Question # 487: If a person has haram income from interest or any other haram option but invests in a halal business, will the income from that business will be halal or haram??

bismi-llahi r-raḥmani r-raḥīm,

Assalamu ‘laikum warahmatullahi wabarakatuh,

All praise and thanks are due to Allah (سبحانه و تعالى), and peace and blessings be upon His Messenger (صلى الله عليه و سلم).

Dear questioner,

First of all, we implore Allah (سبحانه و تعالى) to help us serve His cause and render our work for His sake.

Shorter Answer: The best way to deal with the income earned from the haraam source is to seek Allah’s forgiveness and get rid of it by giving it away to someone in need (which will be an expiation for the sin and not regarded as charity/sadaqah or zakaah) or to return to its rightful owner (for example, in case of fraud or stealing), if possible. However, if one acquires haraam wealth by means of a haraam transaction (for example, riba) because he was ignorant of the prohibition or he believed it to be permissible based on a fatwa from a scholar whom he trusted, he should immediately stop such dealings on learning about the prohibition but may keep his past gains. Next, using haraam money to do business is only permissible in case of dire need; therefore, one may take as much as one needs, and give away the rest. And as for the income generated from investing such haraam money into the halal business, the preponderant opinion among the scholars is that there is no harm in benefitting from the profits earned from it, provided the aforementioned steps were followed. However, in the case of haraam wealth acquired fraudulently, a share of the profit should belong to the person from whom the money was stolen – this is similar to the treatment in mudarabah[1] investment.

Long Answer: Haraam wealth may take various forms. It may be haraam in and of itself or because of the manner in which it was acquired. That which is haraam because of the manner in which it was acquired may have been taken with or without the consent of the owner, and the one who acquired it may have been aware of the prohibition, or he may have been ignorant of it, or he may have thought, on the basis of ijtihad, that it was permissible (and then realized that it is not). Each situation has its own ruling.

  1. Whoever takes the property of another person in an unlawful manner, without the owner’s consent or permission, such as stolen wealth, wealth that was seized by force, anything obtained fraudulently from the public wealth, anything taken by means of deceit and cheating, …and the like – all such wealth must be returned to its owner, and the responsibility of the one who took it unlawfully cannot be discharged otherwise. If he has spent it or otherwise disposed of it, it remains a debt that he owes until he is able to repay it to its owner.

Ibn al-Qayyim said: If the seized item was taken without the consent of its owner, and was not in exchange for something else, then he must return it to him. If it is not possible to return it to him, then it may be given to a third person to whom the one from whom it was taken owes money. If that is not possible, it must be repaid to his heirs. If that is not possible, then it may be given in charity on his behalf.

In that case, if the one to whom it rightfully belongs agrees to accept the reward for charity on the Day of Resurrection, then it will be his. But if he refuses, and insists on taking from the good deeds of the one who took it unlawfully, he will be recompensed in full commensurate with his wealth that was taken, and the reward for the charity will go to the one who gave it in charity, as is proven from the Sahabah (رضي الله عنهم). (Zaad al-Ma‘aad)

Also, if he took it by means of stealing or seizing by force, he has to return the wealth to its owner no matter how long a time has passed. In al-Mawsoo‘ah al-Fiqhiyyah it says: Repentance in the sense of giving up what you have done in the past and resolving not to go back to it is not sufficient to waive that which you owe to other people. The one who steals or takes by force the property of another, or harms him in some other way, cannot discharge his responsibility merely by regretting it, giving up the sin, and resolving not to do it again; rather it is essential to right any wrongs that have been committed. This is the basic principle upon which there is consensus among the fuqaha’.

The scholars of the Standing Committee said: The one who has taken the property of another person without his permission must return it to him, even if he was a child at the time when he took it, and he should ask him to forgive him because the Prophet (صلى الله عليه و سلم) said: “It is not permissible to take the property of a Muslim unless he gives it willingly.” He (صلى الله عليه و سلم) also said: “Whoever has wronged his brother, let him seek his pardon today before there will be no dinar or dirham (i.e., on the Day of Resurrection).” (Fataawa al-Lajnah ad-Daa’imah)

  1. Whoever acquires haraam wealth by means of a haraam transaction because he is ignorant of the prohibition on this transaction, or he believes it to be permissible on the basis of a fatwa from a scholar whom he trusts, then, in this case, he is not required to do anything, on condition that he give up this haraam transaction when he learns of the prohibition on it, because Allah (سبحانه و تعالى) says in the Qur’an: “So whosoever receives an admonition from his Lord and stops taking Riba (usury) may keep his past gains” (Soorah al-Baqarah 2:275)

Shaykh al-Islam Ibn Taymiyah said: As for that concerning which there is no doubt in our view, it is that whatever he acquired on the basis of ijtihad or ignorance, in this case, he may keep his past gains, without a doubt, as is indicated by the Qur’an and Sunnah and rational thinking. (Tafseer Aayaat Ashkalat ‘ala Katheer min al-‘Ulama’)

And he said: With regard to whatever wealth a man has acquired through transactions concerning which the ummah differs, thinking that it was permissible for him to do that on the basis of ijtihad or because he was following the view of a scholar, or he was following some people of knowledge, or because he was given a fatwa to that effect by a scholar, and the like –

… with regard to this wealth that they acquired and seized, they do not have to repay it. Even if it becomes clear to them after that that they were mistaken in that regard, and that the one who gave them that fatwa was mistaken…

With regard to a Muslim who based his actions on ijtihad and who believes that what he did of buying and selling, rentals and other transactions concerning which some of the scholars gave fatwas, was permissible, if he received some money as a result of that, then it became clear to him later on that the correct view is that it is haraam, that does not make haraam what he had already received of money on the basis of ijtihad that allowed him to do so. (Majmoo‘ al-Fataawa)

And he said: Whoever does something, not knowing that it is forbidden, then he finds out that it is forbidden, is not to be punished. If he engages in a riba-based transaction, believing it to be permissible, and he acquires wealth thereby, then an admonition comes to him from his Lord, he may keep his past gains. (Tafseer Aayaat Ashkalat ‘ala Katheer min al-‘Ulama’)

  1. Whoever acquires haraam wealth despite knowing that it is haraam, and takes it with the permission and consent of its owner, such as that which is taken on the basis of an invalid contract, wages for haraam jobs, profits on trade in haraam things, fees for haraam services such as bearing false witness or writing down riba (usury), or money that is taken as a bribe so that the one who pays it may obtain something that he is not rightfully entitled to, or money acquired by means of gambling, lotteries, soothsaying and the like, etc. All of this comes under the heading of wealth that is haraam because of the manner in which it was acquired. It does not have to be paid back to its owner, according to the more correct of the two scholarly opinions.

Ibn al-Qayyim said: With regard to what was received of payment if the payer gave it willingly, and he already got the haraam thing that he paid the money for – such as one who paid money for alcohol or pork, or unlawful sex or immoral actions – then the money does not have to be returned to the payer, because he paid it willingly and received the haraam thing in return. It is not permissible for him to both take back the money and keep the thing he paid for, because that comes under the heading of helping him in sin and transgression, and making things easy for sinners. (Zaad al-Ma‘aad)

Shaykh al-Islam Ibn Taymiyah said: Whoever takes money for a particular item that is haraam, or for a particular service that he did – such as wages for carrying alcohol, or payment to a cross-maker or a prostitute, and the like – let him or her give it in charity, and repent from that haraam deed, and the giving of that money in charity will be in expiation for what he or she did…  This payment is not permissible for him or her to benefit from personally, because it is an evil earning. At the same time, it is not to be given back to the one who paid it, because he has already got something in return for this money. And he or she should give it in charity, as was stated by the scholars, such as the statement by Imam Ahmad concerning the one who carries alcohol, and as was stated by the companions of Maalik and others. (Majmoo‘ al-Fataawa)

It says in Fataawa al-Lajnah ad-Daa’imah: If the individual knew at the time of earning it that this income was haraam, it does not become halal for him by means of repentance; rather he must get rid of it by spending it on charitable causes.

Shaykh Ibn ‘Uthaymeen said: But if he was aware (that it was haraam), he must dispose of the riba by giving it in charity, so as to get rid of it, or by building mosques, repairing roads, and the like. (al-Liqa’ ash-Shahri)

Ibn al-Qayyim favored the view that if he is poor, then he may take from this money as much as he needs. He (may Allah have mercy on him) said: The way to get rid of it and repent completely is by giving it in charity. But if he needs it, he may take as much as he needs, and give the rest in charity. This is the ruling on all earnings that are regarded as evil because of the manner in which they are earned, whether it was in return for a physical item or some service. (Zaad al-Ma‘aad)

Shaykh al-Islam Ibn Taymiyah was inclined towards a different view, which is that he may make use of it and he is not obliged to give it in charity, so long as he has repented. He said: …if anyone earns haraam money and repents, then it becomes permissible for him if the money was paid willingly, and that is also applicable to money earned by prostitutes and soothsayers. This is not alien to the principles of sharia, because the guidelines of sharia differentiate between the one who repents and the one who does not repent… As for giving it to charity, this is a more appropriate option.

But it may be said that this person who has repented is more entitled to it than anyone else, and if he is poor, then he is undoubtedly more entitled to it than any other poor person. This is a fatwa that I have given more than once: if the one who has repented is poor, he may take as much as he needs of it, for he is more entitled to it than anyone else, and it will help him in his repentance. But if he were obliged or required to give it away, that would cause him a great deal of harm, and he may decide not to repent as a result. Whoever reflects on the general guidelines of Islam will realize that people should be encouraged to repent by all possible means.

Moreover, there is no mischief that will result if he keeps it, for he has already received the money and it is no longer the property of the one who paid it. It is not haraam to own the money itself; rather it may be haraam if it is a means of committing sin. But this person has already been forgiven by virtue of his repentance, so it is undoubtedly permissible for him to keep it if he is poor, but his keeping it even if he is well off may also be justifiable, because it is making repentance easier for the one who has acquired such wealth… (Tafseer Aayaat Ashkalat ‘ala Katheer min al-‘Ulama’)

[And as far as the income generated from investing such haraam money into the halal business is concerned,] …there is a difference of opinion among the fuqaha’ concerning [giving the profit to the person from whom he stole if he did business with that money.]

The Hanbalis are of the view that he should return the profit too. The Malikis and Shafi‘is are of the view that the profit belongs to the one who stole it, because he is liable in the event of it being destroyed or lost. Abu Hanifah was of the view that he should give it to charity because it came from a haraam source. Ibn Qudaamah said in al-Mughni: If he took something valuable and did business with it, or he took some trade goods and sold them and did business with the money, then our companions say: The profit belongs to the owner and the purchased item belongs to him. … al-Shareef said: And it was narrated from Ahmad that he should give it in charity.

Al-Sharbeeni al-Khateeb said: If the one who took wealth by force did business with the wealth, then the profit belongs to him according to the more correct opinion. (Mughni al-Muhtaaj; See also al-Mawsoo‘ah al-Fiqhiyyah al-Kuwaitiyyah)

Shaykh al-Islam Ibn Taymiyah favored the view that he should take from the profit a share like that of his peers, so he should be treated as if he took the money for a mudarabah investment, so he may have half of the profit or one third or one quarter, according to what is customary.

Shaykh Dr. Khaalid al-Mushayqih was asked: A person stole a car belonging to someone else, and he used it for work and earned a certain amount of money from it. Now he has been arrested. To whom should this money be given? To the thief or to the owner of the car?

He replied: The money in such cases is a matter concerning which there is a difference of opinion among the scholars. The favored view is that of Shaykh al-Islam Ibn Taymiyah, which is that if he stole some money and did business with it, then he should have a share like that of his peers, i.e., he should look at this person who used this money and pay him what experts and business people regard as the usual payment for such matters. So, if they say that he should take half of the income, then he should be given half. If they say that he should take one quarter, then he should be given one quarter, and the rest belongs to the owner.

An example of that is the one who worked using this car; he should be given the share of his peers and he should be paid for his work. If someone like him would take one half or one quarter (then he should do likewise) and the rest should be given to the owner. This was narrated from ‘Umar (may Allah be pleased with him), in the story of his son, when he took some money from the bayt al-maal and consulted ‘Umar (رضي الله عنه) about that; he told him that he should regard it as a loan, i.e., mudarabah. (This was narrated by Maalik in al-Muwatta’)  (Fataawa Mawqi‘ al-Islam al-Yawm)

(The above reply is based on various answers on similar topics provided by Islamqa.info)

[It is stated in a fatwa on Islamweb.net that the] profits earned in [one’s] business are not affected by the fact that the project originated from a riba-based loan [or, in other words, haraam source]. Hence, if the activity of the business investment is lawful, then there is no harm in benefitting from the profits earned from it.

(The above answer – shorter version has been verified by Dr. Abu Umar Faruq Ahmad, Associate Professor of Islamic Finance Law, Islamic Economics Institute, King Abdulaziz University)

Allahu A’lam (Allah (سبحانه و تعالى) knows best) and all Perfections belong to Allah, and all mistakes belong to me alone. May Allah (سبحانه و تعالى) forgive me, Ameen.

Wassalaam

[1] Mudarabah is a partnership in profit in which one partner provides capital (rab al-mal) and the other provides labor and business expertise (mudarib)