The Ruling on Bank Guarantees and Taking a Fee for the Guarantee

Question:
Honorable Shaykh, this question asks: What is the ruling on bank guarantees?

Answer:
Yes, and regarding the bank. The default ruling for a guarantee is that it is a contract of assistance, as the scholars have said. That is, one person guarantees another to help him achieve his objective, and if he is unable to pay, you take on the burden, because the guarantor is a debtor. This is the meaning of a guarantee in Islamic jurisprudence: a person borrows from someone, but the lender does not give him the loan because he thinks, or it is more likely in his mind, that the borrower will not be able to repay. So he says to him, "Give me a guarantor, give me a surety," meaning that he will pay on your behalf if you are unable to pay, or if you do not request it, or if you are unable to enable him to take his right from you. So this guarantor pays and takes on the burden. The document certifying this is a certification of the right. This is an act of kindness by the guarantor, who is doing good by helping this person in need. Therefore, it is not permissible for him to take anything for his guarantee, because this act is from the category of kindness. He seeks the reward, just like a loan. A loan is intended for worldly investment and reward, not for worldly gain and greed. So a guarantee is fine; it is a good thing, and it is one of the contracts of cooperation to achieve benefits, whether this guarantee is from individuals or from institutions. The basis for this is like the saying of Allah the Exalted: The "za'im" (guarantor) is the guarantor, and as you know, it is intended to be an act of kindness to the borrower, enabling him to achieve his objective. Likewise, the guarantor receives the reward from Allah, Glorified and Exalted is He, and his right returns to him. If he pays on his behalf, he claims his right from him. It is like the nature of a loan as well: he takes on the burden, and when he pays, it becomes a loan in the liability of the guaranteed person. So it is not permissible for him to take an increase over that, as that would be riba (usury or interest). Yes.

The presenter:
May Allah bless you,