A Loan with a Very Low Interest: Permissible?
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A Loan with a Very Low Interest: Permissible?

Questioner

Hosam

Reply Date

Oct 03, 2018

Question

As-salaamu `alaykum. I am working in a government organization which engages maritime business. The employees of this organization are entitled to apply for the various types of loan (Vehicle loan, Ten month loan, etc.) based on their job category. Although these loans are interest-based, the interest is very low compared to the bank loan. I’m also thinking of applying for a loan to buy a vehicle since I don't have one. But some fellow Muslim employees say it is haram. Others say it is acceptable since I don't have any other options. Please clarify this to me. Jazakam Allah khairan.

Mufti

Answer


A Loan with a Very Low Interest

Wa `alaykum as-Salamu wa rahmatullahi wa barakatuh.

In the Name of Allah, Most Gracious, Most Merciful.

All praise and thanks are due to Allah, and peace and blessings be upon His Messenger.


In this fatwa:

It should be clearly known that interest is impermissible (haram) either it is high or low. Hence a good Muslim is required to save no effort in avoiding interest in his dealings and seek the correct alternatives, even if they are more difficult for him.


In his response to your question, Prof. Dr. Monzer Kahf, Professor of Islamic Finance and Economics at Qatar Faculty of Islamic Studies, states:

Interest is haram whether the rate is low or high; of course higher rates make it more ugly. Interest is haram because a loan makes a debt on the borrower and the debt does not generate any increases through time.

For this reason, it is called zhulm (injustice) in the Qur’an since the lender takes an increase which is not, and cannot be, generated by the asset he owns.

The alternative is either credit sale even, if it were at a higher price (which is definitely different from riba, because the seller gives a car that generates utility/value) or you wait until you save the price of the car.

Allah Almighty knows best.

Editor’s note: This fatwa is from Ask the Scholar’s archive and was originally published at an earlier date.




About Prof. Dr. Monzer Kahf

Professor of Islamic Finance and Economics at Qatar Faculty of Islamic Studies

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