Can the money given to a madrasa in Zakat be saved in an Islamic bank where it will then be invested with the risk of both profit and loss? Is this permissible?
Because the intention of the donors is that their donated money be used to the people it was donated for, it is not permissible to invest this money. This must be refrained from because of an unnecessary delay in using the money for the purpose it was donated. However, if due to an excess in the funds of the madrasa or no immediate need for the donated money, it will be permissible to invest the donated money under the following mentioned conditions:
(1) The donors give such permission to trustee of the madrasa.
(2) Such permission is also given by the administrative committee. If there is no such committee, then one should be established for this purpose and permission should be taken from them.
(3) The amount that is needed to fulfill the necessities of the students and the madrasa should be spent on them. It is not permissible to invest this amount.
(4) The excess amount can be invested for the interests of the madrasa. Meaning: the objective for investing this money should be to increase the funds of the madrasa or to prevent it from going to waste, not for anyone’s personal needs.
(5) The excess amount should be invested where profit is almost certain.
(6) The profit of the invested amount should be spent on the interests and necessities of the madrasa.
(7) The excess amount should not be invested for such a lengthy period that there will be the risk of loss.
Under the above mentioned conditions, it will be permissible to invest the money donated to a madrasa. However, it should be noted that unless Shari Tamleek occurs, it will not be permissible to invest the amount given in Zakat or mandatory forms for charity, and the Zakat will also be invalid.