عربي
18 Jamadi al-Thani 1443  ,  21 January 2022

The Obligation of ... Date Added: 16-05-2021

The Family and Ramadan Date Added: 26-04-2021

The Pandemic Absolves a ... Date Added: 15-03-2021

Forbearance is the Basis ... Date Added: 04-01-2021

The Road to Love Date Added: 07-12-2021

The Birth of the Prophet ... Date Added: 18-10-2021

Birth of the Awaited ... Date Added: 18-10-2021

Nullifying the Tripartite ... Date Added: 14-09-2021

Fatawaa


Subject : Ruling on Considering Bad Debts Part of the Loan`s Expenses

Fatwa Number : 3133

Date : 12-10-2015

Classified : Usury (interest) &Loans

Fatwa Type : Search Fatawaa


Question :

Is it permissible to consider bad debts part of the loan`s actual administrative expenses?


The Answer :

All perfect praise be to Allah, The Lord of The Worlds; and may His blessings and peace be upon our Prophet Mohammad and upon all his family and companions. Bad debts are debts that are impossible to collect from the debtor for a certain reason such as bankruptcy, and it isn`t permissible to consider them from the loan`s administrative expenses. This is because they aren`t part of the actual expenses and charging the debtor with them is considered forbidden usury. However, charging the debtor with the actual expenses of the loan`s services is permissible and that increase isn`t considered forbidden usury, because the creditor doesn`t benefit from it; rather, the debtor is the one who benefits from it. Moreover, every benefit that the loan brings to the creditor is forbidden usury, as stated by Al-Imam Ar-Ramli(May Allah bless him), "Usury is of different kinds. A loan`s usury is one of them. In it, a certain benefit is conditioned in favor of the creditor."{Nihayat Al-Mohtajj/424}. However, in order for these administrative expenses to be permissible, it is conditioned that they should be a definite amount equal to the actual cost of delivering the loan, without the slightest addition as a profit. This is in order to avoid incurring usury under the pretext of the administrative expenses. Also, actual administrative expenses should be calculated accurately, not approximately. This has been indicated in the book, {Al-Ma`eer Ashar`ia/271}, which states, "Accuracy should be observed when defining the actual expenses, so that they don`t produce a benefit…….actual expenses don`t include indirect expenses such as salaries, rent, furniture, transportation and the like." We would like to point out that it is important to separate the account of the administrative expenses of the loan from that of the loans`. For more details, please refer to Fatwa(3073). And Allah knows best.






Comments

 

Name *

E. mail Address *

Country

Comment Title *

Comment *

Captcha
 
 

Warning: this window is not dedicated to receive religious questions, but to comment on topics published for the benefit of the site administrators—and not for publication. We are pleased to receive religious questions in the section "Send Your Question". So we apologize to readers for not answering any questions through this window of "Comments" for the sake of work organization. Thank you.