Paying back a loan in a different currency
Q: Bakr and Zaid are travelling in a foreign country. Zaid takes a loan of 100 USD from Bakr. Bakr makes the condition that when they return to South Africa, Zaid must not pay him 100 USD, but rather the equivalent of 100 USD in South African Rand. The equivalent of the 100 USD will be based on a mutually agreed exchange rate decided by Zaid and Bakr when they return to South Africa. Is this entire type of transaction permissible?
A: This type of transaction is impermissible. In the repayment of the loan, the law of Shariah is that one should pay back the actual loan. If one repays the loan in another currency, then it is compulsory that one gives the equivalent of the loan (in that currency) at the time the loan is repaid.
And Allah Ta’ala (الله تعالى) knows best.
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