Are Premium Bonds Halal?
Edited By Staff Writer, Halal Incorp
Premium Bonds are a savings product whereby instead of getting interest, savers are put into a monthly prize draw. The cash invested is typically safe & can be withdrawn at any time period, however any gains come through the chance of winning prizes in contrast to a fixed return.
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From an Islamic viewpoint, the permissibility of Premium Bonds is related to whether they involve riba (interest), maysir (gambling), or gharar (excessive uncertainty).
These three aspects are important in understanding whether a financial product adheres with Shariah ethics.
A lot of scholars state that Premium Bonds are not permissible for multiple reasons. Initially, although the scheme does not pay direct interest, the actual prize fund is generally generated from interest which is earned on the underlying cash.
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This indirect connection with riba makes it an issue of concern. Then, the distribution of prizes is wholly based on chance, which very closely resembles gambling.
The Islamic faith prohibits gambling because it relies on luck rather than fair trade or actual productive effort. Then, there is also some uncertainty: for example an individual may hold bonds for a long period of time without ever actually receiving any prizes, in contrast to others who might benefit significantly, which then essentially creates an imbalance.
Due to these problems, the major opinion amongst Islamic theologians is that Premium Bonds are actually not Halal. Those who may have held them previously are advised to withdraw their capital & if they have won prizes, give away the winnings to charity where possible without the intention of earning any kind of spiritual reward.
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So while Premium Bonds might seem as if they are a risk free way to save, their structure includes aspects that clash with Islamic financial ethics.
So for Muslims who are searching for Halal savings opportunities, alternatives do exist for example Shariah-compliant savings accounts, Islamic investment funds, or even sukuk (Islamic bonds) are typically seen as more suitable.
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