Question

Is it permissable to use child trust fund, if so can I use all of it?

Answer

Without the specifics on what the fund invested the money into, it is difficult to give a specific ruling. Nonetheless, I shall offer general principles for your case.

The government contributions towards the Child Trust Fund (CTF) can be considered a gift. Additionally, the capital gains from shari’a-compliant investment products would be lawful to keep. However, the capital gains from the subsequent investment into non-shari’a compliant financial products are not permissible. Those capital gains on top of the principal must be dispensed into charitable ventures without the hope of reward.

We have answered a general question on CTFs previously, which details the rationale behind this ruling alongside the permissible avenues for charitable expenditure. You may refer to it.[1]

[1] https://fatwacentre.org/uncategorized/child-trust-funds/ It reads:

“Buying a non-compliant financial investment product amounts to an invalid transaction (bay‘ batil).[1]

No transactional relationship occurs between the two parties in an invalid transaction. Instead, the product remains in the hands of the buyer as an entrusted item (amanah), and the counter value remains in the hands of the seller as an entrusted item. Therefore, both parties should claim “their” property from the other party.[2]

In your circumstances, you have entered an invalid transaction. One must therefore annul the trade and take back their capital. Here, the capital is likely to include the principal amount (government and personal contributions) and the capital gains. In light of the fiqh, the principal amount was left entrusted to the other party. You have a rightful and permissible claim to that.

As for the capital gains, this is an impermissible form of income, and as such, must be discharged in charitable causes without the intention of reward.[3] Some scholars have necessitated discharging impermissible income to the poor and those eligible for zakat, as opposed to donating it towards public works. Others, such as Mufti Taqi Uthmani, have opined that one is permitted to discharge impermissible income towards public work projects also.[4] Both opinions are valid.

I hope this clarifies the matter.”

[1]           الدر المختار وحاشية ابن عابدين (رد المحتار) (5/ 50) [تَنْبِيهٌ] فِي شَرْحِ مِسْكِينٍ: ثُمَّ الضَّابِطُ فِي تَمْيِيزِ الْفَاسِدِ مِنْ الْبَاطِلِ أَنَّ أَحَدَ الْعِوَضَيْنِ إذَا لَمْ يَكُنْ مَالًا فِي دِينٍ سَمَاوِيٍّ فَالْبَيْعُ بَاطِلٌ سَوَاءٌ كَانَ مَبِيعًا أَوْ ثَمَنًا، فَبَيْعُ الْمَيْتَةِ وَالدَّمِ وَالْحُرِّ بَاطِلٌ، وَكَذَا الْبَيْعُ بِهِ، وَإِنْ كَانَ فِي بَعْضِ الْأَدْيَانِ مَالًا دُونَ الْبَعْضِ إنْ أَمْكَنَ اعْتِبَارُهُ ثَمَنًا فَالْبَيْعُ فَاسِدٌ فَبَيْعُ الْعَبْدِ بِالْخَمْرِ أَوْ الْخَمْرِ بِالْعَبْدِ فَاسِدٌ، وَإِنْ تَعَيَّنَ كَوْنُهُ مَبِيعًا فَالْبَيْعُ بَاطِلٌ فَبَيْعُ الْخَمْرِ بِالدَّرَاهِمِ أَوْ الدَّرَاهِمِ بِالْخَمْرِ بَاطِلٌ اهـ. قُلْت: وَهَذَا الضَّابِطُ يَرْجِعُ إلَى الْفَرْقِ بَيْنَهُمَا مِنْ حَيْثُ الْمَحَلُّ فَقَطْ، وَمَا مَرَّ مِنْ حَيْثُ الرُّكْنُ وَالْمَحَلُّ فَهُوَ أَعَمُّ فَافْهَمْ

[2]           الدر المختار وحاشية ابن عابدين (رد المحتار) (5/ 59) (وَ) الْبَيْعُ الْبَاطِلُ (حُكْمُهُ عَدَمُ مِلْكِ الْمُشْتَرِي إيَّاهُ) إذَا قَبَضَهُ (فَلَا ضَمَانَ لَوْ هَلَكَ) الْمَبِيعُ (عِنْدَهُ) ؛ لِأَنَّهُ أَمَانَةٌ وَصَحَّحَ فِي الْقُنْيَةِ ضَمَانَهُ، قِيلَ وَعَلَيْهِ الْفَتْوَى … (قَوْلُهُ: لِأَنَّهُ أَمَانَةٌ) وَذَلِكَ؛ لِأَنَّ الْعَقْدَ إذَا بَطَلَ بَقِيَ مُجَرَّدُ الْقَبْضِ بِإِذْنِ الْمَالِكِ وَهُوَ لَا يُوجِبُ الضَّمَانَ إلَّا بِالتَّعَدِّي دُرَرٌ

مجمع الضمانات (ص: 215) الْبَيْعُ الْبَاطِلُ لَا يُفِيدُ الْمِلْكَ بِالْقَبْضِ، وَلَوْ هَلَكَ الْمَبِيعُ فِي يَدِ الْمُشْتَرِي فِيهِ يَكُونُ أَمَانَةً عِنْدَ بَعْضِ الْمَشَايِخِ؛ لِأَنَّ الْعَقْدَ غَيْرُ مُعْتَبَرٍ فَبَقِيَ الْقَبْضُ بِإِذْنِ الْمَالِكِ وَعِنْدَ الْبَعْضِ يَكُونُ مَضْمُونً

[3]           البحر الرائق شرح كنز الدقائق ومنحة الخالق وتكملة الطوري (8/ 229)ِ قَالَ بَعْضُ مَشَايِخِنَا كَسْبُ الْمُغَنِّيَةِ كَالْمَغْصُوبِ لَمْ يَحِلَّ لِأَحَدٍ أَخْذُهُ قَالُوا وَعَلَى هَذَا لَوْ مَاتَ رَجُلٌ وَكَسْبُهُ مِنْ ثَمَنِ الْبَاذَقِ وَالظُّلْمِ أَوْ أَخْذِ الرِّشْوَةِ تَعُودُ الْوَرَثَةُ وَلَا يَأْخُذُونَ مِنْهُ شَيْئًا وَهُوَ الْأَوْلَى لَهُمْ وَيَرُدُّونَهُ عَلَى أَرْبَابِهِ إنْ عَرَفُوهُمْ، وَإِلَّا يَتَصَدَّقُوا بِهِ؛ لِأَنَّ سَبِيلَ الْكَسْبِ الْخَبِيثِ التَّصَدُّقُ إذَا تَعَذَّرَ الرَّدُّ

[4] Mufti Taqi Uthmani, Fatawa Uthmani, 3: 128-140. Quranic Studies Publishers.

Answered by:
Ifta Research Fellow

Checked & Approved by:
Mufti Abdul Rahman Mangera
Mufti Zubair Patel