Qard El Hassan is a loan of money or fungible goods granted without any return, under which the borrower must give back exactly the equivalent of what was received, the lender seeking a moral or spiritual reward rather than a financial gain.
A loan whose only return is the principal
The lender hands over a sum and gets the same sum back, no more and no less, even if inflation has eroded its value meanwhile. Hassan, meaning beautiful or benevolent, echoes the Quran, which describes a loan made for God in these terms.
Why any benefit agreed in advance becomes riba
Jurists apply the maxim that every loan generating a benefit for the lender falls under riba. This excludes a percentage or a compulsory indexation, but also a free service demanded from the borrower or a gift set as a condition of the loan.
The borrower's spontaneous gesture at repayment
Giving back slightly more than owed remains permissible when nothing was stipulated or implied by custom: tradition reports that the Prophet repaid a borrowed camel with a better animal. A bank, however, cannot turn such extras into a systematic practice.
Arrangement fees: actual cost only
The AAOIFI standard on loans allows the lender to charge actual administrative expenses, such as assessing the file or transfer costs. These fees must be fixed and justified, never calculated in proportion to the amount lent or to the duration.
Where does Qard Hassan appear in an Islamic bank?
It shows up less as a credit product than as a legal foundation: current accounts, occasional advances to loyal clients, staff loans and solidarity funds. Amounts stay limited because the bank earns nothing on them and still has to reward its depositors.
The current account as a loan from client to bank
In many Islamic banks the demand deposit is classified as Qard: the customer lends to the bank, which guarantees full repayment and may use the funds. In return, no yield or contractual bonus can be promised to the depositor.
Free microcredit: the solidarity network model
In Pakistan, the organisation Akhuwat became known for granting interest-free microloans financed by donations and often disbursed in places of worship. The model relies on positive social pressure and on donors who cover the running costs of the organisation.
Salary advances and loans between individuals
Outside banking, Qard Hassan governs advances an employer grants to an employee, family loans and neighbourhood mutual aid funds. The verse on debt, the longest in the Quran, recommends a written record stating the amount, the due date and witnesses.
What does Sharia require when the borrower struggles?
The Quran urges granting time to a debtor in hardship until things become easier, and presents remitting the debt as even better. The lender therefore cannot turn a delay into a source of profit by adding any kind of surcharge.
Pledge, guarantee and a promise to pay in case of delay
The lender may require a pledge, Rahn, or a guarantee, Kafala, to protect the principal. With a solvent but negligent debtor, some institutions have the borrower sign an undertaking to pay an amount to charity, which never goes to the lender.
Lending or giving: the boundary with Sadaqa
Sadaqa transfers ownership for good, whereas Qard creates a debt that must be repaid. Some jurists nonetheless consider lending more meritorious, because it helps without humiliating, preserves the borrower's dignity and lets the same capital circulate several times.
What to check before accepting a so-called Qard Hassan
Ask for the exact list of fees and their justification, the due date, the consequences of late payment and whether a Sharia board opinion exists. A supposedly free loan carrying a commission proportional to the principal deserves a written explanation.
Specialist external source
The IMF presents its work on Islamic finance there, including the prudential oversight of Islamic banks and the treatment of non-remunerated accounts based on loans.