[Q-ID0262] I want to loan money to someone, but want some benefit from it, what can I do?

QUESTION:

Zayd wants to take a loan from `Amr for $150 without any interest. `Amr does not want to take any interest, but still wants some type of benefit that is within the bounds of the Sharia. What should be done in this situation?

ANSWER:

The noble scholars have written several scenarios for this issue. The easiest one is that Zayd, the person who wants to take the loan, should sell `Amr an item in his possession, like a pot or article of clothing, for $150. `Amr should buy this and give the $150 over to Zayd’s possession. After this meeting, or after another meeting, `Amr should sell this item back to Zayd for $200, and the amount should be payable after one year. Zayd should buy this item back, and `Amr can keep it in his possession as collateral (rihan) if he wants. In this way, Zayd obtains his item against which $150 was given, and $200 is now mandatory (wājib) for `Amr. However, `Amr must not obtain any benefit from the item held as collateral because that will be considered interest. It is written in “Fatāwa Qāḍī Khān”:

رجل له على رجل عشرة دراهم فاراد ان يجعلها ثلاثة عشر الى اجل قالوا يشتري من المديون شيئا بتلك العشرة و يقبض المبيع ثم يبيع من المديون بثلثة عشر الى سنة فيقع التجوز عن الحرام و مثل هذا مروي عن رسول الله صلى الله عليه و سلم انه امر بذلك

“[The scholars say] that if a man who is owed ten dirhams from another man wants to make that amount thirteen dirhams payable after a specific time period, he should buy something from the creditor for those ten dirhams and take possession of that item. Then he should sell that item back to the creditor for thirteen dirhams payable after one year. [In this way], tolerance of the illicit occurs, the like of which is narrated from the Messenger of Allah  commanded such.”

[Fatāwa Khāniyya, Kitāb ul Buyū`, Faṣl fī mā Yakūnu Firāran `an ir Ribā, Vol. 2, pg. 279, Dār ul Kitāb]

And Allah knows best.

[Fatāwa Ridāwiyya, 12-Vol. Edition, Vol. 7, pg. 121]

Translated by Omair Shariff – answer from alhaneef.com

Also see:

[Q-ID0264] Can I pay the person who loaned me money extra alongside the repayment? Or is that Interest?

[Q-ID0261] How can any extra money be taken for a Loan without taking interest?

[Q-ID0260] Is it permissible to take out a mortgage in England?

[Q-ID0228] What is the Islamic ruling on taking out a Life Insurance policy in the UK?

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