Qard
Qard is a loan of fungible property — usually money — that the borrower must repay with its equivalent, with no stipulated benefit to the lender. Any benefit the lender requires as a condition of lending raises a riba problem.
Also called: Islamic loan · loan in Islamic law · qard (loan)
In Islamic law a loan is a gratuitous contract. The lender is entitled to get back what it lent, in the same amount and kind, and nothing more that it has stipulated. A classical maxim holds that every loan that brings a benefit to the lender is riba. That covers not only a percentage return but conditions such as requiring the borrower to sell goods to the lender cheaply.
Qard is still heavily used in Islamic finance, but not as the profit-making product. Many Islamic current accounts are structured as qard: the depositor lends to the bank, the bank guarantees repayment, and no return is promised, although the bank may make a discretionary gift (hibah). Takaful operators extend qard to deficit funds, and qard hasan is the benevolent form used for social finance.
Actual costs of administering a loan can be recovered, but only at cost and not in proportion to the amount or the time outstanding.
In practice
A fee calculated as a percentage of the loan, or that rises with time outstanding, is treated as disguised interest even if it is called a service charge.
Example
A worker borrows US$2,000 from an Islamic credit cooperative and repays US$2,000. A one-off US$25 charge reflecting the actual cost of processing may be acceptable; a 2 per cent "service fee" on the amount lent is not.
Commonly confused with
| Term | How it differs |
|---|---|
| Qard hasan | Every qard must be free of stipulated benefit. Qard hasan is the benevolent subset, typically associated with need, social purpose and leniency in repayment. |
See also
- Qard HasanQard hasan is a benevolent, interest-free loan made to help the borrower rather than to earn a return. The principal remains repayable, but the lender seeks no benefit and is expected to be lenient if the borrower struggles.
- RibaRiba is the prohibited increase at the centre of Islamic finance: an unjustified excess in a loan or in certain exchanges. It is broader than the English word "interest" and is not limited to excessive rates.
- UjrahUjrah is a fee or wage paid for a genuine service or for the use of an asset. In Islamic finance it is legitimate compensation — but only where a real service exists and the fee is not, in substance, a charge for credit.
- TakafulTakaful is a cooperative risk-sharing arrangement in which participants contribute to a common fund that pays claims among them, run by an operator under a Sharia-compliant contract rather than sold as conventional insurance.