Question:
A friend wants a loan of £2000 to be repaid after 10 years. £2000 is currently worth 9.24735 gold ounces. Is it possible to lend him the equivalent of 9.24735 gold ounces (i.e. give him £2000 in cash) and then ask him to repay the equivalent of 9.24735 gold ounces in 10 years time (it may be more or less depending on the exchange rate)?
Answer:
If you lend your friend 2000 pounds in cash which is equivalent to 9.24735 ounces of gold then it will not be permissible for you to bind him to repay you the same amount of gold in cash due to inflation or deflation. However, if you fear a loss due to inflation then it is advisable to loan him 9.24735 ounces of gold instead of cash and ask him to repay you the same amount in gold. (Buhoothun fi Qadhaayaa Fiqhiyyah Mu’aasarah, Page.192)
And Allah Ta’ala knows best
Ilyaas bin Hashim Limbada
Attested to as correct by:
Mufti Muhammad Ashraf
Darul Iftaa
Jameah Mahmoodiyah
Springs
16 August 2004
29 Jumaadul Ukhraa 1425