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Can one loan out money for someone & charge them for that service?

Answered according to Hanafi Fiqh by Askimam.org

Salaamu Alaikum,

My question is regarding loaning out money for someone and charging them for that service.

More specifially, as you are most proabaly aware, a lot of University students in the UK take out a student loan to help pay for their fees. They are then expected to make back the money they borrowed once they start earning over £25,725. They pay back, I believe, on a monthly basis with an additional amount as interest.

To combat this, I was thinking of starting a service where I offer to help pay for a student’s fees by giving them the required amount. For the service I am providing, I would charge a fixed amount – e.g. £500.

Would this be permissible or would it still be classed as a form of interest and therefore impermissible?

Jazakallahu Khairan.

Answer

As-salāmu ‘alaykum wa-rahmatullāhi wa-barakātuh.

We appreciate your concern to overcome interest on student loans. However, the proposal of charging a service fee will still be regarded as interest and not permissible.

In principle, any amount demanded over and above the loan amount is interest. The offering of a loan cannot be termed as a service. A loan is a voluntary act whilst a fee is charged in lieu of a contract. Hence, as service fee cannot be charged for offering a loan, the service fee will be regarded as interest and is not permissible

We advise you to continue exploring Shariah compliant avenues to overcome interest in loans. You may forward other alternatives to us for our advice and suggestion.

Interest is expressly prohibited in Quraan and Hadith, Consider the following:

{يَمْحَقُ اللَّهُ الرِّبَا } [البقرة: 276]

Translation: Allah Ta’ala destroys interest (reduces its purchasing power and deprives it of blessings)

{ فَإِنْ لَمْ تَفْعَلُوا فَأْذَنُوا بِحَرْبٍ مِنَ اللَّهِ َ} [البقرة: 279]

Translation: If you do not (avoid interest), then be warned of war from Allah Ta’ala and his Rasool (Salallahu Alahi Wasalam).

[i]قال رسول الله – صَلَّى اللَّهُ عَلَيْهِ وَسَلَّمَ كل قرض جر نفعا فهو ربا

Translation: Rasullulah (Sallalahu Alahi Wasallam) said: Every Loan that draws a profit is Riba.

 

And Allah Ta’ala Knows best

M. Akhtar

Student Darul Iftaa
Phoenix, KZN                                                                                                                                South Africa

Checked and Approved by,
Mufti Ebrahim Desai.

 

 


[i] البناية شرح الهداية (8/ 493)

 

This answer was collected from Askimam.org, which is operated under the supervision of Mufti Ebrahim Desai from South Africa.

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