What is the ruling on employee associations?

The questioner : He says: We are a group of friends, and each of us pays a specific amount of money at the end of every month. We collect the total amount and pay it to one of us in rotation, and this is within the framework of cooperating to fulfill some needs. What is the ruling on this action? And is this riba (usury or interest)?

The Shaykh : Is it a loan or a donation?

The questioner : They call this an association.

The Shaykh : And this is what he wants, my brothers, and you know it or not? In the association, the people are employees, and each one of them pays one thousand riyals every month. And one of them is given the money. The second condition is for the second person, and the third for the third, and the fourth for the fourth. If we assume that there are twenty employees, how much does one of them receive every month? Twenty thousand? No, yes, indeed, nineteen thousand, in addition to his own salary. This is permissible, and it is from the category of cooperating in righteousness and piety, and it is not riba in any way, because each one of them does not receive anything except what he loaned. For example, I gave this one a thousand, and the second a thousand, and the third a thousand, and so on until the last one. What comes to me? Does a thousand come to me as a thousand and one hundred? Only my dirhams come to me, so it is not riba in any way. Rather, this is from good and cooperation in righteousness and piety, and I have no doubt in my mind that it is permissible. If it were not for the fact that a person, praise be to Allah, does not need it, I would have agreed with my brothers and colleagues in the job to do this.