Dr.Monzer Kahf, a prominent economist and counsellor states: “In application of the rule one must not do that. We cannot pay interest that is due with earned interest. The reason is: earned interest is not in fact earned and it is still owned by the party that paid it. But whenever this party is a practitioner of interest transactions we will not return it to the payer and we rather give it away to Muslim charity on the ground that is similar to property that is in hand but has no owner. When we use it for any reason that relieves us from an obligation we have otherwise to pay it from our own money that amounts to taking interest to ourselves. To the best of my knowledge there is an agreement on this principle and in some collective Fatwa there is an explicit statement that one may not use earned interest to pay obligated interest.”
Using earned interest to pay obligated interest
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