Is the Help-to-Save Scheme Shariah compliant?

The scheme essentially functions as a loan structure. Individuals make regular deposits, and the government matches these contributions. However, if an individual chooses to withdraw funds in a given month, they receive a reduced contribution from the government. This reduction in the government’s contribution is viewed from a Shariah perspective as akin to interest.

Money Helper, a government-approved online advice service explains the arrangement as follows; “When saving or investing with NS&I, you’re lending to the government and your money is totally secure.” – [Moneyhelper.org.uk] Furthermore, the underlying aim of the NS&I agreement is captured in numerous publicly available documentation as being a secure place for people to save, and a source of funds for public borrowing. In essence, the money is being lent to the government, with a promise of a fixed return upon depositing these savings.

Ribā refers to the surplus amount that one party pays or receives over the principal amount of a loan or debt. When a participant is required to deposit money into the scheme to qualify for the incentive, they are effectively extending a loan to the government. Subsequently, this amount is invested by the National Savings and Investments (NS&I) in an attempt to generate profit. Regardless of the investment’s outcome, the participant receives a predetermined amount as a top-up. This top-up is regarded as interest. Any contract that necessitates lending to receive additional benefits falls under the category of Ribā. A well-known juristic maxim asserts, “Any loan that draws an increment is Ribā”.

Ibn ‘Abidin (d.1252 AH), Ibn Nujaym (d.970 AH) amongst many jurists pen the description of Ribā as the unjustified excess that one party claims entitlement to. Any loan that yields benefits beyond the capital amount is deemed usurious. This principle is widely recognised and documented in the chapters of lending. Furthermore, ‘Allāmah Marghināni (d.593 AH) states that interest is the excess of a transaction, where one of the transacting parties assumes entitlement, either contractually, through customary practice, or by pre-agreement, without consideration.

Imam Abu Bakr al-Jaṣṣāṣ al-Rāzī (d.370 AH) describes the Ribā of Jāhilīyyah as a loan that has a contractual deferred repayment period in lieu of a premium. This type of Ribā is Ribā al-Nasī’ah, which is commonly practiced in all forms of conventional lending.