charging you interest directly. If this interest rate is anything above zero it is haram (anything which is haram in a large quantity is also haram in a small quantity).

To my dismay, instead of acknowledging his mistake, my friend played the “Fatwa Card” and sent me a fatwa from a very large fatwa body in North America, which was also basing their argument on this false assumption. Fortunately for me, my friend pointed out the hotline number and the day and time the mufti who gave the fatwa would be available to answer questions.

I got in touch with the scholar and over a series of text messages proceeded to explain to him that his fatwa was based on a wrong assumption and for this reason people would be misled into leasing cars on interest and signing agreements with financing companies which are haram.
He was nice enough to hear my arguments, but still insisted that “maybe things were different in Canada.” Again this disappointed me because giving fatwa is a big responsibility – by saying “maybe” he was implying that full research has not been done and a blanket fatwa has been given for all of North America.

It also meant that if my point was true (for both Canada and the United States) dozens of Muslims maybe engaging in riba due to this fatwa.

The next week I proceeded to call two large dealerships (Honda and Toyota) in the very city where the Fatwa body is registered in the US and asked them about paperwork related to leasing. They both confirmed that when leasing a new vehicle, the lease contract is signed with a third party financing company which has the lien on the vehicle and the dealer is acting on the financing company’s behalf.

It is only when a vehicle is purchased in cash that a contract is signed with the dealer. This proved my point that both in the US and Canada car lease contracts are signed with the financing company and the interest obligations are directly with the consumer, therefore if the interest rate is anything above 0% it is haram. I sent a final text to the mufti and my friend sharing what I had found and letting him know that it was now between them and Allah.

1. As we will stand in front of Allah alone on Yaum al Qiyamah, in many ways we also stand alone in dunya. You would think that world renowned scholars and an entire institution would be basing their fatwas on fact-checked assumptions but this is not the case. You would also think that friends who you deem knowledgable and you trust would also use logic and critical thinking, but many times judgment is clouded for reasons unbeknownst to us. We must not take things at face value. We must do our research and get to the bottom of the truth. Allah subḥānahu wa ta'āla (glorified and exalted be He) says to stand up for truth and justice even if it be against our ourselves; although it is difficult to do so in front of friends and scholars who you respect, it is the only way.

2. There are too many discussions, debates and arguments that never reach closure or get resolved. It is important to follow up with each other on proofs and facts to bring things to closure, otherwise our deen will slowly be reduced to a swath of grey areas. Alhamdulillah, I now know enough about this subject to provide a 360 degree view and can share this with others. It is critical to bring these discussions to a close whether the result is for you or against you.

3. Many times we have a very pessimistic and half hearted view towards access to information. When I was calling the dealerships from Canada in the US,  part of me said: Why would these guys give me the information? But if you say Bismillah and have your intentions in the right place Allah makes the path easy. One of the sales managers said “I can see you’re calling from Toronto, are you sure you have the right place?” I replied, “I need the information and if you can’t give it to me I don’t mind hanging up.” He was nice enough to provide me with the detailed process and paperwork that goes into leasing a car.

Finally, I haven’t mentioned any names in this opinion and I want to make clear that I am not doubting the intentions of those who I spoke to; I still respect and admire them greatly in their other works. We have to be able to separate individual cases and actions from the overall person.

May Allah subḥānahu wa ta'āla (glorified and exalted be He) guide us to the truth and rid of us any weaknesses or arrogance during the process.


Ed’s Note: The writer is not a religious scholar and is offering his opinion based on his research on leasing contracts in North America.

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Muslim’s Guide to Debt and Money Management Part 6

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[Video] Invest with Wahed to Secure your future without making big changes to your life.





With Wahed’s’ recurring deposit feature, you can decide on an amount of money to be automatically deposited to your Wahed account from your bank account on a regular basis. The time frame is up to you — set up weekly, bi-weekly, or monthly deposit.

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Simply put, it’s a great way to build wealth by setting aside a portion of your earnings to be invested without the hassle of continuous setting-up transfers!.

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Wahed’s easy-to-use platform is the first automated halal-focused system that is overseen by an Ethical Review Board, preventing concerned investors from investing in companies that do not agree with their values (e.g., companies involved in any aspect of the liquor, firearms, gambling and tobacco industries). The platform also screens investments that generate profit from interest and those that do not comply with certain debt ratios.

This article is part of a paid promotional package for Wahed Invest LLC.Wahed Invest LLC is registered as an investment adviser with the Securities and Exchange Commission. Registration does not imply a certain level of skill or training. Custodial and brokerage services are provided by Apex Clearing Corporation, member of New York Stock Exchange, FINRA and SIPC. Any returns generated in the past are no indication of future returns. All securities involve some risk and may result in loss. This is not an offer, solicitation, or advice to buy or sell securities in jurisdictions where Wahed Invest is not registered. For full terms and conditions please visit

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