Loan Interest Hukm

25 Oct 2018 Ref-No#: 1144

Assalamu’alaikoom Ya Mufti,
Please kindly explain to me why a conventional loan annuity interest that is originally Haram due to Riba can change to Halal after the said interest is converted to Ujrah and the said Loan Transaction is converted to the ‘Aqad Ijarah.
Jazakallah khair.

Answer

Wa’alaykum as Salam wa rahmatullahi wa barakatuhu,

We are unaware of which exact loan you are asking about, nor did we see any contracts of the Ijarah referred to in the question. The Ijarah contract could be permissible, or if there is still interest or any clause which contradicts Shariah, then it will still not be permissible. Just calling it Ijarah does not make it permissible. The entire contract will have to be studied.

Generally, the complete contract and deal is changed. Thus, whilst a bank charges interest from non-Muslims, it might construct the deal in a completely different way for Muslims. It is not just a change of wording. Rather, the whole contract changes. Since there is a complete change in the entire deal, the ruling will differ.

Again, we do not know of the details in this case and cannot comment on the deals which you spoke about in your question. You should ask a reliable Mufti to see if it is really Ijarah, and if there is nothing which contradicts Shariah.