Inflation and Riba : hedging inflation by taking interest

Fatawa Question

Assalam-o-Alaykum, I live in the US and I need your help to clarify certain questions related to financial issues. My question is regarding hedging inflation by taking interest from savings account in a bank. 1. What is the concept of inflation in Islam ? 2. Bank deposits in US or in Pakistan's saving account generally give interest less than or equal to inflation. Since, inflation eats away paper money (dollar or rupee) is permissible to take interest from banks ? If not, why ? 3. If one is not allowed to take bank interest in any circumstance, what can one do to preserve its (dollar or rupee) value over time, especially in Pakistan where inflation is always in double digits ? 4. Banks can change their savings rate several times in a year. Is it still considered fixed ? 5. Certificate of deposits in US or savings certificate in Pakistan allows you lock the interest rate and invest at fixed rate for several years. Is that permissible in Islam ? 6. My mother has invested in Bahbood certificate in Pakistan, which gives fixed interest. It is a special scheme from government of Pakistan in which only older people (60 years or older) can invest. Is that permissible in Islam ? If not, what are the ways older people support themselves financially ? Thank you for your help. Arifaa

Fatwa

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Publication Date

2013-03-01

Main Subjects

Financial and Accounting Sciences
Islamic Studies

Topics

• Islamic jurisprudence
• Inflation(Finance)
• Hedge(Finance)
• Usury

No. of Pages

2

Data Type

Fatawa

Language

English

Record ID

BIM-730624

• APA
• MLA
• AMA