Are High Yield Savings Accounts haram?
- Thread starter hope2019
- Start date
@hope2019 Delighted to answer in detail and give as much time as needed. Let's start slow here 
Haraam, a word rooted in limits/sanctity, a simple meaning is forbidden.
Only Allah decides what is Haram and what is halal (permissible).
On the outset many things are clearly Haram or halal, as they have been spelled out. And there is a spectrum between the these that are unclear, and we are told by the prophet to stay away from them. (That is when in doubt about issues permissibility, it's best to take another clear route that is known to be permissible/halal, and avoid getting into the details, scholars who have spent a lifetime can deduce (jurisprudence) a good understanding of such issues)
Now as for interest, Allah clearly says that he has forbidden usury and permitted trade. And dealing in interest is declaring war against Allah and his messenger. This is explicit.
Where people try to argue and stir the pot is what "forms" of usury/interest are forbidden. There were many forms of usury that were prevalent before the prohibition, and there is no explicit mention of allowing specific forms of usury by the prophet. In all, this alludes to having all forms of usury/interest being Haram.
There is one form that is not considered interest, it when a future payment in installments or full is agreed upon on a higher price (there is no compounding of interest). Buy car now at 10k, or pay me $12 within a year. (It's a cash for car)
Also an explicit hadith forbids the trade of like with like (trading one kind of dates with another kind of dates), which means you can't lend $x and have an extra fixed amount paid later $x+10 (it's money for money)
Also the hadith about partaking in interest, either you witness it, give it, take it, or write record it, all have committed the same sin.
PS - I'm no scholar, please consult an imam and get more info. I tried my best here.
Haraam, a word rooted in limits/sanctity, a simple meaning is forbidden.
Only Allah decides what is Haram and what is halal (permissible).
On the outset many things are clearly Haram or halal, as they have been spelled out. And there is a spectrum between the these that are unclear, and we are told by the prophet to stay away from them. (That is when in doubt about issues permissibility, it's best to take another clear route that is known to be permissible/halal, and avoid getting into the details, scholars who have spent a lifetime can deduce (jurisprudence) a good understanding of such issues)
Now as for interest, Allah clearly says that he has forbidden usury and permitted trade. And dealing in interest is declaring war against Allah and his messenger. This is explicit.
Where people try to argue and stir the pot is what "forms" of usury/interest are forbidden. There were many forms of usury that were prevalent before the prohibition, and there is no explicit mention of allowing specific forms of usury by the prophet. In all, this alludes to having all forms of usury/interest being Haram.
There is one form that is not considered interest, it when a future payment in installments or full is agreed upon on a higher price (there is no compounding of interest). Buy car now at 10k, or pay me $12 within a year. (It's a cash for car)
Also an explicit hadith forbids the trade of like with like (trading one kind of dates with another kind of dates), which means you can't lend $x and have an extra fixed amount paid later $x+10 (it's money for money)
Also the hadith about partaking in interest, either you witness it, give it, take it, or write record it, all have committed the same sin.
PS - I'm no scholar, please consult an imam and get more info. I tried my best here.
princesst1
New member
@sbmor777
A clarification:
it depends on the bank. As well as Al Azhar has allowed for this "interest" due on the grounds it is profit for using your capital and you are a partner in the bank.
The bank uses your funds to generate a profit by investing in assets then pays a portion of the profit to you. This could be viewed as an exchange of value and thus allowed.
https://www.sukuk.com/education/al-...t-bank-deposits-271/#/?playlistId=0&videoId=0
This mostly does not apply to western banks but Islamic banks who have this model shouldn't be included in the impression [all] savings accounts accumulate riba.
A clarification:
it depends on the bank. As well as Al Azhar has allowed for this "interest" due on the grounds it is profit for using your capital and you are a partner in the bank.
The bank uses your funds to generate a profit by investing in assets then pays a portion of the profit to you. This could be viewed as an exchange of value and thus allowed.
https://www.sukuk.com/education/al-...t-bank-deposits-271/#/?playlistId=0&videoId=0
This mostly does not apply to western banks but Islamic banks who have this model shouldn't be included in the impression [all] savings accounts accumulate riba.
@princesst1 Yes Islamic banks might be different and permissible but the post is about HYSA and I don't think the savings account equivalent offered by Islamic banks is called high yield savings accounts. I've usually seen Islamic banks call their equivalent some kind of term deposit product. So I assume OP is asking about a conventional bank, in which any savings account is haram.
This definitely would not apply to a conventional bank as they don't invest deposits. They use deposits for lending and making more money from riba. The fatwa you linked specifically says if the bank uses deposits to invest in "permissible dealings" and then pass the return on to the depositors. Which like you said is how I understand Islamic banks offer savings accounts/term deposits.
This definitely would not apply to a conventional bank as they don't invest deposits. They use deposits for lending and making more money from riba. The fatwa you linked specifically says if the bank uses deposits to invest in "permissible dealings" and then pass the return on to the depositors. Which like you said is how I understand Islamic banks offer savings accounts/term deposits.
@sbmor777 1 additional point, the downside risk must be shared for the savings account to be shariah compliant (in most cases). Shariah compliant accounts in UK mention in their terms and conditions that in the event of a loss you have the option to waive the FSCS £85k protection (and thereby maintain shariah compliance)
christian_testimonies
New member
@christian_testimonies You are correct with fscs but there is similar uk banking regulations where a bank is obliged to return the initial deposit of a cash saving account. So in the rare situation where the profit rate is negative you are still entitled to the full initial deposit however this is not shariah compliant. A UK shariah compliant savings account will have a waiver clause in their terms to allow the consumer to sidestep that protection and maintain shariah compliance.
fascinatingone
New member
@princesst1 They invest and take riba from the business they invest. It's not profit. No bank does business.
princesst1
New member
@fascinatingone You obvious do not understand banking in general nor islamic banks in particular.
I suggest instead of relaying on information you heard you actually studied with a qualified teacher.
I suggest instead of relaying on information you heard you actually studied with a qualified teacher.
@hope2019 Before accepting these simplistic answers, read up on the meaning of riba in the context of the prophet's society. A good place to start is the fairly balanced wiki entry on riba. https://en.wikipedia.org/wiki/Riba . To modernists, modern interest is not the same as riba from the time of the prophet.
I've copied a bit of the discussion among scholars on the subject below :
John Esposito describes riba as a pre-Islamic practice in Arabia "that doubled a debt if the borrower defaulted and redoubled it if the borrower defaulted again".[sup]\[/sup]32]) It was held responsible for enslaving some destitute Arab borrowers.[sup]\[/sup]29])
Abdullah Saeed quotes the son of Zayd b. Aslam (died 136/754) on what the Quran 3:129-130 means by riba being "doubled and redoubled":
Orthodox Islamic scholar and Islamic banking advocate Taqi Usmani disagrees. In describing "riba in the days of Jahiliyya", he makes no mention of debts being doubled, but states that riba "had different forms" and that "the common feature of all these transactions is that an increased amount was charged on the principal amount of a debt".[sup]\[/sup]48])
I've copied a bit of the discussion among scholars on the subject below :
Riba al-jahiliya[edit]
John Esposito describes riba as a pre-Islamic practice in Arabia "that doubled a debt if the borrower defaulted and redoubled it if the borrower defaulted again".[sup]\[/sup]32]) It was held responsible for enslaving some destitute Arab borrowers.[sup]\[/sup]29])
Abdullah Saeed quotes the son of Zayd b. Aslam (died 136/754) on what the Quran 3:129-130 means by riba being "doubled and redoubled":
Orthodox Islamic scholar and Islamic banking advocate Taqi Usmani disagrees. In describing "riba in the days of Jahiliyya", he makes no mention of debts being doubled, but states that riba "had different forms" and that "the common feature of all these transactions is that an increased amount was charged on the principal amount of a debt".[sup]\[/sup]48])
@annache
By "simplistic answers" do you mean the opinion held by the vast majority of scholars?
I've honestly never seen a qualified scholar try to argue that interest on lending in the modern world isn't riba. I've only seen reformists/Western academics who don't actually have degrees in fiqh like a Mufti would try to redefine riba.
By "simplistic answers" do you mean the opinion held by the vast majority of scholars?
I've honestly never seen a qualified scholar try to argue that interest on lending in the modern world isn't riba. I've only seen reformists/Western academics who don't actually have degrees in fiqh like a Mufti would try to redefine riba.
@sbmor777 My post merely suggested that one read up on the meaning of riba in the context of the prophet's society. I dont think Muftis have a monopoly on knowledge, and in any case their fiqh is an interpretation, not a revelation.
I do like to drill down and see the content of these scholars' thought. I dont find a lot there except interest=riba. Their economic arguments (rich richer, poor poorer) are simplistic.
I am not impressed with the reasoning of many of these qualified scholars who prohibit interest and turn around and approve murabaha or tawarruq with amortized deferred markup (fixed time dependent compensation to the lender - interest). Similarly with their prohibitions on insurance.
Check out the "Egyptian tradition" as I call it - Mufti Muhammad Abduh, Mufti Tantawy, and the Dar al Ifta fatwa site (associated with al Azhar University I think.)
I do like to drill down and see the content of these scholars' thought. I dont find a lot there except interest=riba. Their economic arguments (rich richer, poor poorer) are simplistic.
I am not impressed with the reasoning of many of these qualified scholars who prohibit interest and turn around and approve murabaha or tawarruq with amortized deferred markup (fixed time dependent compensation to the lender - interest). Similarly with their prohibitions on insurance.
Check out the "Egyptian tradition" as I call it - Mufti Muhammad Abduh, Mufti Tantawy, and the Dar al Ifta fatwa site (associated with al Azhar University I think.)