Answered by: Alimah Zakiratul Hoque
I am living in Hong Kong and last year the government has introduced a new loan scheme for the unemployed. The new loan scheme is a relief measure for people who are affected by the covid-19 virus.
The loan itself is an interest loan with 1% interest per annum which is obviously haram in shariah. The repayment period for this loan is 6 years and the maximum amount for this loan is HKD $80,000.
There is something else which is included in this loan scheme. There is a rebate of the interest paid once the loan is fully paid. This means the interest paid during the repayment period will be all given back in the future.
I would like to ask if this type of loan scheme is permissible in Islam. Paying and receiving interest is haram but in this type of loan scheme, the paid interest is given back. Could you please give a fatwa on this loan scheme?
In the name of Allah, the Most Gracious, the Most Merciful
As you mentioned, taking or giving interest is Haraam in Shariah.
هو في الشرع عبارة عن فضل مال لا يقابله عوض في معاوضة مال بمال هو محرّم
“And it (Ribaa), in Shariah, is an expression of the surplus of money that is not matched by compensation in the exchange of money for money, and it is forbidden.” (Fatawa Hindiyah, Vol 3, Pg 125)
Allah says in the Qur’an:
“O, believers! Do not consume interest, multiplying it many times over. And be mindful of Allah, so you may prosper. And guard yourselves against the Fire prepared for the disbelievers. And obey Allah and the Messenger, so you may be shown mercy.” (3:130-132)
As for paying interest, there is a principle that “that which is Haraam for one to take, is Haraam to give”. (Qawaaid Fiqhiyyah, Pg 78)
In this case, although the interest money will be returned under certain conditions, the individual would need to pay the interest for the 1st year. Therefore, it would still be impermissible (as they would be paying interest for the 1st year).
Only Allah knows best.
Written by Alimah Zakiratul Hoque
Checked and approved by Mufti Mohammed Tosir Miah
Darul Ifta Birmingham