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Fatwa Answer

Question ID: 593 Category: Business Dealings
Difference in Currency while Taking and Returning Loan

 

Assalamualaikum Warahmatullah Mufti sahib

I have the following question, related to my mother in law who lives in Turkey and works as a teacher.

She receives her salary from the job in Turkish lira, which for the past 2 years she has started converting into dollars right away and keeping it in her dollar account. This way when she comes to the US, she can use that money without worrying about the exchange rate and losing any money due to inflation.

Her sister’s husband for the longest time has been asking for financial support time to time. She always helped him by giving him the money he needed in lira. Recently, that person again asked for a loan and she told him that the money she is receiving, she converts it into dollars to keep in her dollar account. She mentioned the condition to him that if he really wants the money, she will have to give it to him in form of dollars. He agreed that the money she will send him in form of lira (as that person does not have a dollar account), he will convert that lira into dollars based on that day’s exchange rate and that final amount will be the amount of loan. He even told my mother in law that the final amount is XYZ dollars, she believed whatever number he informed her about.

At time of this transaction, she asked him when he will return this money to her, his responded by stating that as soon as he sells his old car, he will be sure to return that money to her. Later on, he sold the car, still did not make the loan repayment to my mother in law, on top of that, recently he has been in the currency exchange business where he surely makes money all the time, yet he does not return her money. A few months back, he did return a small portion of what he owed, in form of dollars.

In addition, now he is telling her that upon his inquiry to the Islamic scholars they have stated that returning the money in dollars will be considered haram since he took the money in form of lira at the time of the original transaction. One of the reasons why he is trying to pull this tactic off is the exchange rate of lira vs dollar has depreciated almost twice its previous worth. In other words, in past if 1 dollar was equal to 100 lira, now it has become 200 lira, returning the money in lira for him will be much cheaper as compared to returning it in dollars per the original agreement between them. Subsequently, when she receives this money in lira, she will convert it in dollars and the amount she will really receive will be half of the number of dollars she actually gave him.

My mother in law wants to understand if it is haram for her to take the money back in dollar amount instead of lira, although the original agreement was he will return the money in dollars.

الجواب وبالله التوفيق      

In the situation inquired about, it’s compulsory to pay back the loan in the currency agreed upon between the creditor and the debtor, e.g., if the agreement was for the dollars then it’s compulsory to return the dollars and if the loan is paid back in some other currency then it would be compulsory to pay back in the other currency at the exchange rate of the dollars in to that currency at that time. And this transaction is not an interest bearing because the conditions for interest are not verified in this transaction.  

و کان علیہ مثل ماقبض (تنویر الأبصارمع الشامی: فصل فی القرض)

عند أبی یوسف تجب قیمتہا یوم القبض أیضا و علیہ الفتوٰی  (شافی، کتاب البیوع، فصل  فی القرض)

واللہ اعلم  بالصواب