The Ruling on Collective Loans

Question:
What is the ruling in the Shari'ah regarding the association in which a number of people, whether they are employees or not, participate, such that each person pays a certain amount of money, and each one of them takes the association's fund in turn, equally, without any increase or decrease? May Allah reward you with good.

Answer:
This issue has occurred and questions about it have become frequent. It is a new matter that was not known before, which they call the collective loan. I hold that this is not permissible, because this is a loan that brings benefit, even if there is no increase in it. Yes, there is no increase in it, but there is a benefit, because you did not lend to them except on the condition that they lend to you. Yes, yes. And this is among the loans that bring benefit. Also, it is a conditional loan within a loan, so it falls under the prohibition of the Prophet (peace and blessings be upon him) regarding two sales in one sale; because this is a contract conditioned within a contract, and it has other dangers; because it burdens the conscience with the rights of people without any need for that. If a person needs a loan, let him borrow from one of his brothers without this organized work and the commitment that may burden him in the future, and it ties people to multiple rights without any need for this work, and it is merely imitation. I hold that this is not permissible, even though some of our scholars have issued a ruling permitting it; because they looked only at the fact that there is no increase in it, and did not look at the other dangers that we mentioned. Yes. May Allah reward you with good, and may He do you good.