Authored by: Saudi Fatwa Committee
Question:
I loaned someone an amount in dollars with the agreement that they would repay in dollars. However, the dollar's value has since increased compared to when the loan was given. Is this increase considered interest (riba)?
Ruling:
If someone lends an amount in dollars, the borrower is obligated to repay the loan in dollars, regardless of whether this condition was explicitly agreed upon or not.
Similarly, if the loan was given in Saudi Riyals, the borrower must repay in Saudi Riyals. The borrower is not required to repay in any other currency, regardless of whether the currency's value has increased, decreased, or remained stable.
For example:
However, if the borrower and lender mutually agree to settle the loan in a different currency, it is permissible, provided the conversion is made at the current exchange rate on the day of repayment. This exchange must be settled immediately, without any deferred payments. This ruling aligns with the Hadith of Abdullah ibn Umar (may Allah be pleased with him), where he narrated:
"We used to sell camels in Baqi’ for dinars and take dirhams in return, or sell them for dirhams and take dinars in return. We asked the Prophet ﷺ about this, and he said: 'There is no harm in doing so, provided it is based on the current exchange rate and the transaction is settled before parting.'"
([Weak: Sunan Abu Dawood, Hadith No. 3354])
[Ibn Uthaymeen: Noor ‘Ala Al-Darb: 3/244]
Question:
I loaned someone an amount in dollars with the agreement that they would repay in dollars. However, the dollar's value has since increased compared to when the loan was given. Is this increase considered interest (riba)?
Ruling:
If someone lends an amount in dollars, the borrower is obligated to repay the loan in dollars, regardless of whether this condition was explicitly agreed upon or not.
Similarly, if the loan was given in Saudi Riyals, the borrower must repay in Saudi Riyals. The borrower is not required to repay in any other currency, regardless of whether the currency's value has increased, decreased, or remained stable.
For example:
- If the loan was in dollars, and at the time of the loan, 1 dollar equaled 5 Saudi Riyals, but the exchange rate later increased to 10 Riyals per dollar, the borrower must repay in dollars, even if its value in Riyals has risen.
- If the loan was in dollars and its value decreased (e.g., 1 dollar equaled 5 Riyals but later dropped to 3 Riyals), repayment must still be made in dollars.
However, if the borrower and lender mutually agree to settle the loan in a different currency, it is permissible, provided the conversion is made at the current exchange rate on the day of repayment. This exchange must be settled immediately, without any deferred payments. This ruling aligns with the Hadith of Abdullah ibn Umar (may Allah be pleased with him), where he narrated:
"We used to sell camels in Baqi’ for dinars and take dirhams in return, or sell them for dirhams and take dinars in return. We asked the Prophet ﷺ about this, and he said: 'There is no harm in doing so, provided it is based on the current exchange rate and the transaction is settled before parting.'"
([Weak: Sunan Abu Dawood, Hadith No. 3354])
Summary:
- The borrower is obligated to repay the loan in the same currency as received, regardless of value fluctuations.
- This repayment is not considered riba (interest), even if the currency's value increases, as the borrower is returning the same amount they borrowed.
- If repayment is agreed in another currency, it must be calculated at the current exchange rate and settled immediately without any outstanding balance.
[Ibn Uthaymeen: Noor ‘Ala Al-Darb: 3/244]