Subject : Ruling on Loans and Grants of Hayat Educational Fund
Fatwa Number : 3060
Date : 26-03-2015
Classified : Current Financial Issues
Fatwa Type : Search Fatawaa

Question :

What is the ruling of Sharia on the contracts of Hayat Educational Fund?

The Answer :

All perfect praise be to Allah, The Lord of the Worlds.

Seeking knowledge and helping others in this quest are amongst the righteous deeds for Allah the Almighty Says (What means): "Help ye one another in righteousness and piety, but help ye not one another in sin and rancor." {Al-Mai`dah, 2}. The best form of helping one another is supporting science and scientists in various disciplines needed for the development of the Muslim nation.

Having examined the contracts offered by Hayat Educational Fund (Grants, loans, and donations), we found that they are religiously valid. However, it is imperative to consider the following remarks:

First: Obliging the student (Debtor) to do a certain number of community-service-hours in favor of particular parties is permissible under the condition that the Fund doesn`t benefit from this service directly or indirectly, because when the Fund (Creditor) benefits from the loan, it is considered forbidden usury. The evidence on this is that it was reported that the Prophet (PBUH) said, "Every loan yielding benefit is usury"{Sunnan Al-Baihaqhi}. Although we hold the view that it is permissible to stipulate the aforementioned condition, we suggest including it in a separate agreement to avoid the suspicion of usury. Al-Jamal (May Allah have mercy on him) said: "The loan contract is considered faulty when a benefit is stipulated therein and the stipulation is at the heart of the contract. However, if both parties reached an agreement about this stipulation out of the contract then this is permissible." {Hashiyat Al-Jamal, 12/140}.

Second: If the 10% grant given to the donor is from Zakah money then it is impermissible, because the Zakah money must be given to the poor in full without deducting any amount against administrative expenses and the like.

Third: It isn`t permissible for the Fund, in its capacity as a deputy for the givers of Zakah, to delay giving the funds to the poor students through investing them in productive projects. Al-Shirbini (May Allah have mercy on him) says: "Zakah funds must be given to the poor immediately, because the can`t be postponed." {Moghni Al-Mohtaj, 5/129}.

Moreover, it isn`t permissible to give Zakah funds to poor students as loans, which they have to settle later, because Zakah is a right of theirs. In order to be on the safe side as far as the teachings of Sharia are concerned, we suggest distributing the Zakah funds amongst the eligible students in the form of grants as soon as possible. As for the donations and other charities, the Fund is allowed to dispose of them in the best interest of the poor students, provided that the donors or givers are made familiar with that.  And Allah The Almighty knows best.   



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