Answered by Shaykh Muhammad ibn Adam al-Kawthari
What if the interest amount is so minimal that it doesn’t burden that much? What if the state is not fulfilling its responsibility to its fullest and there are no interest-free institutions in sight and one needs a loan, what should one do?
In the name of Allah, Most Compassionate, Most Merciful,
Bank interest (riba) is unlawful and sinful even if it is a very small amount that does not harm the one paying interest, as the reason for its prohibition is paying an excess amount on a loan taken, regardless of whether one is harmed or otherwise.
One must always remember that the rulings of Islam are based on their legal reasoning (illa), and not the wisdom. Indeed, one of the wisdoms behind the prohibition of interest is not to harm the interest-payer. However, the ruling of its prohibition is not based on the presence of this wisdom, rather on the reasoning, which is to demand an excess amount upon a loan advanced to another.
Similarly, bank interest will remain unlawful even if there are no institutions helping people in acquiring interest-free loans. One would have to search for an alternative interest-free loan or seek some other form of financial assistance. For further clarification, please refer to the excellent work “The Historic Judgment on Interest” by Shaykh Taqi Usmani, available from most good Islamic bookshops.
And Allah knows best
Muhammad ibn Adam al-Kawthari
Darul Iftaa, Leicester, UK