The Ruling on What Is Called the Employees' Association

Question:
The questioner asks, and this questioner also, in one of his questions, says: Honorable Shaykh Salih, we are brothers who have a cooperative fund in which each of us pays a monthly amount of one hundred riyals. The purpose of the fund is for whoever needs it to take a loan from it and then return it to the fund. Is there zakah in it?

Answer:
This is called an employees' association, and I do not permit it because of the riba (usury or interest) in it; because this is a loan that yields a benefit. You lend to them in order for them to lend to you. It may be that it was reported from the Messenger (peace and blessings be upon him) that every loan that yields a benefit is riba, and the scholars have agreed that it is not permissible to stipulate a benefit in a loan. This mutual lending is giving a benefit from some of them to others. If you want to lend to your brother, lend him a good loan; lend him without stipulating anything on him or entering into a lending association. Lend him seeking the face of Allah, and he will return the loan to you when he is able, and you will get the reward and your money will come back to you. This is the known practice among the Muslim leaders. As for these associations, as we mentioned, they only appeared recently, and a benefit is obtained in the loan from some of them to others. If he is sincere, he lends to the needy who did not enter into this association with them to get the reward. But lending to them in order for them to lend to him is a loan that yields a benefit. Yes.