Fatwa #146833 November 2006South Africa
I need a loan of about R200 000 to extend my home. I have four children who are growing up and need their own space,
Question
As salaamu Alaikum
Dear Mufti Saheb
I need a loan of about R200 000 to extend my home. I have four children who are growing up and need their own space, I approached an Islamic financial institution. They agreed to lend me the money according to Shariah conditions. However, they say that they will review the loan every year. This means that they will charge a profit on the initial amount of R200 000 and at the end of year one review the profit percentage charged. Is this permissible in terms of Shariah? My understnding is that the amount is fixed over the period and may not very. Please advise.
Also please advise thta if this transaction is not Shariah compliant, have you certified any organisation that can offer me the type of Islamic finance that I require.
Answer
Muhtaram Brother
Assalamualaikum Warahmatullahi Wabarakatuhu
Any excess on a loan is interest and haraam. Any reliable Islamic financial institution will know that. You may request the financial institution to give a written explanation of their offer to you. We will study the proposal and then comment on that. It is possible that you did not understand their proposal in line with Shariah principles of business and dealings.
And Allah Knows Best
Mufti Ebrahim Desai