The Ruling on Employee Associations

Question:
We return at the beginning of this episode to a message received by the program from one of our brothers in the Western Region. The sender is named. We presented a large portion of his questions in a previous episode, and other parts of his message remain. We will try to review them in this meeting, if Allah wills. The question he is asking now is: Honorable Shaykh, some employees in certain departments form a periodic association in which they participate with equal shares, for example, two thousand riyals per person. Then they determine who will take the first share, and the second, and so on, according to their agreement among themselves, with the intention of helping one another. Is this practice permissible in the Shari'ah? Or does it fall under loans that yield benefit? May Allah reward you with good, and may He do you good.

Answer:
In the name of Allah, the Most Gracious, the Most Merciful. Praise be to Allah, Lord of the worlds, and may Allah send prayers and blessings upon our Prophet Muhammad, and upon his family and all his Companions. As for this question, it is repeated often. This is because this practice is widespread among people. It is known as the collective loan, where a group of employees gathers, and each of them pays a specific installment of money. Then one of them takes this total amount in turn, until it reaches all of them, and then it starts again from the first one, and so on, repeating.
In my opinion, this loan is not permissible for several reasons. Good, good. First, it is a loan that yields benefit.
The Prophet (peace and blessings be upon him) said: The scholars have agreed on the meaning of this hadith, which is the prohibition of the benefit that a loan yields for its owner. This is because a loan is a contract of brotherhood, intended for drawing near to Allah (Glorified and Exalted is He), and immediate material benefit does not corrupt it. Therefore, the profit taken on a loan or the interest taken on a loan, which is stipulated at the time of the contract, is riba (usury or interest). These people stipulate: "I will lend to you on the condition that you lend to me," or "I will lend to you on the condition that you lend to me." This is a material benefit that returns to the lender. This is from one aspect.
The second aspect is that this is a contract with a condition within a contract: "I will lend to you on the condition that you lend to me." It is as if I said, "I will sell you this item on the condition that you sell me such-and-such item," or "I will sell you my car on the condition that you sell me your house, or your car." It is a sale with a condition within a sale. The Prophet (peace and blessings be upon him) prohibited two sales in one sale, as some scholars of knowledge interpreted this hadith to mean.
The third matter is that this practice involves carrying the debts of many people. There is no doubt that carrying debts is a difficult matter. If the debt is owed to one person, it is difficult, so how much more so if it is owed to several creditors and several debtors? A person may face what may face him, such as being dismissed from his job or being transferred to another place. What will happen to these collective rights against him? They are exposed to danger, and he is also exposed to embarrassment. Perhaps some of these people are loudmouths or foul-mouthed, so his reputation is not safe from them. If the creditor were one person, it would be lighter, and it would be possible to reach an understanding with him, or he could be excused. But if they are a large group, this is something that even the heedless debtor perceives, and it exposes him to embarrassment. This is a matter that should have been avoided from the start. Whoever is in dire necessity or has a pressing need for a loan should borrow from one of his brothers, as is customary and as the Muslims have done since ancient times. This practice came to our society from other societies, and it is a foreign practice containing the harms we have mentioned. It may also contain harms that have not yet appeared to us, which is why this practice should be abandoned. Yes.