In view of the ban on treating money as a commodity in Islamic law, interest bearing loans are not permitted. Only loans free of interest are available and they may be used by a bank customer for any lawful purpose. The conditions of the law of loan are as follows:

  • the usual contractual requisites regarding parties, offer/acceptance and specification of assets apply
  • the bank may require a guarantor or pledge
  • the loan money is transferred to the possession of the customer
  • the customer acquires unconditional ownership
  • the customer may use the loan money for any lawful purpose
  • borrowed money must be repaid
    • in the same amount and
    • in the same currency
  • the majority view is that there cannot be a specific date for re-payment of the loan
    • one law school holds that a repayment date may be agreed
  • the loan should be settled on demand (in the absence of an agreed date
    • although not a legal requirement Islamic law commends forbearance when the lender is financially constrained
    • the lender may not make a condition that repayment must be in a different location (e.g. jurisdiction or country)[1]
  • upon death of the borrower all outstanding loans become payable
    • they are payable from the estate and take priority over other beneficiaries
    • in the case of a bankrupt, outstanding loans must be dissolved
  • the borrower is not entitled to anything more than the principal the money lent


Islamic law makes provision for the Transfer of Debt.



Mejelle, 6th Book, Chapter III


[1] However according to a minority view a loan contract stipulating a different place for the settlement of the loan is lawful. If this view is followed, the loan contract becomes a means of transferring money safely and inexpensively for the creditor in a legal form called a Bill of Exchange (suftaja).