Disposing interest on loans

Question:

If I have earned interest on loans, and I have no way to dispose it off.
1. Is it permissible to deposit it in the bank account of some institution which treats poor people and in the bank account of someone who has made appeal for financial help on account of his illness etc.

2. Is it permissible to open such an account in which we can collect the interest earned by the people and use the said amount for social services or to give interest free loans to loans to unemployed?

Answer:

In the Name of Allah, the Most Gracious, the Most Merciful.
As-salāmu ‘alaykum wa-rahmatullāhi wa-barakātuh.

It is not permissible to open up an account specifically to earn interest even if the intention is noble, to provide social services and empower people.

If by chance and subordinately, one received interest due to using the bank facility out of personal need, then the interest accrued should be disposed to the poor and needy. This maybe done personally or even depending on reliable institutions to dispose of it on your behalf. In the enquired case, if the institution is reliable and serves the needs of the people, then interest monies should be given to those institutions to dispose of on your behalf.

Likewise, if a person needs financial help due to ill health, interest may be dispensed to his account. In this case, it is important to ensure that the person is poor and needy. [1]

Interest monies cannot be given as loans. They have to be dispensed to the poor and needy.

And Allah Ta’āla Knows Best

Ismail Desai

Checked and approved by:

Mufti Ebrahim Desai.