SHARIAsource

This fatwa acknowledges that shari'a financial institutes, aside from being commercial institutes, must also play a social role to stimulate the economy. The fatwa notes that this can be achieved by channelling funds pursuant to the principle of al-Qardh, whereby a loan agreement is executed in the customer's favour on the condition that the customer returns the principal sum to the shari'a financial institute at a time agreed on by both parties. The fatwa states that such an agreement is permitted if:

1. the customer bears the associated administrative costs;
2. the shari'a financial institute requests from the customer a security if deemed necessary;
3. the customer wishes to voluntarily provide to the shari'a financial institute a donation, provided it is not a condition of the agreement; and
4. if the customer is unable to return a part or all the funds at the time agreed upon and the shari'a financial institute has already determined the customer's impecuniosity with certainty, the institute can either extend the term of the agreement or write-off the debt in part or in its entirety.

If the customer shows no signs of repaying the principal sum, the shari'a financial institute may take a number of steps including selling the security and/or enforcing the customer's contractual obligations.