In an ideal and perfect world, Riba, or interest we know it, does no need to exist. What created its very existence is because of the two main factors – Demand and Supply:
- Demand: Consumers lacking of today’s money and needing future money to make purchases
- Supply: Financial institutions looking to earn revenue from lending money
1. Avoid Credit Cards (Completely, if possible)
We cannot escape the fact that we are brought up in a society where credit cards are prevalent, well unless, you’ve been living under a rock.
Credit cards is one the best way to earn good cashback and cash rebates, ONLY IF you pay it promptly every month. The convenience in swiping the cards can lead to a potential in debt as the instant gratification of using future money can be really enticing. You can keep the debt from growing by paying off the balances each month, but if you only pay the minimum and keep making purchases, your debt and interest will grow.
On a Muslim perspective, credit cards is an example of Riba. They are the cornerstone to consumerism. It encourages you to spend even if you don’t have the money. The credit cards are made to benefit the banks more than the consumers. By being an active credit card user, you are indirectly supporting the very idea of the conventional banking system which involves Riba.
So, ditch those credit cards and use cash or debit card instead. That’s the most safe-proof way of avoiding Riba altogether.
2. Apply for Interest-Free Study Loan
When it comes to higher education, we all know that it does not come cheap. Tuition fees in our local universities are S$25,000 upwards, and unless your parents has set aside for you an education endowment or good savings, you will probably have to seek study loans from banks.
However, do not forget that there are organizations, both government and private entities, which can help to defray those costs for potential students who meets certain criteria.
For example, Yayasan Mendaki, a Singaporean government body, provides interest-free study loans for Malay/Muslim Singaporean citizens. Depending on your household income, you may receive partial or a full loan which will greatly help to reduce your cash outlay upfront. The good thing is, you are not burdened with accumulated interests which can easily add up. On top of that, Yayasan Mendaki gives you an ample time to start paying the loans which is 6 months after graduation. Unlike bank loans, repayments start immediately.
There are also other Malay/Muslim community-driven organization like Lembaga Biasiswa Kenangan Maulud (LBKM) and the non-profit social organization, Badan Agama Dan Pelajaran Radin Mas (BAPA), which provide study grants to students who need financial assistance.
3. Seek Dividends and Capital Appreciation, Not Interest
Focus on good dividend-yielding investments or undervalued stocks that may bring strong future capital appreciation. For Riba-bearing instruments like bonds and fixed deposits, it is highly advisable avoid them altogether.
As a yardstick in Singapore’s context, MUIS has also came up with an answer on the permissibility of investing in the stock market.
MUIS does not certify or endorse any individual stocks or investment portfolios – unlike food. We have to take full responsibilities on how our money is invested. For newbies who are keen in the stock market, it is safer to focus on Syariah-Compliant companies. For companies to be listed as Syariah-Compliant, there are in-depth financial parameters that the companies have to adhere to.
If financial jargons is something that you live and breathe, you can do your own due diligence based on the MUIS’s guidelines.
4. Minimize Interest-Bearing Liabilities which are Avoidable
Unless you managed to save S$300,000 before 30 to purchase a modest 4-room BTO to start a family in Singapore, you will most likely have to seek for a bank or HDB loan. That is something which is almost unavoidable for most Singaporeans. That would be understandable to take on a loan in Singapore’s context where there is a lack of alternatives such as Syariah-compliant home loans.
But, how about car loans?
Public transportation in Singapore might not be the best in the world with the constant breakdowns, but there are other alternatives like the ride-sharing services, Grab and Uber. There are even bike-sharing services like Ofo, Obike and Mobike if you can consider cycling to work. These mode of transportation are definitely cheaper than owing a car in which you will have to commit monthly on its loan installment, petrol, ERP, carpark, road tax, insurance and maintenance.
Home renovation and furnishing loans are also another interest-bearing liabilities that we have to consider. If your walk-in wardrobe or the Smart TV are out of your budget, exercise prudence by spending wisely on the things that you need, rather than your wants. Riba comes in when you decide to commit to a 2-year home renovation or furnishing loan repayment just because you badly wanted that Smart TV that loses value over time.
The last thing you would want is to over-commit to home mortgage, renovation, furnishing and car loan all at the same time which can add unnecessary pressure and stress to your financial and mental health.
As Singaporean Muslims, we know today our society is build around the conventional banking system and it is hard for us to avoid them completely. But what we can do is to control the choices that we make in life. If we choose to lead a simple life and avoid the consumerism mentality, these issues can easily overcome.
Sesungguhnya orang-orang yang dicabut nyawanya oleh malaikat sedangkan mereka telah menganiaya diri mereka sendiri (kerana enggan berhijrah untuk membela Islam dan rela ditindas oleh kaum kafir musyrik), mereka ditanya oleh malaikat, “Apakah yang kamu telah lakukan untuk Agama kamu?” Mereka menjawab, “Kami dahulu adalah orang-orang yang ditindas di bumi.” Malaikat bertanya lagi, “Tidakkah bumi Allah itu luas untuk kamu berhijrah dengan bebas di atasnya?” Maka orang-orang yang sedemikian, tempat akhir mereka ialah Neraka Jahanam, dan Neraka Jahanam itu adalah seburuk-buruk tempat kembali” (Al-Nisaa’, ayat 97).
Salam.. I am seeking some clarifications.. it’s regarding property loan in SG.. if we were to take home loan for property for own stay and investment property (each) is this loan considered Riba? But in SG context no Islamic home loan.. how do we deal with this?
Thanks in advance.
Did someone answer your question?
If you can pay rent and live, Riba should be avoided. You will be blessed for the rent you pay for your family to live, Insha Allah. If you intend to take Home loan with Riba and pray in your home, will your prayers be answered?
Allah knows the best!
Salam Azi, good question. My personal opinion – I would imagine taking a home loan for a property which you seek for your own stay is permissible as it considered a need. Having a roof over our heads is a necessity.
However, from an investment perspective, it is akin to participating in riba to make more money. Do we have a choice to do investments in other ways without taking a loan or debt leverage? Yes we do.
On the other hand, I do acknowledge that we do not have a Shariah-compliant home loan in Singapore today. In the context as a Singaporean Muslim, we’re in a rather unfamiliar position. A gray area to put it simply – whether you’re comfortable with that notion or not.
I believe there is an ongoing discussion among our Shariah scholars today which I would personally would love to delve deeper too in the coming articles.
Thank you for your article and answer. I too am looking for clarifications about taking housing loan in Singapore.
Maybank has Islamic fixed deposit and car loan offerings.
Salam, I hope I am not too late to jump on board with this topic.
What about investment opportunities, like eg. getting a condo or having multiple assets. No doubt there’s no shariah-compliant products for real estates, or even loans in Singapore but what are the proper guidelines based on the fatwa.
Regarding home financing, I do feel like we take the term “darurat” lightly when there are still alternative like renting and living with the in laws. Unless Mufti has given a fatwa on its permissibility(which I would be inclined to follow), its still in the gray area and hopefully MUIS is finding some alternative solution to this.