Loans are permissible in Islam only if they are to be returned later in the same amount. It is lawful and strongly encouraged through numerous verses and hadiths as a way to help others and easing their problems. 

Loans: definition and supporting evidence

A loan is money given by one person to another to be returned later in the same amount, so as to benefit the recipient only. It is legitimate, as is clearly stated in numerous Qur’anic verses and hadiths that encourage helping others and easing their problems. It is universally agreed by Muslims that loans are perfectly lawful.

Abu Rafi' reports that ‘Allah’s messenger borrowed a young camel from a certain man. He subsequently received a number of camels which were part of people’s zakat. He ordered Abu Rafi' to give the man a similar camel. Abu Rafi' came back later and said that the youngest camel among them was already over six years old. 

:The Prophet (peace be upon him) said to him

‘Give it to him.The best of people are the ones who repay their debts best[2]’

Related by Muslim, hadith No. 1,600


references

  1. Ibn Abidin, Al-Durr al-Mukhtar, vol. 4, p. 179; al-Dasuqi, Hashiyah, vol. 2, p. 222; Al-Dardir, Al-Sharh al-Saghir, vol. 3, p. 291.
  2. It should be noted that: 1) The older camel is more valuable than a young one because it could be better used and for harder tasks. Hence the Prophet’s (peace be upon him) comments. 2) The fact that the Prophet (peace be upon him) gave the man more than what was due to him does not constitute usury, because this was not agreed between them in advance. This is a gift he gave to the man, which is perfectly permissible. 3) The Prophet (peace be upon him) must have borrowed the camel in the first place to help someone else, not for his own use. Had it been for himself he could not have repaid the man from zakat, as zakat was not lawful for him to take.

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