Every committed Muslim should try his best to rid himself from interest in all its forms. This is to be on the safe side. However, there is nothing wrong, as far as Islam is concerned, in accepting donations from usurious banks to help establish charitable and developmental projects.
Dr. `Ali Muhyy Ed-Deen Al-Qara Daaghi, head of the Department of Islamic Jurisprudence, Qatar University, states the following: “There is no legal proof that forbids accepting donations from usurious banks to support charitable and developmental projects. Rather it is permissible to accept such donations and spend them in any charitable way except for buying copies of the Qur’an or building Mosques.
According to a resolution issued by the OIC Fiqh Academy, usurious money should be spent on charitable purposes. This is based on the fact that when usurious banks and those receiving usury, whose property is mixed with prohibited usurious interest, donate some of their property, the donated money is no longer considered ill-gotten. This ruling relies upon the hadith reported by Imam Al-Bukhari on the authority of Anas that once some meat was presented to the Prophet (peace and blessings be upon him) and `A’ishah drew his attention saying that the meat was given to Barirah – the freed salve girl of `A’ishah – as a charity (as the Prophet should not accept charity). The Prophet (peace and blessings be upon him) replied, “It (the meat) is a charity for her, but a gift for us.”
To conclude, such donated properties, even if coming from ill-gotten money, are only prohibited to be utilized by their owners, and once they are donated, the donee may accept them and spend them in charitable purposes.”