In the name of Allah, the compassionate the merciful
First of all, Islam, in general, emphasizes the removal of hardship and difficulties in societies through the establishment of sadaqah and zakat (charity) distribution centers, Awqaf (endowment foundations), orphanages, scholarship schemes, interest-free loans, hiba (gifts), donations, etc. to drive away social vices in the community.
A virtuous loan is a loan with the stipulation to return the principal sum in the future without any increase; in Islamic law, all loans have to be virtuous, as seeking any benefit or profit from loaning amounts to Riba which is strictly prohibited.
In Islamic tradition, lending money to people is generally considered a virtuous act, as long as it is done with good intentions and without charging interest. There are numerous verses in the Quran and Ahadith of the Messenger of Allah (SAW) that emphasize the importance of helping others, being charitable, and showing kindness to those in need. These principles can be applied to lending money in a manner consistent with Islamic ethics. The following are some Quranic verses and traditions of the prophet that are related to Qard al-Hassan;
Allah, exalted be He elevated the status of people who feed the needy, the poor, the orphans, and those who remove difficulties for their fellow vulnerable human beings by saying in the Quran 2: 245, “Who is it that would loan God a goodly loan so He may multiply it for him many times over? And it is God who withholds and grants abundance, and to Him, you will be returned.” This verse means that, by being generous to your fellow human beings, you are doing it to receive multiple rewards from God.
Secondly, Abu Huraira (RA) reported that the Messenger of Allah (SAW) said, “Whosoever relieves from a believer some grief about this world, Allah will relieve from him some grief about the Hereafter. Whosoever alleviates the difficulties of a needy person who cannot pay his debt, Allah will alleviate his difficulties in both this world and the Hereafter.” (Sahih Muslim).
Thirdly, Abu Qatadah (RA) reported that the Prophet Muhammad (SAW) said, “If anyone would like Allah to save him from the hardships of the Day of Resurrection, he should give more time to his debtor who is short of money, or remit his debt altogether.” (Sahih al-Bukhari).
Furthermore, Allah, exalted be He also commands the lender to be lenient to his needy debtors, by saying “And if someone is in hardship, then let there be postponement until a time of ease. But if you give from your right as charity, then it is better for you if you only knew.” Quran 2: 280.
Last but not least, Abu Huraira (RA), reported that the Prophet Muhammad (SAW) said, “Whoever is not merciful to others will not be treated mercifully.” (Sahih al-Bukhari). These Ahadith emphasize the importance of helping those in need, including those who are in debt or facing financial difficulties. They encourage acts of kindness, generosity, and assistance to others, which can encompass lending money without charging interest when it is done to help the borrower.
Qard al-Hasan, as an interest-free and benevolent loan in Islamic finance, can offer myriads of advantages for the economy:
Promotes Financial Inclusion: Qard al-Hasan can help individuals and businesses, especially those who may not have access to conventional financing due to financial constraints or creditworthiness issues. This promotes financial inclusion by allowing a broader segment of the population to access interest-free financial resources.
Economic Stability: By providing interest-free loans, Qard al-Hasan reduces the financial burden on borrowers, preventing them from falling into a cycle of debt. This contributes to economic stability by reducing the risk of financial crises caused by excessive debt.
Supports Small and Medium-Sized Enterprises (SMEs): SMEs often face challenges in accessing affordable financing. Qard al-Hasan can be a valuable source of funding for these enterprises, helping them grow and contribute to economic development and job creation.
Charitable Giving and Social Welfare: Qard al-Hasan encourages charitable giving within the community. It allows financially well-off individuals or institutions to support those in need without expecting any financial gain in return. This enhances social welfare and cohesion.
Ethical Banking: Qard al-Hasan aligns with Islamic ethical principles, which prohibit the charging or payment of interest (riba). As a result, it fosters a financial system based on ethical and moral values, promoting transparency and fairness in financial transactions.
Stimulates Economic Activity: By providing interest-free funds, Qard al-Hasan can stimulate economic activity. Borrowers can use the loan for various purposes, such as starting or expanding businesses, investing in education, or meeting urgent financial needs.
Resilience to Economic Downturns: During economic downturns or crises, interest-based debt can become a heavy burden for individuals and businesses. Qard al-Hasan loans, which do not involve interest, offer a more flexible and manageable way for borrowers to navigate challenging financial circumstances.
Reduces Income Inequality: Interest-free loans can help reduce income inequality by providing financial support to those in need. This can lead to a more equitable distribution of resources within society.
In a nutshell, Qard Alhassan removes hardships and difficulties, promotes social welfare, caring for others, and good relationships among members of a community. However, it is important to note that the effectiveness of Qard al-Hasan may depend on factors such as the extent of its implementation, the regulatory environment, and the level of awareness and acceptance within the financial community and society at large. Additionally, the specific impact of Qard al-Hasan can vary depending on how it is utilized by individuals and institutions.
Praise be to Allah in Whose favor good things are accomplished. And Allah knows best!
YAHAYA ILIASU MUSTAPHA
The writer is an Islamic Banking and Finance patron and advocate in Ghana.
Email: yahaya0246873726@gmail.com
Facebook account: facebook.om/Yahaya.iliasu.94
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