Using Interest to Fund Charitable Projects

Question and answer details
Farooque PP
As-salamu `alaykum. Dear Sir, I hereby request you to give me your opinion regarding the following: We are living in Dubai and we have set up a charitable organization in our country in India to help the poor. This is a trust and it collects the funds from its members in UAE as well as in India and with those funds, we used to help poor people for their living aid, medicine, educational scholarships, etc., and also we build houses for the poor and recently set up a Dialysis unit for the kidney patients. This dialysis unit is a subsidized one which is not a profitable institution. We will charge very nominal charges from those who are able to pay and are giving free to those who could not afford to pay. My question is: 1. Is it permissible for us to accept the interest income which the people are getting against their fixed deposits from the banks, for the above charitable things? 2. Is it permissible for us to accept the Zakah for this trust as we are helping non-Muslims also? Majority of our beneficiaries are Muslims at the same time, we are not denying any deserved non-Muslims.
Monzer Kahf

Wa `alaykum as-salamu wa rahmatullahi wa barakatuh.

In the Name of Allah, Most Gracious, Most Merciful.

All praise and thanks are due to Allah, and peace and blessings be upon His Messenger.

Dear brother, your question is really appreciated as it shows your concern about the suffering fellow brothers and sisters and your keen desire to help the poor.

The interest money cannot be given to the payers, as it is riba. So, it can be given to the needy either Muslims or non-Muslims.

In his reply to your question, Dr. Monzer Kahf, a prominent Muslim economist and counselor, stated,

In a quick word, yes it is permissible to accept the interest because you are distributing it to the poor and the needy, Muslims and non-Muslims.

The details are: this money is haram for those who got it because it is riba (usury). Also, it is wrong to return it to the payers because they are professional riba dealers (conventional banks). It is then treated as property that has no owner which then must be given to the poor and needy rather than wasted.

Details given in your question raise a few points:

1- Zakah payment requires that it must be made owned by the poor; this applies to direct giving in cash or in kind such as medicine and housing. But in education, payment must be given to the poor and once they own the money, they may pay it for education or other needs. You cannot give it to teachers (unless you are giving it to them because they are themselves poor) for teaching students or other needs of educational institutions.

2- In India especially Zakah must only be given to Muslims as this is the general rule and poor Muslims in India are usually poorer. I do not say that you stop helping the non-Muslims but I suggest that your accounting system must watch assigning all Zakah collected to Muslims only through implementing the principle of Tamlik (making them own what is given) and give to non-Muslims from other sources such as interest.

Allah Almighty knows best.