Taking Interest-based Finance To Grow a Business

Responding to this issue question, Dr. Monzer Kahf, expert in Islamic economics and finance, said,

First, Dubai has several Islamic banks and there is no reason or justification to take conventional bank loans whatsoever. Any interest-based loan in Dubai is Haram. In fact, it is also Haram in all other places but I said Dubai because in Western countries there may be sometimes necessities or quasi-necessities that call for relaxation of the prohibition or tolerating exceptions of the rule.

Second, debt, if not interest-based, is not Haram of course and it is permissible for any business to incur debts and give on credit to customers. Businesses always choose an appropriate balance between equity and debts depending on many factors. This is of course left to experience and circumstances; Shari’ah does not set any level to either.

Finally, it is not permissible to take interest-based finance from any bank to grow a business but it is permissible to take financing from an Islamic bank for the same purpose.