Person A lends some money to Person B, say $500. At the time of lending, $500 will buy you 1 ounce of gold….

Answered according to Hanafi Fiqh by Askimam.org

Scenario 1:

Person A lends some money to Person B, say $500. At the time of lending, $500 will buy you 1 ounce of gold.
When lending money, Person A tells Person B that he is basically giving him 1 ounce of gold, and that Person B should return however amount it will come out to be for 1 ounce of gold at the time of returning.

Question1: Is this transaction considered halal? Will the difference in amount be considered interest?
Question2: If halal, What should one do if he has already lent money without the above condition, but now he wants to put this condition in this transaction?

Scenario2:

My wife inherits some money from her Mother after her demise. Actually, her mother had left a house in her estate in Pakistan. The brother decides to buy the house from his siblings, and agrees to pay the amount to all of them, including my wife. My wife has moved to Canada since then. The brother hasn’t paid the amount even after several requests made to him. The Pakistani rupee is devaluing with respect to Canadian $. Is it permissible for my wife to set a Cdn$ rate with her brother which she should get the money at, so she doesn’t lose money? If yes, will it have to be set on present rate? The money was borrowed almost a year ago.

Even in Pakistan, the inflation makes money less worthy after certain time.
How can she islamically receive money from her brother without having more loss?

 

Answer

In the name of Allah, Most Gracious, Most Merciful

Assalaamu `alaykum waRahmatullahi Wabarakatoh

In principle when repaying a loan, a person will have to pay the equivalent of what ever was taken as a loan.

For example, when Zaid lends $500 to Bilal, Bilal will repay Zaid $500.  If Zaid lends Bilal 1 ounce of gold, Bilal will repay 1 ounce of gold, regardless of the fluctuation in the currency or price of gold.

(الديون تقضى بامثالها)

(Rud Al-Muhtar 848/3 H M Saeed)

If Zaid lends $500 to Bilal stating that he is not lending $500 but rather he is lending him 1 ounce of gold and demands Bilal to pay the price of 1 ounce of gold on the due date, this is incorrect.  The loan was given in currency and not gold.  Bilal will have to repay $500.  However, if Zaid loans Bilal 1 ounce of gold and on the due date Bilal does not possess 1 ounce of gold, he may pay him the value of the 1 ounce of gold.  In this case, the value of 1 ounce of gold when the loan was given will be considered.  (When Zaid loaned 1 ounce of gold, the value was$500, however, on the due date the value is $450, Bilal will pay $500)

(و حاصل ما مر انه على قول ابي يوسف المفتى به لا فرق بين الكساد و الانقطاع و الرخص و الغلاء فى انه تجب قيمتها يوم وقع البيع او القرض لا مثلها

(Rud Al-Muhtar 534/4 H M Saeed)

In the second scenario consideration will be of the currency used when the transaction between brother and sister took place.  Fluctuation of the currency will not be considered, as that will open up the doors of riba. (interest)

(Ahsanul Fatawa 510/6 H M Saeed)
(Fatawa Mahmudiya 406/16 Jamia Farukiya)

And Allah knows best

Wassalam

Ml. Ahmed Mohomed Pandor,
Student Darul Iftaa

Checked and Approved by:

Mufti Ebrahim Desai
Darul Iftaa, Madrassah In’aamiyyah

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