Rules Concerning Ribā: Ruling on Bank Loans for Home Refurbishment Labeled as Ju‘ālah
Practical Laws of Islam as per the teachings of Imam Khamenei
Rules Concerning Ribā: Ruling on Bank Loans for Home Refurbishment Labeled as Ju‘ālah
English:
Question #1617:
Some banks give some house owners a loan — named ju‘ālah — to refurbish their property. The recipient of the loan has to pay it back plus an extra, within a given period, by instalments. Is such borrowing shar‘ī? And how can one call it ju‘ālah?
Answer #1617:
If the advance payment is made as a loan to the house owner for refurbishing his property, giving it the label of “ju‘ālah” does not make sense. It is, therefore, not permissible to pay back more than the actual amount of the loan, although in essence giving the loan is in order.
But, there is no objection if the house owner compensate [to make a compensation (ju‘l)] to the bank as the bank has refurbished his house. This compensation is not equal to what the bank has paid for the refurbishment but the whole amount the bank receives by instalments in return for refurbishment.
-Imam Khamenei, Practical Laws of Islam, Importance and Conditions of Rules Concerning Ribā