Understanding Islamic Finance #

Original Question: “Hi! What should I do once I get my $ surplus from T-bill investment? I just learnt that it is not Shariah compliant”.

Answer:
It is only permissible for you to take the principal amount and not the returns (if you are not in dire need of it), evidenced by the quranic verse in Surah Al baqarah “if you repent then the principal is yours” (2:279)

But a T-bill surplus is different from your typical bonds as no coupon/interest is paid to the investors. T- bill bonds are purchased at discounted rates. The surplus is the refunded amount you will get from the investment. Only that amount needs to be purified by donating to charitable bodies.

For example, if you invested $1,000, you will get a refund of ~$20 from the ten t-bill units you bought at ~$98 each unit = $980 investment amount.

Six months later, you will get back $1,000.
You only invested: $980 (original capital)
Total returns: $20
Duration: 6 months
Returns yearly: approximately 4%, but you will get around 2% every six months.

So only a $20 refund (surplus) must be donated. You may also include a transaction fee of, e.g.:$2, if you use cash, which can be deducted from the purification money. Therefore only $18 needs to donate away.

Do try to donate to general causes! We are inclined to Nouman Ali Khan’s view, stated on his book Revive Your Heart in the chapter “How we earn”, not to donate questionable earnings to religious causes as it might be void of barakah.

Wallahu A’lam