The Ruling on the Collective Loan ("Al-Jam'iyyah") Among Employees

Question:
What is your opinion regarding what is called the fund, where individuals contribute a specific amount, which is then collected and given to one of them, and they continue paying and collecting again, so that a specific amount accumulates for each person? Do you consider this permissible, or is there a concern with it? May Allah reward you with good.

Answer:
This is what is called the collective loan, which has become widespread among employees in this time. There is a difference of opinion among scholars regarding it. Some permit it due to the benefit it contains, while others prohibit it because it is a loan that yields a benefit, and because it is a conditional loan; one does not lend to his colleagues except on the condition that they lend to him, and it is done in rotation. The Prophet (peace and blessings be upon him) prohibited the loan that yields a benefit, and the scholars agreed on the prohibition of the loan that yields a benefit. This is the opinion of the other group, and I hold this opinion and consider it the stronger position.
The door of borrowing is wide, praise be to Allah. If one wants to borrow, he should not enter this network and entangle himself in it. He should borrow from one of his brothers what he needs. If he is not in need of borrowing, why should he burden himself with these debts and join them? He is not in need of that; rather, he wants the large amount of money he receives, as they intend for the group to accumulate a large sum that one of them takes. But this money he takes becomes a debt on his record, and he has many creditors. He is not in need of this in most cases. Rather, this is a customary practice that has spread among employees in their offices, and it is a custom that should not be practiced. Yes.