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Fatwa CenterInterest from Certificate of Investment
Question
Is the interest taken from certificate of investment Halal or Haram?
Answer
All perfect praise be to Allah, The Lord of the Worlds. I testify that there is none worthy of worship except Allah, and that Muhammad 
is His slave and Messenger.
There are three conditions for lawful investment in banks or elsewhere:
1) To invest money in lawful activities such as useful projects, building houses and so on. On the other hand, it is forbidden to invest money in building usury-taking banks, cinemas and mixed places of swimming and so on. Also, it is forbidden to take usurious loans. So, one must know the types of activities of investment that are run by banks.
2) To make no guarantee for capital. In other words, a certificate that shows the amount of investment should also state the possibility of profit and loss. So, if there is any form of guarantee to the capital, it will be considered as a loan and any profits, interest or bonus received due to this loan is a form of Riba.
3) Any speculation or partnership contract should state the percentage of profit in general and not from the capital. For example, the two parties are to agree that 30 percent, 50 percent or 20 percent from the profits will be received by one of them. So, it is not correct to leave the profit unfixed as the state of the certificate in question.
Besides, you have to know that banks that do not follow Islam concerning investment and speculation, fix interest on the value of certificate beforehand. Then, some banks state the interest and distribute it after three or six months, while others hide the interest and distribute it to some investors by drawing lots.
This last state combines in fact Riba and gambling.
As a result, nobody (outside of the banks) knows how business in conducted with certificates of investment that have no fixed profit. We state that such transactions are not permissible, since they are loans and receiving any profit from such a loan constitutes Riba. We pray to Allah to save all of us from Riba and its dangers.
Allah knows best.
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