Premium bonds
24 Aug 2011 10:38 GMT
The government issues something called a prize bond. These bonds are entered into a draw and the bondholder can possibly win a large sum of money as a prize. At any time, however, the bondholder has the option of returning the bond and receiving his initial investment back. I want to know if this prize is lawful or unlawful.

Answered by

the Fatwa Department Research Committee - chaired by Sheikh `Abd al-Wahhâb al-Turayrî

The prize bond is also called a premium bond in some countries.

A bond is a loan. When a person purchases a prize bond, he is loaning money to the government. According to the conditions of the loan, the person loaning the money can receive his money back upon demand.

In return for the loan, the borrower offers the lender a chance to receive much more than his initial loaned sum back.

This contract is a contract of interest with uncertainty added to it as well. Effectively, what the issuers of the bond are doing is collecting the interest together from a large number of smaller loans and paying it all out to the winner of the draw instead of paying each lender his share of the interest.

Therefore, the prize money constitutes unlawful interest earnings.

And Allah knows best.

Source: Islam Today

-- Al Arabiya Digital