The Ruling on Group Loans Among Colleagues

Question:
We are colleagues who participate in a monthly association of one thousand riyals each. We collect it and give it to one of us, and so on. What is the ruling on this practice? Is it lawful, or does it contain riba (usury or interest)?

Answer:
This is called a group loan. It appeared two or three years ago, and research was conducted on it. The scholars are currently divided on it. Some permit it because they say there is benefit for all parties, and the benefit is shared in facilitating things for those in need. Some scholars suspended judgment on it, and some prohibited it, saying that it is not permissible because it is a loan that brings benefit. You lent to your colleagues on the condition that they lend to you when your turn comes. This is a conditional loan within a loan, so it is two sales in one sale. It is also a loan that brings benefit, and every loan that brings benefit is riba. The expectation for Muslims is that if one of them needs something, they lend to him without this arrangement and without this organization. The one who needs a loan borrows from his brother or his brothers without this commitment. Suppose one person takes these funds and assumes the debts to his colleagues, then he is dismissed from his job, transfers, or dies. The rights of his colleagues are lost. This involves some risks. In addition to what we mentioned, it is a loan that brings benefit, and it is a conditional loan within a loan. It has many precautions. What I see is that it is not permissible, and that Allah will make the loan good without this method. A person needs to borrow from his brothers or from one of his brothers. Yes. Without this commitment and these organizations that may cause difficulty in the future. Yes.