I have been confused on the issue of Masjids collecting interest money for distribution. Many people believe this money can be collected and donated for the use of toilets in a public place, but I have always been under the impression that this money is filthy and should be destroyed or buried. Is it permissible to collect interest money in the Masjid?
ANSWER
In the name of Allah, Most Compassionate, Most Merciful,
Interest transactions are totally unlawful (haram), thus whosoever deals with interest money in any way or form will be sinful. There are grave warnings promised in the Qur’an and Sunnah for the one who deals with interest.
Giving and taking interest are both decisively impermissible in Islam. Similarly, it is impermissible to consume unlawfully-earned money.
The ruling in the Hanafi School with regards to Haram and wrongly-acquired money is that the money must be returned to its owner(s). If it is not possible to return it to its owners, such as bank Interest, then one must give it away to the poor with the intention of removing the burden of this unlawful filthy money. (See: Radd al-Muhtar, al-Fatawa al-Hindiyya and Ahsan al-Fatawa)
Therefore, if the collection of interest money in the Masjid is distributed on poor people, then this is permissible, otherwise impermissible.
It should also be remembered here that, this ruling is in the situation when one already has interest money in their ownership. To actually open up an interest bearing account for the purpose of distributing interest money on poor people, will be unlawful.
And Allah Knows Best
[Mufti] Muhammad ibn Adam
Darul Iftaa
Leicester , UK