Qard 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. Qard Hassan, also written Qard El Hassan, is the benevolent interest-free loan of Islamic law: it creates a debt that must be repaid in full, but it may never earn a profit for the lender.
Who uses a Qard Hassan and for what
A Qard Hassan helps a person who needs money for a short, defined need: paying a school fee, covering an urgent repair, buying tools to start a small trade, bridging the days before a salary arrives. The lender gives time and trust, not a commercial service. For this reason, the borrower is expected to explain the purpose honestly and to repay as agreed, since the contract rests on good faith more than on pricing.
Institutions use it for beneficiaries who are not served by commercial products. Charitable funds, foundations, employers and some Islamic banks set aside a pool for benevolent loans, funded by donations, zakat where the fund is eligible to receive it, or surplus allocated by the board. The borrower returns the principal, and the fund lends the same capital to the next applicant.
A Qard Hassan 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.
Repaying a Qard Hassan: schedule, proof and early payment
The Qard Hassan is repaid in the amount lent, whether in one payment on a set date or in instalments. A repayment plan helps both sides, because the borrower can budget and the lender can plan the next loan. Where a due date is stated, the lender may not demand the money before it, except when the contract allows it for a defined cause such as the borrower's disappearance.
Writing the loan down is recommended: the amount, the date, the schedule, the names of witnesses and any security agreed. Every repayment should be acknowledged by a receipt. Paying early is welcome and needs no reduction, since the debt is the principal alone; the borrower who can pay sooner than the schedule does the lender a favour and should not be asked to compensate for it.
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.
Qard Hassan versus disguised interest-free offers
Not every offer described as an interest-free loan qualifies as a Qard Hassan. A seller who gives free credit but raises the price of the goods, a lender who requires the borrower to buy a service or an account, or an arrangement in which the borrower must deposit part of the sum with the lender can all hide a benefit for the lender. When that benefit is linked to the loan, the transaction leaves the field of benevolence.
A useful test is to ask what the lender gets besides the principal. If the answer is nothing beyond documented costs, the loan is probably within the rules. If the answer includes a fee that grows with the amount, a mandatory purchase or a favour owed, the transaction needs review by a Sharia scholar before anyone signs.
- List every payment the borrower will make, with the reason for each.
- Check that fees reflect real, documented costs and do not scale with the amount.
- Confirm that no purchase or deposit is a condition of the loan.
- Ask whether a Sharia board has approved the scheme.
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.
Setting up a Qard Hassan fund
A community group or employer wishing to run a Qard Hassan fund should decide in advance who may borrow, the maximum amount for one person, the longest repayment period and who approves requests. A small committee, written rules and a ledger of loans protect the fund from favouritism and from disputes among members, and they make it simple to show donors what became of their contributions.
The fund also needs a rule for defaults. Many choose to grant more time in case of hardship, to ask a guarantor to step in, and in the last resort to write off the balance from a reserve funded by donations. Because the fund earns nothing, a modest reserve is the only protection that keeps a benevolent loan scheme alive over several years.
Providers offering these services
- Rammis Bank (Qard al-Hassan) : Rammis Bank presents its benevolent loan, repaid at the principal alone, without profit.