A charitable organization has engaged in several partnerships with some community colleges whereby it receives a discount on tuition fees for every student it sends. This is in return for a number of services that the charitable organization provides to the benefit of the college. For example, advertising, giving zero-interest loans to students, and offering training courses to them.
However, the following observations should be taken into account:
-The organization pays the tuition fees to the college against (25%) as discount and recovers that whole sum from the student.
-The organization receives the discount from the college regardless of whether the student had taken a loan or not.
-The college considers this discount a charitable donation.
-The profits received by the organization from the college are saved in favor of the poor students.
Based on this, are the profits that the charitable organization receives from the college considered a loan which provides benefit to the lender?
Answer:
All perfect praise be to Allah the Lord of the Worlds. May His peace and blessings be upon our Prophet Mohammad and upon all his family and companions.
If the charitable organization pays the tuition to the college directly, receives the discount, and recovers that whole amount from the students, then this is unlawful because it is a loan which provides benefit to the lender. In this regard, the juristic rule states: "Any loan that provides benefit to the lender is considered usury/Riba."
However, in case the charitable organization doesn`t give a loan to the student whom it sends to the college; rather, he/she pays the tuition fees, then it is permissible for the charitable organization to receive the discount from the college because this is considered a form of Ju`alah (Conditional payment) where the college had agreed with the organization to be granted a (25%) discount for every student the latter sends. And Allah the Almighty knows best.