What is the ruling on savings associations among employees?

Question:
May Allah reward you, Honorable Shaykh. This questioner says: I and some of my colleagues at work agreed that each of us would pay two thousand riyals monthly, and then one of us would take it, and so on until each of us receives his share from this association. What is the ruling on this? Is this practice valid?

Answer:
I hold that this is not permissible, and I have said more than once that this is not permissible; because it is a conditional loan, a loan conditioned within a loan. For you did not lend to your colleagues except on the condition that they lend to you. So it is a loan conditioned within a loan, and it is two sales in one sale. Also, it is a loan that brings benefit. So I hold that this is not permissible for these two causes. The one who wants a loan should borrow from one of his brothers, not from a group in this manner. Rather, he should borrow from one of his brothers and repay the loan when he is able, without resorting to this method.