Are Prize Bonds Halal in Islam?

While investing money in prize bonds, people are often concerned about their authenticity in Islam, such as is prize bond halal in Islam or is winning money haram? Also, it is important to know whether prize bonds are permissible in Islam or not.

In this article, we will give answers to all these questions in light of Ulma’s statements.

Prize Bonds Basics

Prize bonds are a financial instrument issued by the governments for public borrowing. When a government needs money, it would either go out to external lenders such as IMF, World Bank, etc. (called external debt). 

Or it may borrow the money internally from sources within the country (called local debt), i.e., from commercial banks, printing currency notes, or borrowing from its citizens through public borrowing arrangements (such as prize bonds and national saving schemes). 

To any layman who is not familiar with the principles of finance and economics – the prize bonds may seem like non-interest-bearing security on the surface. However, in reality, the cumulative interest (Riba) in the case of Prize Bonds is paid out to a selection of bond owners in the form of prize money. 

The amount paid for purchasing bonds is nothing but a loan because no person gives this amount for a business to risk gaining some profit or loss. Thus the prize bonds are, in fact, a loan with interest. Rather than the government or bank giving interest to every prize-bond holder, the interest grows. A draw is held whereby some of the prize-bond holders win, and others lose; this is the reality of gambling.

In prize bonds, interest is added (according to the investment ratio) to each person’s original investment and gathered in a communal pool. Then, instead of returning each person their interest, it is all given to the individual who won the prize. Therefore, this prize is pure interest and unlawful. 

Due to the original investment being safe, it does not fall within the definition of chancing and gambling, which is also unlawful. However, scholars mention that it resembles chancing in that the interest accumulated on the original investment is uncertain. Thus, one may receive this interest and more (in winning a prize) or not receive any interest altogether. 

Hadith About Prize Bonds

According to Hadith:

“Any lending arrangement which results in some benefits to the lender, is one of the kinds of Riba”

(Sunan al-Bayhaqi)

The respected scholars of Ahl-e-Sunnah from various parts of the world have given numerous rulings classifying such prize bond income as Haram primarily because of the intrinsic element of Riba in prize money. 

Conclusion Of Are Prize Bonds Halal

Therefore, we can infer that it is not permissible to buy these prize bonds as they include gambling and interest at the same time. Purchasing prize bonds, in reality, are lending money to the issuers of these bonds. Therefore, any prize received will be deemed Riba, thus unlawful. It will also be impermissible to invest in these bonds to receive a prize. 

Besides this, keep in mind that those who do not receive any prize on the bonds are also wrong because they purchased these bonds to gain a prize (interest), which is also forbidden. 

The respected scholars of Ahl-e-Sunnah from various parts of the world have given numerous rulings classifying such prize bond income as Haram primarily because of the intrinsic element of Riba in prize money. 

Yes, prize bond income is Haram primarily because of the intrinsic element of Riba in prize money. Islamic Scholars Said.

Yes, prize bonds are legal because these prize bonds are issued by the government. The Ministry of finance and state banks held the draws.

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