Hello, I am a young doctor living in Pakistan and I am hopeful to start my investment journey soon. As I have progressed on my research journey to find halal avenues to invest in, a talk by Harris Irfan on the The Thinking Muslim podcast made me come across the fact that all banks, including Islamic banks, function based on a fractional reserve system, which according to him, to put it simply, is money created from money, and comes under the heading of Riba. This has caused me much distress since there are reputed scholars including Mufti Taqi Usmani who endorse Meezan Bank (Pakistan’s premier Islamic bank) and the financial products they have to offer. Am I to consider it okay investing with Meezan Bank, for example, since there isn’t an alternative to the fractional reserve system? Or stick to other investment avenues such as halal stocks and gold etc? But keeping in mine that, investing with Islamic banks seems to be the most viable investment option for me at the moment since it requires less capital to begin with, especially keeping my current salary/status in mind.
Wa alaykum salaam,
As long as there is a Shariah board that oversees the banking product you invest in, it is permissible to invest.
Allah knows best