Loans are among the good deeds
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Lending is among the good deeds
Question: In our country, there is a type of lending transaction that I doubt is valid. It is that when a person needs to borrow a sum of money, he goes to one of the merchants to borrow from him. If that merchant is also a farmer, he conditions that the borrower must first buy from his crop before the harvest, so that he can sell it and benefit from its price. He may sell it to him at a low price, while he pays his original creditor at a higher price. Is such a loan permissible or not? And does this fall under the category of a loan that brings benefit, or not?
Answer: There is no doubt that a loan which meets the need of a Muslim is among the good deeds for which one is rewarded, and it is an act of doing good. It is expected of a Muslim to lend to his brother for the sake of Allah the Exalted, not intending any worldly greed or material benefit from it, but rather intending to draw near to Allah the Exalted by meeting his brother's need and facilitating matters for the one in difficulty. However, the borrower must return the loan to its owner without delay or postponement, if he is able to do so, so that he may repay the kindness to its owner and so that this transaction may prevail among Muslims. This is because a loan is one of the contracts of accommodation from which both parties benefit: the borrower benefits by having his need met, and the lender benefits by the reward and by doing good.
As for exploiting a loan for worldly gain through profit or benefit, this is among the greatest
forbidden things. And in the hadith from the Prophet (peace and blessings be upon him), he said: Therefore, it is not permissible for the lender to condition upon the borrower a benefit that returns to him from the loan, whether by an increase in the repayment or by a benefit he exploits from the borrower. And what the questioner mentioned, that if the lender is a farmer, he conditions upon the borrower to buy a portion of his crop at a high price, then sell it afterwards at a lower price, this is a general question.
If the questioner means that the lender does not give the loan to the borrower unless he buys from him something from his crop—the questioner said—before the harvest, as he says, then this is forbidden because it is two sales in one sale, because he did not lend to him except on the condition that he buy from him this crop. This is combining two contracts: the contract of the loan and the contract of purchase. It is a contract conditioned within a contract, and it becomes two sales in one sale, which is prohibited.
And if he means by that that the rich man sells a portion of his crop to the needy person before the harvest so that the needy person can sell it and benefit from its price, then this is not called a loan, but rather it is called the issue of tawarruq (a commodity sale used to obtain cash). That is, the needy person comes to the merchant and buys from him a commodity at a deferred price, then the needy person sells it in the market at a price lower than that and benefits from its price. This is permissible according to the majority, with its conditions, that the commodity must be present with the merchant at the time of the contract,And secondly: and that the merchant does not buy it from the borrower at a lower price, because in that case it becomes the issue of 'inah (a buy-back sale used to disguise a loan), which is prohibited. Rather, he sells it to him at a deferred price,
then he goes with it and takes possession of it completely, and sells it to others in the market, and benefits from its price. If it is of this nature, then this is called the issue of tawarruq, and it is permissible according to the majority of scholars, and the need is a driver for it. But as we mentioned, it is required that the commodity be present with the merchant at the time of the contract, and it is required that he does not buy it from the borrower.
And if the commodity is a portion of the crop, as is apparent from the question, then there is a problem with this, because the crop is not permissible to be sold before its grain has hardened. Also, the needy person may not reach his need from this crop, and selling it while it is standing in the ground also involves precautions and problems. It should be avoided to engage in this transaction, and they should borrow with immediate goods, which the needy person can take possession of and sell to customers, and which are known by all the requirements of knowledge. And Allah knows best.
Question: In our country, there is a type of lending transaction that I doubt is valid. It is that when a person needs to borrow a sum of money, he goes to one of the merchants to borrow from him. If that merchant is also a farmer, he conditions that the borrower must first buy from his crop before the harvest, so that he can sell it and benefit from its price. He may sell it to him at a low price, while he pays his original creditor at a higher price. Is such a loan permissible or not? And does this fall under the category of a loan that brings benefit, or not?
Answer: There is no doubt that a loan which meets the need of a Muslim is among the good deeds for which one is rewarded, and it is an act of doing good. It is expected of a Muslim to lend to his brother for the sake of Allah the Exalted, not intending any worldly greed or material benefit from it, but rather intending to draw near to Allah the Exalted by meeting his brother's need and facilitating matters for the one in difficulty. However, the borrower must return the loan to its owner without delay or postponement, if he is able to do so, so that he may repay the kindness to its owner and so that this transaction may prevail among Muslims. This is because a loan is one of the contracts of accommodation from which both parties benefit: the borrower benefits by having his need met, and the lender benefits by the reward and by doing good.
As for exploiting a loan for worldly gain through profit or benefit, this is among the greatest
forbidden things. And in the hadith from the Prophet (peace and blessings be upon him), he said:
Every loan that brings benefit is riba
كل قرض جر نفعًا فهو رباIf the questioner means that the lender does not give the loan to the borrower unless he buys from him something from his crop—the questioner said—before the harvest, as he says, then this is forbidden because it is two sales in one sale, because he did not lend to him except on the condition that he buy from him this crop. This is combining two contracts: the contract of the loan and the contract of purchase. It is a contract conditioned within a contract, and it becomes two sales in one sale, which is prohibited.
And if he means by that that the rich man sells a portion of his crop to the needy person before the harvest so that the needy person can sell it and benefit from its price, then this is not called a loan, but rather it is called the issue of tawarruq (a commodity sale used to obtain cash). That is, the needy person comes to the merchant and buys from him a commodity at a deferred price, then the needy person sells it in the market at a price lower than that and benefits from its price. This is permissible according to the majority, with its conditions, that the commodity must be present with the merchant at the time of the contract,And secondly: and that the merchant does not buy it from the borrower at a lower price, because in that case it becomes the issue of 'inah (a buy-back sale used to disguise a loan), which is prohibited. Rather, he sells it to him at a deferred price,
then he goes with it and takes possession of it completely, and sells it to others in the market, and benefits from its price. If it is of this nature, then this is called the issue of tawarruq, and it is permissible according to the majority of scholars, and the need is a driver for it. But as we mentioned, it is required that the commodity be present with the merchant at the time of the contract, and it is required that he does not buy it from the borrower.
And if the commodity is a portion of the crop, as is apparent from the question, then there is a problem with this, because the crop is not permissible to be sold before its grain has hardened. Also, the needy person may not reach his need from this crop, and selling it while it is standing in the ground also involves precautions and problems. It should be avoided to engage in this transaction, and they should borrow with immediate goods, which the needy person can take possession of and sell to customers, and which are known by all the requirements of knowledge. And Allah knows best.