What is the ruling on a collective loan?

Question:
He says: We are a group of people who collect a sum of money, which is one hundred and fifty dinars, at the end of every month. Then we hold a lottery, and the person whose name comes up takes the money, and so on until the money is finished and everyone receives the amount. Is that permissible?

Answer:
This is called a collective loan. The group lends to one another in turn, or by lottery as the questioner mentioned. I hold that this is not permissible, because it is a loan that brings benefit. He lent to his colleagues on the condition that they lend to him, hoping that they would lend to him and his turn would come. It is a loan that brings benefit. The scholars have reached consensus on this, and there is a report from the Messenger of Allah (peace and blessings be upon him) that every loan that brings benefit is riba (usury or interest). The purpose of a loan is to be kind and help the needy, and then the amount is returned. This is not the purpose here. The purpose here is greed: you lend to them so that they will lend to you, your turn will come, and the lottery will come up for you. This is intended for benefit.