Qard al-Hasan

Qardh al-hasan (Arabic: قرض الحسن, transl. benevolent lending) is an Islamic concept of interest-free lending. It is based on the principle of helping others without expecting a financial gain. However some Ulama deem it a form of interest-free loan (fungible, marketable wealth) that is extended by a lender to a borrower on the basis of benevolence (ihsan). Al-qardh, from a shari’a point of view, is a non commutative contract, as it involves a facility granted only for the sake of tabarru’ (donation).

Therefore, al-qardh al-hasan is a gratuitous loan extended to people in nee, for a specified period of time. At the end of that period, the face value of the loan (asl al-qardh) is to be paid off. In other words, shari’a prohibits the stipulation of an excess for the lender, as it amounts to riba, whether the excess is expressed in terms of quality or quantity, or it is a tangible item or a benefit. However, it is permitted that the repayment of qardh (loan extinguishing) is made with an excess (tangible item, benefit, service, etc.) IF such an excess is neither expressly stipulated nor implicitly pre-arranged (through collusion or tawatu’) in the contract of loan.