Short answer
Not in the mainstream Hanafi view. With prize bonds or premium bonds, you lend money to a government savings scheme, and instead of paying everyone interest it pays prizes to a few holders by draw. The prizes are interest handed out by lottery. Some scholars allow them because your money is never at risk.
Buying prize bonds for the chance of a prize is not permitted, and any prize won should be given to the poor without hoping for reward. The original amount you paid in is yours and may be withdrawn.
The four schools agree on this.
Explanation
How these bonds work: you lend money to the government or a savings bank. Your capital is safe and can be cashed in. The issuer sets aside an amount based on an interest rate, and instead of sharing it out to all holders, it pays it as prizes to the numbers drawn.
Why most Hanafi muftis, including Darul Uloom Karachi and Darul Uloom Deoband, say it is not permitted:
- The bond is a loan, and any extra the lender receives because of the loan is riba.
- Paying that extra by draw adds a lottery element to the riba rather than removing it.
- The holder only buys in for the chance of a prize.
The other view: some scholars have allowed prize bonds, arguing that no holder loses anything, so it is not gambling, and that the prize is a gift from the government. Most fatwa bodies reply that the gift is funded by interest and promised as a reason to lend, so it is still riba.
If you already hold them:
- Cash them in and keep your capital.
- Give away any prizes you have won to the poor, without counting it as zakat or sadaqah.
- For a safe place to save, use a current account or a Shariah-compliant savings account.
The bonds are still part of your wealth for zakat until you cash them in. See Is interest from a savings account haram? and Is the lottery haram?
The evidence
Quran, Surah Al-Baqara 2:278
يَٰٓأَيُّهَا ٱلَّذِينَ ءَامَنُوا۟ ٱتَّقُوا۟ ٱللَّهَ وَذَرُوا۟ مَا بَقِىَ مِنَ ٱلرِّبَوٰٓا۟ إِن كُنتُم مُّؤْمِنِينَ ﴿٢٧٨﴾
O you who have believed, fear Allah and give up what remains [due to you] of interest, if you should be believers.
Any extra on a loan must be given up.
Quran, Surah Al-Maaida 5:90
يَٰٓأَيُّهَا ٱلَّذِينَ ءَامَنُوٓا۟ إِنَّمَا ٱلْخَمْرُ وَٱلْمَيْسِرُ وَٱلْأَنصَابُ وَٱلْأَزْلَٰمُ رِجْسٌۭ مِّنْ عَمَلِ ٱلشَّيْطَٰنِ فَٱجْتَنِبُوهُ لَعَلَّكُمْ تُفْلِحُونَ ﴿٩٠﴾
O you who have believed, indeed, intoxicants, gambling, [sacrificing on] stone alters [to other than Allah], and divining arrows are but defilement from the work of Satan, so avoid it that you may be successful.
Handing out the extra by draw adds a lottery element.
Sahih Muslim 1598
Sahih... آكل الربا وموكله وكاتبه وشاهديه ...
"The one who consumes riba, the one who pays it, its scribe and its two witnesses."
Receiving interest in any form is cursed.
Where the ruling is recorded
- Fatawa Usmani (Mufti Taqi Usmani), Chapter on riba, on prize bonds. Why prize bond prizes are interest.
- Fatawa Mahmudiyya, Chapter on riba, on prize bonds. Purchase for the prize is not permitted.
Checked by our team. For a more accurate answer to your own situation, consult a scholar. Quran translation by Sahih International. Hadith Arabic from the standard editions of the six books and the Muwatta, with gradings as recorded there; the English is our own rendering. Spotted a mistake? Tell us.