Forbidden interest a windfall for the disadvantaged

Islam, which aims to establish an economic system free of exploitation, prohibits its adherents from benefiting from interest on investments.

When al Baraka Bank, part of the Bahrain-based al Baraka Banking Group, was established in South Africa in 1989, it faced a dilemma.

“Generally speaking, in banking we have to meet certain requirements like having cash reserves et cetera. We therefore had to place funds with the South African Reserve Bank and other commercial banks and interest was earned on these funds,” said Mahmoud Youssef Baker, director of the only fully fledged Islamic bank in South Africa.
“We cannot distribute this interest to our shareholders or use it for banking.”

At first the amount was negligible, but as the bank grew so did the funds. “It grew to a significant amount—we’re talking millions,” Baker said. “So we decided that we had to do something.”

An opinion was sought from an Islamic scholar, who ruled that the money could be used for the socioeconomic upliftment of the community. To make things simpler, in 1994 the bank established a charitable wing called Iqraa Trust.

“The moment the interest monies leave al Baraka they become charitable funds, which we use to support all kinds of humanitarian initiatives. [But] the bank cannot benefit from the money in any way,” said Baker, who is also chairperson of the trust.

He said that the sustainability of the trust had been secured by the reinvestment of funds and from donations in kind, such as income-generating properties.

Since its inception the trust has disbursed a total of R85-million in the form of donations and interest-free loans to organisations that implement projects in line with its objectives.

Education is one of the key areas Iqraa focuses on and nearly 2 000 students have benefited from an interest-free study loan programme. Eighty-four portable science laboratories have been donated to rural and disadvantaged schools and computer centres have been established in several others.

“In my opinion, education is the hope of this country,” said Baker. “It will open wide horizons to people here. Once they are educated or have skills they’ll be able to help themselves.

“Our slogan is ‘helping people to help themselves’—in other words, we are trying to give people a positive future rather than money to do so. You need to ensure they have access to education and skills so that they can deal with poverty and unemployment themselves.”

The trust also recently donated more than half a million rands to the establishment of KwaZulu-Natal’s first community renal dialysis centre and dedicates a significant part of its grants to HIV/Aids prevention programmes.

Although the trust was established by the Islamic bank, Baker said that religion was not a determining factor in selecting beneficiaries.

“Islam is a universal religion with a strong humanitarian dimension. The Qur’an talks about assisting the poor and the orphaned in many verses without specifying their religion. It urges us to be kind to every­one around us,” said Baker.

“It would unfair to judge the needs of people by their religious affiliation.”

When Mandy Goble, director of Durban Children’s Homes, was advised to approach Iqraa for assistance in refurbishing a home for disadvantaged teenage girls, she was sceptical.

“I asked our public relations officer if we really stood a chance considering that they were Muslim, and she said we should give it a try.”

Goble applied for a grant and R200 000 later she has a different perspective.

“For us it was a confirmation that it doesn’t matter who or what we call him, there is a God. And the fact that we receive assistance for the work we are doing bears testament to the fact that caring for children amounts to doing His work.”

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