Question:
In light of the current pandemic of Coronavirus (COVID-19) and the limited donations received by Islamic non-profitable institutions, is it permissible for mosques and institutions to take conventional loans from western banks to avoid declaring themselves bankrupt, bearing in mind that the interest rate does not exceed 1 or 2%?
Answer:
In responding to this question, the European Council for Fatwa and Research (ECFR), states:
Conventional loans involve the prohibited usury, or even to get a quote for a home loan, an interest small or large added to the capital. Allah says: {And if you do not, then be informed of a war [against you] from Allah and His Messenger. But if you repent, you may have your principal – [thus] you do no wrong, nor are you wronged.} (Al-Baqarah 2:279)
Muslim institutions in the West have financial difficulties due to ignoring a great Islamic institution i.e. the religious endowment (waqf). Waqf refers to an ownership of a property granted by a donor. The donations received could be invested in a profitable project that gives regular income that guarantees the continuity of the Islamic institutions and independence from the donors’ circumstances and economic changes and seasonal crises such as this COVID-19 pandemic.
The religious endowment is the pure Islamic solution to protect the Islamic institutions. However, in the time being, especially in light of the pandemic and the possibility of closing some Islamic institutions e.g. mosques, schools, etc., the conventional loans are exceptionally permissible as a necessity.
This is similar to the prohibition of consuming pork. Allah says {He has only forbidden to you dead animals, blood, the flesh of swine, and that which has been dedicated to other than Allah. But whoever is forced [by necessity], neither desiring [it] nor transgressing [its limit], there is no sin upon him. Indeed, Allah is Forgiving and Merciful.} (Al-Baqarah 2:173)
Nevertheless, prior to taking loans the Islamic institutions are to exhort all other alternatives such as the state paying the staff’s salaries or most of the salaries or taking interest free loans from well off people.
The scenario of the least harm is that the Islamic institutions avail of banks in light of the state programmer that give interest free loans or grants in return for keeping people employed or other administrative conditions. This is available in some European countries and also some states in America.
In such a case, it is permissible for the Islamic institutions to take loans adhering to the stipulated conditions in order to avoid paying interest.
In another scenario suggested by some states is that the Islamic institutions repay the interest but not the loan itself. This is available in America and some European countries. It is permissible if done with the intention of repaying some of the loan as if the creditor relinquishes the rest especially as the interest paid is less than the loan.
As for the cases where the interest is not zero, they are judged in light of the necessity. The smaller the interest rate is (as for instance in Canada, Germany and Spain it is 1 or 2%) the more available the concession is as it is seen as part of the management fees.
The ECFR urges Muslims, who have the means, to support the Islamic institutions so that they continue performing their vital role in serving the Muslim existence in the West.
The ECFR also urges the Islamic fund institutions, if they exist, to play their role and facilitate the Islamic institutions with interest free loans with reasonable conditions or enter into partnership with profitable Islamic institutions e.g. schools and Abiturs and henceforth share the loss and the profit.
Almighty Allah knows best.
Source: https://www.e-cfr.org/