Is Developing Legal-Tech Software Involving Interest Permissible?

Answered by Shaykh Muhammad Carr

Question 

I work as a software/automation engineer building legal-tech solutions for law firms and other clients. Legal documents, claims, contracts, reminders, court documents, etc., may contain statutory/default interest, late-payment interest, or specific interest claims.

Often, we do not know before a project starts how much interest will appear. Could you please clarify which of these activities are permissible?

Reading, scanning/OCR, storing, archiving, classifying, or moving existing documents containing interesting information.

Extracting existing data, including an already stated interest amount, and transferring it between systems.

Building general document-management tools, APIs, workflows,mail-merge, or document-generation systems that can also process documents containing interest.

Filling neutral data such as name, address, case number, dates, or principal amount into a template that already contains a standard sentence that interest may become payable in case of delay.

Automatically generating or sending such a document when I did not write the interest clause.

Processing or sending a document that already contains a specific existing interest amount.

Building general paid/unpaid checks, although others may later use the result for reminders, enforcement, or interest-related steps.

Building neutral components that another developer may later reuse in an interest-related workflow.

If a specific task directly involves interest and I therefore cannot do it myself, may I ask or assign a colleague to handle only that part, while I continue working on the permissible parts of the project?

I am especially concerned about Sahih Muslim 1598 regarding recording riba, and Quran 5:2 regarding assisting in sin.

At what point would my technical involvement count as recording or directly assisting Riba, and what remains permissible as general/administrative work?

Answer

In the Name of Allah, the Most Merciful and Compassionate.

May Allah reward you for striving to ensure that your services align with Shariah principles. The Prophet (May Allah bless him and grant him peace) said, “Among people are those who are keys to goodness and locks against evil.

So, glad tidings to the one through whose hands Allah has made the keys to goodness, and woe to the one through whose hands Allah has made the keys to evil”. [Ibn Maja]

As Muslims, we operate within a system that is not our own. While we complain to Allah about its shortcomings, we must nevertheless make the best of our circumstances.

Avoiding prohibitions, which is by far the more important consideration and is generally regarded as categorical and non-negotiable,  has, by the dictates of our circumstances, sometimes become subject to unavoidable compromise.

In such an environment, treading cautiously is not merely a superlative form of piety; it is a necessity dictated by the circumstances in which we live.

Let us strive to get matters right, and where that is not possible, to come as close to what is right as we can. It is the latter consideration that governs your situation and informs our answer.

The issues at hand are governed by the degree-of-separation rule. Generally, if you are not involved in the actual contract in a primary or secondary role, you are considered uninvolved.

Uninvolved means that you fall outside the ambit of the curse of the Prophet (May Allah bless him and give him peace).

Thereafter, compromise generally comes about if your actions can be construed as aiding in sin and transgression.

If you are both uninvolved and your action does not aid in the furtherance of usury, it is considered permissible.

Statutory interest is treated like any other form of interest. However, due to its systemic nature, it is overlooked and tolerated where unavoidable at an operational level.

Notwithstanding necessity or general affliction that justifies engagement in such activities, we must strive to maintain a bulwark. Or a modicum thereof.

Is Statutory Interest Permissible?

Statutory interest is interest after all. Shariah evidence does not draw a distinction between contractually agreed-upon interest and systemic interest.

Rather, Sharia classifies such an intrusion as systemic violence.

At an operational level, we should avoid statutory interest whenever possible. Pragmatism, however, dictates that we deal as best we can with the systems that we find ourselves in. Allah says, “If you are capable of breaking out of the limits of the very heavens and the earth, then break free”. [Quran, 55:33]

Building legal-tech solutions that contain unavoidable statutory interest is permissible due to the inability to avoid it and general affliction. And Allah knows best.

What is Statutory Interest?

Statutory interest is the rate of interest that applies automatically when a payment obligation is not met by the due date, without any need for a separate contractual clause.

Two rates exist: the standard statutory rate for non-commercial situations and the significantly higher statutory commercial rate for B2B transactions. The commercial rate applies automatically as soon as the payment deadline passes; no reminder or separate agreement is required.

Could You Please Clarify Which of These Activities Are Permissible?

Reading, scanning/OCR, storing, archiving, classifying, or moving existing documents containing interesting information.

The above would typically be permissible, as it involves the post facto recording of interest. Recording an already-completed usurious transaction is permissible; drafting or documenting the transaction at the time it is concluded is not.

Imam al-Nawawi states: “This prohibition explicitly forbids documenting usurious transactions and serving as a witness to them” [Sharh Sahih Muslim]. The associated curse applies specifically to the scribe and witnesses involved in the transaction when it is concluded.

However, referring to or recording the transaction at a later stage does not fall within this prohibition and cannot ordinarily be deemed assistance in sin or transgression, unless there is clear evidence of a nefarious or otherwise impermissible purpose.

Extracting existing data, including an already stated interest amount, and transferring it between systems.

The permissibility would depend on how the extracted interest information is used. The default ruling is permissibility, and one is not morally responsible for undertaking an undue investigation into the matter.

On the other hand, if there is a reasonable basis to believe, or certainty, that these amounts will be used to facilitate or further interest-based transactions, then it would not be permissible.

Building general document-management tools, APIs, workflows,mail-merge, or document-generation systems that can also process documents containing interest.

Building the general tools described above is permissible. The mere possibility that they may be used in connection with documents containing interest constitutes doubt (shakk) and does not compromise the validity or permissibility of the aforementioned service. Assistance in sin is established only where there is a reasonable probability or certainty that the tools will be used for such a purpose.

Filling neutral data such as name, address, case number, dates, or principal amount into a template that already contains a standard sentence that interest may become payable in case of delay.

Automatically generating or sending such a document when I did not write the interest clause.

A standard sentence that interest may become payable does not invalidate the contract. a) A mere possibility of an interest payment that b) may or may not happen at the conclusion of a contract is overlooked. The governing principle here is, “What is overlooked in the course of an action is not overlooked at the beginning”. [See Suyuti, Ashbah]

A standard clause stating that interest may become payable does not, in itself, invalidate the contract. A mere possibility that interest may or may not become payable upon the conclusion of a contract is overlooked.

The governing principle here is, “That which is overlooked in the course of an action is not overlooked at its inception.” [See al-Suyuti, al-Ashbah wa al-Nazair.]

Processing or sending a document that already contains a specific existing interest amount.

A document that contains an already existing interest amount is null and void according to the Shafi’i School. Processing such a document is considered impermissible. Sending the same is construed as aiding the impermissible.

Building general paid/unpaid checks, although others may later use the result for reminders, enforcement, or interest-related steps.

Building neutral components that another developer may later reuse in an interest-related workflow.

Building general paid/unpid checks and neutral components that another may later reuse for interest is permissible. The mere possibility does not constitute aid in sin and transgression.

If a specific task directly involves interest and I therefore cannot do it myself, may I ask or assign a colleague to handle only that part, while I continue working on the permissible parts of the project?

Under the ambit of the strict-ruling (azima), it is not permissible for you to appoint a colleague to handle the interest-bearing aspect on your behalf. The principle of agency is that you cannot appoint an agent to do something that you are not permitted to do yourself. [Khatib, Mughni]

If your engagement in the project is justified on the basis of necessity or general affliction, then assigning the interest to a colleague is praiseworthy, thereby limiting your engagement with the interest despite the concession.

Do your level best to deploy your skills to benefit and secure your felicity in this world as well as in the hereafter. Allah says, “And seek earnestly in all Allah has given you the final abode”. [Quran, 28:77]

I pray this is of benefit and Allah guides us all.

[Shaykh] Muhammad Carr
Checked and Approved by Shaykh Faraz Rabbani

Shaykh Muhammad Carr has dedicated his life to studying and transmitting our beautiful deen. His studies have taken him around the globe, where he has benefitted from many luminaries. Under the guidance of his teachers – Shaykh Taha Karan, Shaykh Yaseen Abbas, Shaykh Muadh Ali and many others – Shaykh Muhammad has grown to appreciate the beauty and benefits of diverse scholarship. He completed his memorization of the Qur’an at Dar al-Ulum Zakariyyah in September 1997 and received an Alimiyya Degree in 2006 from DUAI (Darul Ulum al-Arabiyyah al-Islamiyyah). He is also affiliated with Masjid Auwal in Bo Kaap, Cape Town (the oldest mosque in South Africa), where he serves as a co-imam, and Dar Al-Safa, where he has taught since 2018. As a teacher, he imparts the wisdom of our heritage and tradition by opening the door for students. As an imam, he has the unique opportunity to serve his community in daily life. 

In addition to his roles as a teacher and imam, Shaykh Muhammad Carr has contributed significantly to the administrative and advisory aspects of Islamic institutions. Since 2023, he has served as the Administrative Director at The Imam Kurani Institute, contributing to the institution’s growth and development. He continues to pursue traditional Islamic Sciences, possessing a keen interest in Islamic Contract Law and Finance. Shaykh Muhammad has been a Shari’ah Board Member for Islamic Asset Management & Insurance Companies since 2001, aligning financial practices with Islamic principles.