Question(s)

Are the new Government Bounce-Back loans for businesses during Covid-19 shariah-compliant?
Info for the scheme can be found here: https://www.gov.uk/government/news/new-bounce-back-loans-to-launch-today

Answer(s)

الجواب حامدا ومصليا ومسلما

In the Name of Allah, the Most Gracious, the Most Merciful.

As-salāmu ‘alaykum wa-rahmatullāhi wa-barakātuh.

Firstly, dealing with interest is strongly prohibited in Islam. Thus, if from the outset, the creditor stipulates a fixed extra amount upon the amount he had lent, this will be considered as interest, regardless of what the extra amount is named.[1]

The Government Bounce-Back loans

In terms of this specific loan scheme, it is evident that the interest is stipulated from the outset. The government gives a 12-month guarantee and pays the interest fees therein. However, in order to benefit from this scheme, it is necessary for one to appoint the government to make the interest payments of the first 12 months. This is usually paid directly to the bank (loan-provider). Nevertheless, it is evident that this is a necessary condition, such that if one does not appoint the government to make the interest payments of the first 12 months, they will not be eligible for the scheme.[2]

Accordingly, this will be regarded as directly assisting in sin and thus, the loan is not Shariah-compliant.

Allah Almighty states,

وَلَا تَعَاوَنُوا عَلَى الْإِثْمِ وَالْعُدْان
Translation: And do not assist each other in sin and transgression.
(Surah Ma’idah, Verse 2)

Therefore, under general circumstances, this loan would be impermissible to partake in.

Instead, all alternative Halal means, should be sought, such as: obtaining grants, interest-free credit and the Furlough Scheme. The business should also attempt to re-negotiate with its creditors to agree lenient terms for the near future.

If however, all of these options have been exhausted
and yet, the business remains in a dire situation whereby, if the business does not take a loan, the business will go bust – and, crucially, going bust will have a severely negative impact on the individual employees and directors of the business (i.e. they will not be able to afford day-to-day necessities such as household bills), then there is scope for the government Bounce-Back Loan Scheme being temporarily permissible for the business to benefit from, on condition that they firmly believe that they will be able to repay the loan before the end of the 12-month period.[3][4]

In such a case, where this scheme is utilised, the Director(s) of the business adopting this loan should supplicate to Allah Almighty throughout this period, seek His forgiveness and strive to repay the loan swiftly. On the other hand, if they feel they will be unable to repay the loan within 12 months, they must avoid the loan and pursue Halal alternatives.

Given the severity of the prohibition of interest in the Qur’an, it is worth reiterating here that such a temporary leniency/permissibility would only applicable in these extraordinary times. If you are unsure if the ruling applies to your particular business, we advise that you consult a local trustworthy scholar.

Note: This will also apply to the CBILS loan, which is primarily for slightly-larger businesses with higher turnover. In this scenario, the government takes 80% guarantee during the first 12 months. Thereafter, the business pays with interest. The same ruling will apply as above.

And Allah Ta’āla Knows Best.
Mubasshir Talha
18 Muharram 1442 / 6 September 2020

Concurred by:

Approved by:
Mufti Tahir Wadee | Mufti Yusuf Ilolvi
[To see their profiles, click here]

Note: This fatwa is only to be viewed with the question asked. In the event of presenting this to a third party, please ensure it is coupled with the original question, as well as the references below for Islamic Scholars.


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[References]

[1]
وأحل الله البيع وحرم الربا
[Qur’an Al-Kareem, Surah Al-Baqarah – Ayah 275]

يا أيها الذين امنوا اتقوا الله وذروا ما بقي من الربا إن كنتم مؤمنين
[Qur’an Al-Kareem, Surah Al-Baqarah – Ayah 278]

فإن لم تفعلوا فأذنوا بحرب من الله ورسوله
[Qur’an Al-Kareem, Surah Al-Baqarah – Ayah 279]

عن جابر، قال: لعن رسول الله صلى الله عليه وسلم اكل الربا وموكله وكاتبه وشاهديه وقال هم سواء
[
Al-Sahih, Muslim (d. 261h/875) – 1598]

قوله (كل قرض جر نفعا حرام) أي إذا كان مشروطا كما علم مما نقله عن البحر، وعن الخلاصة وفي الذخيرة وإن لم يكن النفع مشروطا في القرض، فعلى قول الكرخي لا بأس به
[Raddul Muhtār, Ibn ‘Abideen (d. 1252h/1836), 15/212 – Farfur]

[2]

[Source: Bounce Back Loan Factsheet, HSBC, Last accessed: 5th September 2020]


Note: This has been cross-referenced with other banks also.

[3]
ولو أقرض رجل رجلا مالا ودفعه إليه على أن يكفل به فلان، أو على أن يحيله به على فلان، أو على أن يضمنه له فلان، فإن القرض جائز
[Al-Asl, Imam Muhammad (d.189h/805), 10/575 – Ibn Hazm]

والقرض لا يتعلق بالجائز من الشروط، فالفاسد من الشروط لا يبطله
[Al-Mabsut, Al-Sarakhsi (d. ca.490h/1097), 14/30, Dar al-Ma’rifah]

قوله (القرض) بأن قال: أقرضتك هذه المائة بشرط أن تخدمني شهرا مثلا، فإنه لا يبطل بهذا الشرط، وذلك لأن الشروط الفاسدة من باب الربا، وأنه يختص بالمبادلة المالية، وهذه العقود كلها ليست بمعاوضة مالية، فلا تؤثر فيها الشروط الفاسدة
[Bahr ul-Ra’iq, Ibn Nujāym (d. 970h/1563), 6/312 – Dar al-Kutub al-Ilmiyyah]

[4]
 قال إبن نجيم في الأشباه والنظائر (ص١٥٢، دار الفكر): الضرورات تبيح المحظورات
[Al-Ashbāh wal Naza’ir, Ibn Nujāym (d. 970h/1563), Pg 152 – Dar al-Fikr]

ما أبيح للضرورة يقدر بقدرها
[Al-Ashbāh wal Naza’ir, Ibn Nujāym (d. 970h/1563), Pg 152 – Dar al-Fikr]

يجوز للمحتاج الاستقراض بالربح
[Al-Ashbāh wal Naza’ir, Ibn Nujāym (d. 970h/1563), Pg 158 – Dar al-Fikr]

إذا كان ملجئاً إليه
[Sharh al-Asbāh, ‘Allamah Bīrī (d. 1099h/1688), Pg 239 – Maktabah Al Irshād]


ههنا خمسة مراتب ضرورة وحاجة ومنفعة وزينة وفضول. فالضرورة بلوغه حداً إن لم يتناول الممنوع هلك أو قارب، وهذا يبيح تناول الحرام والحاجة كالجائع لو لم يجد ما يأكله لم يهلك. غير أنه يكون في جهد ومشقة
[Sharh al-Asbāh, al-Hamawi (d. 1098h/1687), 1/277 – Dar al-Kutub al-Ilmiyyah]

مطلب يے ہے کے جو شخص اس درجہ محتاج ہو کے کما نہیں سکتا، اور بغیر قرض کے گزارہ کی کوئي صورت نہیں، اور قرض بغیر ربا کے نہيں ملتا، تو وہ اپنی مجبوری کی حد تک معزور ہے۔
[Fatāwa Mahmūdiyyah, Mufti Mahmūdul Hasan Gangohi (d. 1417h/1996), 24/399 – Maktaba’ Mahmūdiyyah]

 
حرام كا ارتكاب اضطرار كے حالت ميں معاف ہے، پس اگر جان کا قوی خطرہ ہے یا عزت کا قوی خطرہ ہے، نیز اور کوئی صورت اس سے بچنے کی نہیں تو ایسی حالت ميں زید شرعاً معذور ہے
[Fatāwa Mahmūdiyyah, Mufti Mahmūdul Hasan Gangohi (d. 1417h/1996), 24/438 – Maktaba’ Mahmūdiyyah]