✿ Written by: Saudi Fatwa Committee (Fatāwā)
If a loan transaction is carried out with a prior condition that repayment will be made in a different currency, then this is not permissible, because such a transaction resembles an exchange of currencies (ṣarf), and in Islamic law, currency exchange must be done on the spot (hand to hand)—credit (deferred payment) is not allowed in such cases.
However, if a person takes a loan in Saudi Riyals, or Egyptian or Australian Pounds, and then at the time of repayment, both parties mutually agree to settle the loan in another currency, such as US Dollars, then this is permissible, provided:
The Prophet ﷺ said:
“If you exchange according to the rate of the day, and separate without any dispute between you, then there is no harm.”
(Ḍaʿīf – Sunan Abī Dāwūd, Ḥadīth no. 3354)
If someone borrows 1,000 Saudi Riyals, and at the time of repayment, both parties agree that the borrower will repay in US Dollars, Kuwaiti Dinars, Jordanian Dinars, Australian Pounds, or any other currency—based on mutual consent and provided the exchange is made immediately and on the spot—then there is no harm in doing so.
Reference:
Ibn Bāz – Majmūʿ al-Fatāwā wa al-Maqālāt, 19/208
❖ Returning a Loan in Another Currency (e.g., Riyals Borrowed, Dollars Returned)
If a loan transaction is carried out with a prior condition that repayment will be made in a different currency, then this is not permissible, because such a transaction resembles an exchange of currencies (ṣarf), and in Islamic law, currency exchange must be done on the spot (hand to hand)—credit (deferred payment) is not allowed in such cases.
❖ Permissible Form of Currency Exchange in Loan Repayment
However, if a person takes a loan in Saudi Riyals, or Egyptian or Australian Pounds, and then at the time of repayment, both parties mutually agree to settle the loan in another currency, such as US Dollars, then this is permissible, provided:
- The exchange is based on the rate of that day
- The transaction is carried out hand to hand (on the spot)
The Prophet ﷺ said:
“If you exchange according to the rate of the day, and separate without any dispute between you, then there is no harm.”
(Ḍaʿīf – Sunan Abī Dāwūd, Ḥadīth no. 3354)
❖ Practical Example
If someone borrows 1,000 Saudi Riyals, and at the time of repayment, both parties agree that the borrower will repay in US Dollars, Kuwaiti Dinars, Jordanian Dinars, Australian Pounds, or any other currency—based on mutual consent and provided the exchange is made immediately and on the spot—then there is no harm in doing so.
Reference:
Ibn Bāz – Majmūʿ al-Fatāwā wa al-Maqālāt, 19/208
