The loan (qard) and hawala

The qard (loan)

The loan is giving a fungible good against returning its like. It is lawful by the Book, the Sunnah and consensus: "Whoever relieves a believer's distress, Allah will relieve one of his distresses on the Day of Resurrection" (Muslim 2699); "No Muslim lends twice to a Muslim without it being like one charity" (Ibn Majah 2430); the Prophet borrowed a young camel and returned a better one: "The best of you is the best in repayment" (Muslim 1600). Its essence is recommended; it becomes obligatory toward one in hardship (Shafi'i school), and refusing a request for a loan is no sin (report from Ahmad). The borrower must be able to repay and must not feign wealth or poverty.

Rulings and limits

• Lending a slave woman to one entitled to relations with her: forbidden by the majority (Hanafis, Malikis, Shafi'is, Hanbalis), since it opens a path around marriage; lending her to one for whom she is forbidden (mahram) is allowed by Malikis and Shafi'is.
• Lending benefits (a workday, lodging): not valid for the Shafi'i and Hanbali schools, not being customary; Ibn Taymiyya allows it with compensation; Ahmad holds the loan valid in everything sellable except slaves.
• Repayment: the like of what was taken; lending bread is valid by the constant practice of the cities.

The increase

The scholars agree that if the lender stipulates an increase, a gift or any benefit (lodging, a mount, work), taking it is riba: it is a contract inside a contract (the combined sale and loan is forbidden, reported by Abu Dawud 3503). An increase not stipulated, paid as a fine settlement, is allowed for the majority (Hanafis, Shafi'is, Hanbalis), following the Prophetic model; Malikis allow an increase in quality but not in quantity, unless the term has passed. Some scholars disliked lending to a man known for repaying better, so that the lender does not hope for extra.

The hawala (transfer of debt)

The hawala moves a debt from one liability to another: the delegator transfers to the creditor the burden of a third debtor. It is licit by consensus (Ibn Qudamah, an-Nawawi, al-Zarkashi), as a relief when a person owes a debt and holds one: recovering and paying in two places is hard, so the transfer was permitted. Its nature is debated: a sale of debt for debt (Ibn Rushd), a recovery of a right (an-Nawawi), or an independent contract of transfer, the soundest Hanbali view. Once completed, the delegator is freed: for the majority (Malikis, Shafi'is, Hanbalis) the creditor never returns against him; the Hanafis allow recourse if the delegated debtor dies or is declared bankrupt, the claim falling back to its original seat, and they check solvency before the transfer, the creditor who ignores a known insolvency bearing his own negligence.

Practical note

The loan without increase and the hawala form the humanitarian side of Islamic finance: lending with nothing stipulated in return, and moving a debt to whoever can actually pay it.