Is it riba?

Riba (interest or usury) is an increase taken without a real asset or risk behind it. It has two forms: riba on loans, where money lent is repaid with more money, and riba in exchange, where the same kind of money or goods sold by weight or measure is traded unequally or with delay. Both are forbidden. Trade at a fixed price, with genuine ownership and risk, is permitted. In the Hanafi school the same kind of anything may also never be swapped with delay, even goods that are not weighed or measured.

Yes, if it is hand to hand. One currency may be exchanged for another at any rate, but both sides must be delivered on the spot. The same currency exchanged for itself must be equal and hand to hand; any surplus or delay is riba. Money for goods or services carries no such condition: any amount, now or later. Mufti Taqi Usmani allows one side of a currency exchange to follow later at the day’s rate; AAOIFI, the OIC Fiqh Academy and Diyanet require both at once, and this guidance follows that safer view.

The thing being handed over is money. What gets repaid?

• Exactly what was borrowed — nothing addedHalal · A loan · Qur’an 2:279Money is repaid like for like. Lending as a favour and getting back the same amount is permitted, whether between two people or with an institution. The lender makes no profit on the money itself.This is qard hasan, a benevolent loan. The lender may not require any increase or benefit in return for lending, whether written in the contract or simply expected.Other views: In the Maliki and Hanbali schools a lender should not accept gifts from the borrower before repayment unless such gifts were usual between them before the loan. Hanafis allow gifts that were neither agreed nor expected.
• More than was borrowed — interest, or a fee for taking time to repayHaram · Riba · Qur’an 2:275Money lent for more money is riba in its clearest form. The extra is charged purely for time, not for any real asset or shared risk. It makes no difference whether the lender is a friend, a payday lender or a bank, or whether the rate is 5% or 50%. Any increase on a money loan is riba.Other views: Abu Hanifa and his student Muhammad al-Shaybani held that riba between a Muslim and a non-Muslim in non-Muslim territory is not forbidden, and the European Council for Fatwa and Research relied partly on this in 1999 to allow a first-home mortgage in the West. Most Hanafi authorities today, including Mufti Taqi Usmani and the Deoband fatwa department, do not apply it, and many limit the old view to a Muslim receiving interest, never paying it. This guidance does not rely on it.

I keep money in a bank. What does the bank give me for it?

• Interest: a set rate on my balance, and my money is guaranteedHaram · Riba · Qur’an 2:275A bank deposit is a loan to the bank: it may use the money and must repay it in full. Any interest promised on a loan is riba, whatever it is called. This covers savings accounts, fixed deposits and interest on current accounts.Keep money in a current account that pays nothing, or in a profit-sharing account at an Islamic bank. Interest already paid to you should be given to the poor, not used yourself.
• Nothing: my money sits in a current account, repayable whenever I askHalal · A loan · Qur’an 2:279Your deposit is a loan to the bank, repaid in full whenever you ask, with nothing added. That is allowed. Services that come with the account, such as a card or statements, are fine.Cash or gifts paid because of how much or how long you keep money in the account count as interest. Welcome offers made to every new customer do not.
• A share of real profit, and my deposit can shrink if investments loseHalal · Partnership · MudarabaThis is an investment, not a loan. The bank invests your money and takes an agreed share of the profit as manager. You bear any loss the bank did not cause by negligence. The rate it advertises is only an expectation, never a promise.If the bank guarantees both your money and a fixed or minimum return, the account is an interest-paying loan, whatever its name. Profit comes only with risk.

How do I use the card, and what does it cost me?

• I pay the full balance by the due date, so interest never appliesHalal · A loan · Qur’an 2:279Each purchase is a short loan from the card company, repaid in full with nothing added. Mufti Taqi Usmani allows this if you are confident you will always pay on time. The interest clause itself is wrong, so make sure it can never apply.Set up a direct debit for the full balance every month. A debit card or a fee-only Islamic card is safer still.Other views: The OIC Fiqh Academy does not allow signing up for a card whose terms charge interest, even if you intend to pay on time.
• I carry a balance from month to month and pay interest on itHaram · Riba · Qur’an 2:275Interest on an unpaid balance is an increase on a loan in return for more time. That is riba in its plainest form, whatever the rate. The same goes for cash withdrawals that charge interest from day one.Clear the balance as soon as you can and stop using the card on credit.
• I pay only a fixed yearly fee for the card, not linked to spendingHalal · Service feeA flat yearly or issuing fee pays for the card service. It does not grow with what you borrow or how long you take, so it is not interest. The commission the shop pays the card company is also allowed.

My bank lets me go below zero. What does it charge?

• Interest, or a charge that grows with how much or how long I’m overdrawnHaram · Riba · Qur’an 2:275An overdraft is a loan from the bank. A charge that rises with the amount or the time is an increase on a loan, which is riba even if the bank calls it a fee.Keep a buffer so you never go overdrawn, or use an account that simply declines payments.
• No interest, and at most one flat fee that covers the bank’s real costHalal · A loan · Qur’an 2:279A loan repaid with nothing added is allowed. One fixed charge that only covers the bank’s real cost, and does not change with the amount or the time, is not interest.Scholars require such a fee to match the real cost. Anything above that counts as riba.

I split a purchase into instalments with a pay-later service. What are the terms?

• Same price as paying now, no interest, and I always pay on timeHalal · A loan · Qur’an 2:279You pay the shop’s price in parts and nothing is added. The pay-later company pays the shop and you repay it the same amount, which is a loan without increase. Pay every instalment on time so no late charge can ever apply.Set up automatic payments, and only use it for what you can afford.Other views: Some Hanafi muftis advise against signing up at all, because the terms include late fees. The OIC Fiqh Academy takes the same line on credit cards.
• The pay-later company charges interest or a rate on what I oweHaram · Riba · Qur’an 2:275Here the company lends you the price and takes back more for the time. That is interest on a loan, even if the rate is small. It differs from a shop selling you the item itself at a fixed higher price, which is allowed (see Buy on credit).
• I miss a payment and the company adds a late feeHaram · Riba · Qur’an 2:275Adding money to a debt because it is paid late is the riba the Qur’an came to end, however small the fee. If you are ever charged one, settle the debt quickly and avoid such plans.

My bank charges me. What is the charge for?

• A set fee for running my account, a card, or sending moneyHalal · Service feePaying an agreed price for a real service is ordinary hire. The fee is for the work, not for lending you money, so it is not interest.The OIC Fiqh Academy asks that money-transfer fees stay within the real cost of the service.
• Sending money abroad: it’s converted at today’s rate, then sentHalal · Exchange · AAOIFI 1The bank exchanges your money on the spot at an agreed rate, then transfers it. The normal day or two for the payment to arrive is ordinary banking, and the exchange itself was on the spot.
• A charge that grows with how much I borrow or how long I oweHaram · Riba · Qur’an 2:275Whatever it is called, a charge tied to the size or length of a loan is interest. Only the real cost of a service may be charged on a loan.
• I lock in a rate today for currency delivered weeks laterHaram · Riba · Deferred exchangeCurrencies must change hands on the spot. Fixing today the rate for an exchange that happens later is a forward deal, which is not allowed even to protect against rate changes.

What does the contract name as the thing being bought and sold?

• Money. The bank lends me cash, and the house is only its collateralHaram · Riba · Qur’an 2:275The object of the contract is money, not the house. The bank hands over cash today and takes back more over the years as interest. Naming the house as collateral does not change what it is: a money loan repaid with an increase. Money for more money over time is riba, plainly.Other views: Abu Hanifa and his student Muhammad al-Shaybani held that riba between a Muslim and a non-Muslim in non-Muslim territory is not forbidden, and the European Council for Fatwa and Research relied partly on this in 1999 to allow a first-home mortgage in the West. Most Hanafi authorities today, including Mufti Taqi Usmani and the Deoband fatwa department, do not apply it, and many limit the old view to a Muslim receiving interest, never paying it. This guidance does not rely on it.
• The house. The bank buys it, or a share of it, then sells or rents it to meHalal · Trade · Hadith 2 & 5The object of the contract is the house itself. The bank owns a real asset, bears its risk, and profits by selling or renting it, not by lending money. Buying an asset on deferred payment is allowed, and profit is earned by bearing liability.The halal form: a diminishing partnership (Musharakah Mutanaqisah) or a lease-to-own (Ijara). The financier must genuinely take ownership and its risk, not just hold the deed as security. Each step (the partnership, the rent, buying the bank’s shares) must be a separate contract, and nothing may be added if you pay late.

How is the deal structured in the contract?

• A cash loan with interest, plus extra fees if I pay lateHaram · Riba · Qur’an 2:275The lender gives cash and takes back more. Interest on a money loan is riba, and late fees that grow the debt are the old riba, where time itself is sold for money. The car is only collateral; the lender never owns or risks it.
• The financier buys the car, then resells it to me at a fixed higher priceHalal · Trade · Hadith 2 & 4The seller owns the car, then sells it on for a fixed higher price paid over time. A deferred price may exceed the cash price, the price is locked upfront and can never rise, and the seller bore the risk of ownership.The halal form: a cost-plus sale (Murabaha). The financier must own and take possession of the car before selling it to you. If you pay late it may not add anything for itself; at most you pledge in advance to give a set sum to charity, which it must pass on.
• The financier owns the car and leases it to me, with an option to buy at the endHalal · Lease · Hadith 5The financier owns the car and rents out its use, carrying the risk of ownership. Rent for a real asset is permitted, so long as the payment is a genuine rental and not interest in disguise, and a late payment is not punished with more money.The halal form: a lease (Ijara) or lease-to-own. The option to buy must be a separate promise, not built into the lease. If the "rent" is really a loan repayment priced by an interest rate, it is riba wearing a lease’s clothing.

I’m buying a home that isn’t built yet. How is it arranged?

• I agree a fixed price with the builder for a described home, paid in stagesHalal · Trade · Istisna’Ordering something to be made to a clear description is its own contract, called istisna’. Hanafi scholars recognised it from long-standing practice. The price is fixed at the start and may be paid in stages or at handover, and the builder may owe a penalty for late delivery.Plans, size, finish and handover date must be written down. You may not be charged extra for paying late.Other views: Only the Hanafi school treats a made-to-order contract as its own type. The other schools fit it into the prepaid sale (salam), which needs the full price upfront. The OIC Fiqh Academy and AAOIFI follow the Hanafi form and make it binding on both sides.
• A bank orders the home, then sells it to me at a fixed priceHalal · Trade · Parallel istisna’The bank contracts with the builder and, separately, with you, at a price fixed from the start and paid over time. The bank carries the risk if the builder fails or is late. Its profit comes from that responsibility, not from lending money.The two contracts must be separate, and your price can never rise if you pay late.
• A bank lends me cash to pay the builder, and I repay it with interestHaram · Riba · Qur’an 2:275The bank’s deal is money now for more money later. The unfinished home is only security. That is a loan at interest, however the payments are arranged.

I rent a home now and want to own it later. How does the contract work?

• A real lease now, plus a separate promise to sell or gift me the homeHalal · Lease · IjaraThe owner keeps ownership and its risks while you rent, and your rent pays for living there. At the end, ownership passes by a separate sale or gift, as promised. Major repairs and insurance fall on the owner, not you.The final price may be fixed in the promise, set at market value, or agreed at the time.
• One contract where my rent automatically turns into buying the homeHaram · Two deals in one · Hadith 4A single contract that is a lease and a sale at once leaves it unclear what you are paying for, and you may lose everything if you default. The OIC Fiqh Academy rules this form out.

I sell my home to a financier and stay on as a tenant. What are the terms?

• A real sale; the buyer owns and insures it, and I rent it backHalal · Lease · IjaraIf the sale is genuine, the buyer carries the risks of owning the home and may charge rent for its use. Any buying back later must be a separate deal, not a condition of the sale; otherwise it is a loan in disguise.Buy back at market value or at a price agreed at that time. AAOIFI also requires a real gap in time between the sale and any lease-to-own.
• I must buy it back at the same price, and the rent works like interestHaram · Riba · Loan with benefitA sale on condition that you buy back at the same price is really a loan with your home as security. The rent is then a benefit taken from a loan, which is riba.Other views: Some later Hanafi jurists in Central Asia allowed this "sale with right of return" as a kind of pledge. Even then the lender may not profit from it, and the OIC Fiqh Academy rejects it outright.

I give the landlord a large sum instead of rent and get it back when I leave. How is it set up?

• A large sum the landlord can use; I live rent-free or cheaper until it’s repaidHaram · Riba · Loan with benefitMoney the landlord may spend and must return is a loan to him. Free or cheaper housing because of that loan is a benefit drawn from a loan, which is riba. Hanafi muftis rule this arrangement out, however common it is.Pay the rent upfront instead: one sum for the whole period that is not returned. Or pay normal rent with a small security deposit.
• A normal security deposit, and I pay the full market rentHalal · Security depositA deposit held against damage or unpaid rent is allowed and must be returned in full. If the landlord uses it with your permission it becomes a loan, which is still fine as long as your rent is not lowered because of it.
• I pay all the rent for the whole period upfront; it isn’t returnedHalal · Lease · Advance rentRent may be paid in advance, and a lower price for paying upfront is part of the rent deal. Nothing is lent and nothing is returned, so no riba arises. This is the fix Hanafi muftis give for big-deposit rentals.

I trade in my car at a dealer for another car. How does the swap work?

• I hand over my car, pay the difference, and drive the new one home nowHalal · Trade · Hadith 2 & 3A car for a car with both handed over now is allowed in any combination, and the money you add is part of the price. That money may be paid now or in fixed instalments.
• I hand over my car now, and the new car is delivered laterHaram · Same kind, later · Hadith 3Hanafi scholars do not allow swapping two things of the same kind with one delivered later, based on the Prophet forbidding an animal for an animal on credit. A car for a car to come later falls under this.Sell your car to the dealer for money first, then buy or order the new car in a separate deal. The dealer can set what it owes you against the new price.Other views: The Shafi’i school allows this swap. Hanafi texts treat goods of different craft as different kinds, so some may view very different cars differently; this guidance takes the safer view.

What are you paying for, and how?

• A real item at a fixed price, even if higher than the cash priceHalal · Trade · Hadith 2 & 4Buying an asset on deferred payment is allowed, the deferred price may be higher than the cash price, and a fixed price removes ambiguity. This is a sale, not a money loan.This does not cover gold, silver or currency, which must be paid for on the spot.
• The amount I owe grows the longer I take to payHaram · Riba · Qur’an 2:275A debt that grows with time is money being charged for money. Once the price can increase for delay, it has become a loan at interest. That is riba.

I lent money and prices have risen since. What may I take back?

• Exactly the amount I lent, in the same currencyHalal · A loan · Qur’an 2:279A loan is repaid with its like: the same amount of the same money. This is the main Hanafi position, applied to modern money by Mufti Taqi Usmani and the OIC Fiqh Academy.To protect against inflation, lend in something steadier from the start, such as gold or a stronger currency, and take back exactly that.Other views: Turkey’s Diyanet, citing Abu Yusuf, holds that when money has really lost value, repaying its original value is fairer, and allows the parties to agree on it using official inflation figures. The Maliki school allows value only if the currency collapses.
• The amount adjusted for inflation, as agreed when I lent itHaram · Riba · Qur’an 2:275Tying repayment to a price index, gold or another currency when you lend means you may get back more money than you gave. That increase is riba, and the unknown amount adds uncertainty.

I owe money due later and want to pay early for a discount. How is it agreed?

• The contract promises me a discount for paying before the due dateHaram · Riba · Time sold for moneyA discount agreed in advance for paying early trades time for money: less money for less waiting. Hanafi scholars, the OIC Fiqh Academy and AAOIFI do not allow it to be written into the deal.Other views: Ibn Taymiyya, and one view in the Hanbali school, allowed a discount for early payment. The main view of all four schools does not.
• I pay early, and the seller freely lets me off part, nothing agreed beforehandHalal · Waiver · OIC 64A creditor may always forgive part of a debt. If you pay early and the seller, on their own, reduces the balance, that is a gift, not a sale of time. Islamic banks often do this, but it cannot be promised in the contract.Other views: Classical Hanafi texts also forbid agreeing "pay now and I’ll drop part" at the moment of payment. The OIC Fiqh Academy allows that if nothing was arranged in advance.

I pay an instalment late. What does the contract say happens?

• The lender adds a fee or extra charge, which it keepsHaram · Riba · Qur’an 2:275Anything added to a debt for late payment and kept by the creditor is riba, whether a flat fee or a percentage. It is the old "pay now or pay more" riba, and it applies to Islamic banks too.
• I pledged in advance to give a set amount to charity; the lender keeps noneHalal · Charity pledge · AAOIFI 3Islamic banks use this to discourage late payment. The money must go to charity under the bank’s Shariah board and can never be the bank’s income. It is your promise, not a penalty the lender earns.Other views: This comes from a Maliki view on binding pledges, adopted by Mufti Taqi Usmani and AAOIFI. Some Hanafi scholars doubt that a gift can be made compulsory.
• The lender gives me more time but raises what I oweHaram · Riba · Qur’an 2:275Increasing a debt in return for extending it is exactly the riba of pre-Islamic Arabia. Extra time may be given free, never for more money.

I’m repaying a loan and want to give the lender something extra. Is it allowed?

• I repay in full and, unasked, add a gift of thanksHalal · Good repayment · Sahih al-BukhariThe Prophet repaid a debt to Jabir and gave him extra, and said the best people are those who repay best. A free, unplanned gift at repayment is a kindness, not riba.Other views: The Maliki and Hanbali schools are stricter about gifts given while the loan is still running, unless such gifts were usual between the two before it.
• The extra was agreed, or everyone expected it, when I borrowedHaram · Riba · Loan with benefitIf the lender required it, or it was understood from the start, the extra is a return on the loan. That is riba, even if it is called a gift. What is customary counts as if it were written in the contract.Gifts during the loan that only happen because of it should also be avoided.

I owe euros but want to repay in another currency. How is the rate set?

• On repayment day we agree that day’s rate, and I pay it all at onceHalal · Exchange · Ibn Umar hadithIbn Umar sold camels for gold coins and took silver instead. The Prophet allowed it at the rate of the day, provided nothing was left owing when they parted. So settle the whole converted amount on the spot.
• The exchange rate was fixed when I borrowed, for repaying in the other currencyHaram · Riba · Deferred exchangeFixing now the rate for a currency swap that happens later is a delayed currency exchange, which is not allowed. It can also hide interest in the rate.
• We settle a loan at a rate better for the lender than that day’s rateHaram · Riba · Qur’an 2:275Using a rate above the market to repay a loan gives the lender more than was lent. That extra is riba.

What does the investor receive in return?

• Fixed interest, repaid whether the business wins or failsHaram · Riba · Hadith 5Money returned as more money, with the investor bearing no risk. A guaranteed return on cash, regardless of the outcome, is riba. It is a money loan at interest dressed as an investment.
• A share of the actual profit, and they lose their money if it failsHalal · Partnership · Hadith 4 & 5The investor is paid from real profit and carries the loss if it fails. Profit is justified by bearing liability, and the split is fixed upfront as a share of profit, never a fixed sum or a percentage of the money invested.The halal form: profit-sharing (Mudarabah) or partnership (Musharakah), provided the business itself is permissible.Other views: The Maliki and Shafi’i schools require each partner’s profit share to match his share of the capital. Hanafi and Hanbali law allow another agreed ratio, but a Hanafi sleeping partner may not take more than his capital share.
• A share of ownership (equity), with no promise to buy it back at costHalal · Equity · Hadith 5They buy a real stake and rise or fall with the business. Because there is no guaranteed buyback of their money, it is a genuine partnership, not a hidden loan.The halal form: an equity partnership (Musharakah), provided the business itself is permissible.

I want to swap my old gold jewellery for a new piece. How is it done?

• I sell my old gold for cash, take it, then buy the new pieceHalal · Trade · Sahih al-BukhariThis is the Prophet’s own advice: sell for money, then buy with the money. Each sale is gold for money on the spot, at any agreed price, so the shop may pay less for old gold and charge for new craftsmanship.Pay for the new piece in full on the spot. Buying gold on instalments is not allowed.
• I swap old for new gold of equal pure weight, nothing added, on the spotHalal · Exchange · Hadith 1Gold for gold is allowed when the pure gold weighs the same and both are handed over at once. Age and craftsmanship do not count.
• I give old gold plus cash for a new piece weighing the same or lessHaram · Riba · Hadith 1When the new gold weighs the same or less, your cash is a surplus on gold for gold. That is riba, even if it is called a charge for workmanship.Sell the old gold first, or have your own gold remade and pay the goldsmith only for the work.
• I give old gold plus cash for a heavier new piece, all on the spotHalal · Exchange · OIC 84Hanafi scholars allow this: your gold matches the same weight of new gold, and your cash buys the extra gold. It works only if the new piece truly has more pure gold and everything changes hands at once.Other views: The other schools reject this and require selling the old gold first, which is the safest route everywhere.

I pay a farmer now for produce delivered later. What are the terms?

• I pay in full now; set amount, set quality, fixed delivery dateHalal · Trade · SalamThe Prophet allowed paying ahead for a known measure, a known weight and a known date. The produce must be clearly described and normally available from the deal until delivery, and Hanafis require at least a month’s term.Other views: Hanafis do not allow paying ahead for animals. The other three schools do.
• I pay part now and the rest when the crop arrivesHaram · Debt for debt · SalamIn a prepaid sale the whole price must be paid before you part. Otherwise both sides are left owing each other, which is not allowed, and only the part paid counts.Other views: The OIC Fiqh Academy, following the Maliki school, allows the price to be paid within two or three days.
• The amount is whatever one named farm happens to produce this seasonHaram · Gharar · UncertaintyTying the deal to one farm means the harvest may fail and you pay for nothing. The Prophet asked: "If God withholds the fruit, by what right would you take your brother’s money?" Describe the produce instead, without naming one field.
• I pay in wheat now for barley delivered laterHaram · Riba · Hadith 1Wheat and barley are both sold by measure, so they must change hands together. A prepaid deal with one side later is riba here. Pay with money instead.

An Islamic bank gives me cash by buying and selling a commodity. How does it work?

• The bank sells me metal on credit, then sells it on for me for cashHaram · Riba in disguise · OIC 179In this organised form the commodity is a paper step: the bank arranges both sales and you end up with cash now and a bigger debt later. The OIC Fiqh Academy rules it out as a trick for interest, and Mufti Taqi Usmani rejects the bank being your pre-arranged selling agent.Other views: AAOIFI Standard 30 allows bank tawarruq only when the bank does not sell for you and the goods never go back to the seller. Many banks do not meet that.
• I buy real goods on credit, take them, and sell them myself elsewhereHalal · Trade · TawarruqBuying on credit and selling for cash to an unrelated buyer is a real trade, and the classical schools allow it. You must truly own and receive the goods and sell them yourself. Scholars still prefer an interest-free loan and advise this only in real need.
• The bank sells me goods on credit, then buys them back itself for lessHaram · Riba · ’InaSelling on credit and buying back for less cash is the ’ina sale: the goods go in a circle and what remains is cash now for more later. Hanafis forbid buying back for less before the price is paid.Other views: The Shafi’i school treats the two sales as valid when no buy-back was agreed, which is why this structure appears in some markets. The Hanafi, Maliki and Hanbali schools forbid it.

I want to buy shares in a company. What kind of company is it?

• A halal business with little interest-bearing debt; I give away the impure partHalal · Equity · AAOIFI 21A share is part-ownership of a real business. It is allowed if the main business is halal and interest-bearing debt, interest-bearing deposits and impure income stay within set limits. Give the impure part of dividends to charity.AAOIFI’s limits: interest-bearing debt and interest-bearing deposits each under 30% of market value, and forbidden income under 5% of revenue.Other views: The OIC Fiqh Academy is stricter: it starts from prohibition for companies that sometimes deal in interest.
• A bank, insurer, alcohol or gambling company, or another business haram at its coreHaram · Riba · Haram businessA share makes you a part-owner of what the company does. Owning part of a business built on interest or other forbidden trade is not allowed, whatever the returns.
• A halal business, but its interest-bearing debt is above the limitsHaram · Riba · AAOIFI 21Once a company’s interest-bearing borrowing or deposits pass the limits, it no longer counts as a mainly halal investment. Wait until it is back within limits, or choose a screened alternative.
• I buy shares with money borrowed from my broker at interestHaram · Riba · Qur’an 2:275Buying on margin with an interest-bearing loan is riba, even if the shares themselves are halal.

I want to invest through a bond, a fund or an ETF. What does it hold?

• A bond or bond fund that pays me interestHaram · Riba · Qur’an 2:275A bond is a loan to a government or company, repaid with interest. Held directly or through a fund, the return is riba. Bonds bought below face value are the same: the gain is interest paid at the end.Sukuk that give real ownership of assets, such as leased property, are the halal alternative.
• A Shariah-screened index fund or ETF with its own scholar boardHalal · Equity · AAOIFI 21The fund owns only shares that pass halal screens and sells any that stop passing. It should purify impure income or tell you how much to give away. Check that it does not lend out its shares for interest.
• An ordinary index fund or ETF that holds every company in the marketHaram · Riba · Haram holdingsA standard index includes banks, insurers and companies deep in interest-bearing debt, so buying it makes you part-owner of all of them. Choose a screened version of the same index instead.

I want to trade derivatives or bet on falling prices. What is the trade?

• I trade options: the right to buy or sell later at a set priceHaram · Gharar & gambling · OIC 63The problem here is not riba but uncertainty and speculation. The premium buys a bare right, which is not property that can be sold, and most options end as bets on price moves. The OIC Fiqh Academy and AAOIFI do not allow them.
• I trade CFDs: I bet on the price difference without owning anythingHaram · Gambling & riba · Qur’an 5:90A CFD settles only the change in price. Nothing is bought or delivered, so it is a wager. Holding one overnight usually costs interest too.
• I sell shares I don’t own, borrowed from my broker, to buy back cheaperHaram · Selling what you don’t own · OIC 63The Prophet said: do not sell what you do not have. Short selling sells borrowed shares and usually involves interest as well.
• I buy real shares with my own money and hold themHalal · Equity · AAOIFI 21Owning what you buy, with your own money, is ordinary investing, subject to the halal screens in Buying shares.

I want to trade currencies. How is the trade set up?

• I swap my own money for another currency, settled straight to my accountHalal · Exchange · AAOIFI 1Two currencies at any rate, with both sides delivered on the spot, is an ordinary exchange, and you may profit from rate changes this way. The normal one- or two-day settlement in currency markets counts as on the spot.
• A leveraged account: the broker lends me margin and charges overnight swapsHaram · Riba · Qur’an 2:275The margin is a loan from the broker, which profits from it through your trades, and the overnight swap is interest. Positions are rarely delivered, only closed for the difference, so it is also a bet on prices.
• A swap-free "Islamic" account, but still leveraged and never deliveredHaram · Riba · Loan with benefitRemoving the swap fee does not fix the loan: the broker still lends you money to trade and profits from it. The currencies are also never truly exchanged hand to hand.A swap-free account with no leverage and real settlement is, in substance, the first option.