Fatwa: # 16116
Category: Business Matters
Country: Australia
Date: 28th January 2008

Title

Will the inflation rate be taken into consideration when paying of the loan?

Question

We live in Sydney, Australia, and my wife wants to pursue higher studies in Medicine, for which the government offers an interest-free loan, but with the condition that at the time of repayment any changes that may have occurred in the overall inflation rate will be calculated and added to the amount. Can you please clarify if this is Halaal or not, i.e. would the inclusion of any non-predicted changes in the overall inflation rate be considered as interest or not

Answer

In the name of Allah, Most Gracious, Most Merciful

Assalaamu `alaykum waRahmatullahi Wabarakatoh

It is apparent from your query that you are conscious of the strict impermissibility in Shari’a of all interest-based transactions.  May Allah make it easy for you to abstain from unlawful transactions and make it easy to obtain lawful alternatives, Ameen. 

According to the laws of Shari’a, if a person borrows any amount of money, then the original amount will be due upon the borrower.  The rate of inflation will not be taken into consideration.  Therefore, it will not be permissible to calculate the rate of inflation and add it to the original amount due.

Fiqhi Muqalat of Mufti Taqi Usmani (1/53) Memon Islamic Publishers

And Allah knows best

Wassalam

Ml. Ehzaz Ajmeri,
Student Darul Iftaa

Checked and Approved by:

Mufti Ebrahim Desai
Darul Iftaa

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