carries a certain amount to a reserve fund which it can fall back upon in less profitable years, or in case of loss. So far, therefore, as it is a part of the profits earned by the bank, there is nothing objectionable in it, but that profit itself being largely income from interest, the question of ribā comes in indirectly.
To be on the safe side, a depositor may spend the excess amount which he receives as interest on his deposit for a charitable object.5 In fact, if the depositor deposits his money with the intent that he would not receive the interest for his personal use and, on receiving the amount from the bank, he actually makes it over to some charitable institution, he has relinquished the ribā’, as commanded by the Holy Qur’ān. The only difference is that he relinquishes it, not in favour of the bank, which takes the place of the borrower in the case of a debt, but in favour of some charity. But still the depositor, who takes the place of the creditor, does relinquish the interest. A little thought will show that, in this case, the person in whose favour the interest should be relinquished is not the bank, or a Government treasury, which does not stand in need of such help, but only charitable institutions which are working for the welfare of the Muslim community as a whole.
The co-operative banks are more in consonance with the spirit of the teaching of Islām, as the idea underlying them is the amelioration of the lot of the poor who are thus saved from the clutches of the usurious moneylenders. There is, moreover, this difference between an ordinary bank and a co-operative bank, that the former is generally for the benefit of the rich and the capitalists, and the latter for that of the poor and the labourers. In the co-operative bank, moreover, the shareholders are also the depositors as well as the borrowers of money, and that interest paid to the bank is, more or less, in the nature of a contribution by which the borrower of money is also ultimately benefited.
Interest on the capital with which a business is run differs a little
5 It was the founder of the Ahmadiyyah movement who first suggested this course. On account of his great anxiety for the propagation of Islām, he directed that the interest on bank deposits should be spent for the propagation of Islām. He particularly laid stress on the point that insistence on receiving the ribā was called a war with Allāh and His Messenger (2:279), and that therefore the money so received should be spent on the struggle which was being carried on for the defence and propagation of Islām. The opinion that the amount of interest on bank deposits should be spent on charitable objects was also adopted by the Jamī‘at al-Ulamā’, a representative body of Muslim theologians in India.