Debt and Loan: Validity of Membership and Deposit Conditions in Ribā-Free Loan Funds

Practical Laws of Islam as per the teachings of Imam Khamenei

Debt and Loan: Validity of Membership and Deposit Conditions in Ribā-Free Loan Funds

English:

Question #1772:

As part of their lending policy, ribā-free loan funds require potential loan borrowers to be members in the fund, i.e., to having savings accounts with it and deposit a certain amount in it, and to be resident of the area where the fund is located. Do these conditions amount to involvement in ribā?

Answer #1772:

There is no harm in making the condition of membership or residence in the area, and others which confine the granting of loans to certain people. There is also no harm in opening a savings account with the fund if the aim was to restrict granting the loan to certain people. However, if this condition was an attempt to link granting the person a loan, sometime in the future, with his depositing an amount of money with the fund, the condition amounts to demanding a return on the loan, in which case it is invalid.

-Imam Khamenei, Practical Laws of Islam, Importance and Conditions of Debt and Loan