Q: Two parties want to enter an agreement: Person A wants to loan money to Person B.
The amount is marked up by 10% and the repayment is over a fixed period e.g. 4 years.
If there is a clause in the agreement to say that if you pay by 3 years, you will get R2000 back.
Is the rebate of the R2000 clause permissible? Is the allocation of marked up shares permissible?
A: This is a pure interest based loan. Interest is a curse. Nabi (sallallahu alaihi wa sallam) has sounded severe warnings regarding interest. In one hadeeth, Rasulullah (sallallahu alaihi wa sallam) said, "Avoid the seven destructive things." The sahaabah (radhiyallahu anhum) asked, "What are they, O Rasulullah (sallallahu alaihi wa sallam)?" Nabi (sallallahu alaihi wa sallam) replied, "Associating anything with Allah Ta`ala, sorcery and magic, killing a person whose life Allah Ta`ala has declared as forbidden without a just cause, consuming the wealth of an orphan, consuming interest and usury, turning back and fleeing at the time of war, and slandering chaste believing women who are unwary." (Saheeh Bukhaari)
In another hadith, Nabi (sallallahu alaihi wa sallam) is reported to have cursed the one who consumes interest and usury, the one who pays it, the one who records it, and the two witnesses to it, saying that they were all alike. (Saheeh Muslim)
And Allah Ta'ala (الله تعالى) knows best.
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