Are prizes won through government national saving premium bonds considered Halal or Haram? If it is Haram, can you donate the money to charity?

Quran

Hadith

Islamic Text

Prizes won from Premium Bonds are Haram since it is usury. Therefore, it must be given to charity, if it cannot be returned.

يَاأَيُّهَا الَّذِينَ آمَنُوا اتَّقُوا اللَّهَ وَذَرُوا مَا بَقِيَ مِنَ الرِّبَا إِنْ كُنْتُمْ مُؤْمِنِينَ  فَإِنْ لَمْ تَفْعَلُوا فَأْذَنُوا بِحَرْبٍ مِنَ اللَّهِ وَرَسُولِهِ وَإِنْ تُبْتُمْ فَلَكُمْ رُءُوسُ أَمْوَالِكُمْ لَا تَظْلِمُونَ وَلَا تُظْلَمُونَ 

O You who believe! Fear Allah and abandon that which remains of usury if you are indeed believers. If you do not do so, then know that you are at war with Allah and His Messenger, and if you repent then you may retrieve your principal amount, causing no oppression and suffering no oppression. (Surah al-Baqarah, 278 – 279).

Often the way these schemes work is that one pays in money and is entered into a prize draw. The money itself is safe, so it is not gambling in the sense that one’s outlay is in jeopardy. However, this is still prohibited since it is a form of usury (interest). Riba (usury) is not limited to receiving more money upon the money you pay in, rather it extends to other benefits received too.

وَفِي الْأَشْبَاهِ كُلُّ قَرْضٍ جَرَّ نَفْعًا حَرَامٌ
(قَوْلُهُ كُلُّ قَرْضٍ جَرَّ نَفْعًا حَرَامٌ) أَيْ إذَا كَانَ مَشْرُوطًا (رد المحتار على الدر المختار)

Imam al-Haskafi: In al-Ashbaa (he said) every loan that brings about a benefit is Haram.

Imam Ibn Abideen: His saying, ‘every loan that brings about a benefit is Haram.’ Means (it is prohibited) if it (the benefit) was binding (in the contract). (Radd al-Muhtaar).

If the saving scheme one is involved in or considering is different to this then the same ruling may not apply. Muslims are advised to study the Fiqh of trade to gain a more detailed understanding of legal rulings related to financial transactions.

When one receives prohibited money then he must try to return it to the source, if that is not possible then give it to charity (Sadaqah).

And Allah (Most High) Knows Best.

– Answered by Shaykh Noor ud-deen

See also:

Is it permissible to take a mortgage?