I took a loan from a friend in dollars, is it allowed to repay the loan with the equivalent amount in another currency? Imam Ibn Baz

Question: I took a loan from a friend in Dollars, is it allowed to repay the loan with the equivalent amount in another currency such as the Yemeni Riyal or Pounds?

Answer by Imām Ibn Bāz (rahimahullāh):

Yes, there is no harm for a person who takes a loan in one currency to repay it in another as long as both parties are pleased and agree. If the person who initially possessed the currency is pleased, then there is no harm in that – so long as it is returned hand-to-hand, [at one time] without delay.

It is established from the Prophet (salallāhu ʿalaihi wasallam) that it was said to him: “O Allah’s Messenger! We sell [camels] for dirhams and we take [payment at a later date] in dīnārs, and we sell them for dīnārs and take [payment at a later date] in dirhams?” So, he (salallāhu ʿalaihi wasallam) said: “There is no harm that you receive payment at its rate on that day [of repayment], so long as you do not separate leaving something still to be settled.” (Tirmidhi, Abu Dawud, Nasa’i and Darimi, see Mishkat al-Masābih, no. 2871, saheeh: see Al-Irwā, no. 5/173)

So, suppose a person took a loan, for example, of 100 US dollars, and he returns to the lender the amount in another currency such as the Saudi Riyal, Yemeni Riyal, Jordanian or the Iraqi Dinar hand-to-hand at the current rate of exchange. In that case, there is no problem.

Or that he gives him an increase upon that [voluntarily] because you see him as someone who did a good deed for you, so you give him some increase, there is no harm in that due to the saying of the Prophet (salallāhu ʿalaihi wasallam): “The best of people are those who discharge their debt in the best manner.” (Bukhāri, no. 2392, Muslim, no. 1600. The hadeeth where the Prophet (salallāhu ʿalaihi wasallam) repaid a camel that he loaned with a camel that was better than it.)

Likewise, someone sells you a car for 10,000 US dollars for example. So, you pay him [at a later date] the equivalent in Dinars, Saudi or Yemeni Riyals, or any other currency. There is no harm in that but with the condition that repayment is made hand to hand in one gathering (because the currency is different), and that you do not depart from each other with any payment still outstanding – and that he pays him according to the currency rate of the day he returns the loan. (End)

Source here. 

Additional Points

If both sides agree at the time the loan is taken that the repayment will be made at a later date in a different currency, then that is not allowed, it is harām. That is like saying: ‘I will take 10 grams of gold from you, and I will repay you in 6 months with 400 grams of silver.’ This transaction is impermissible. This is what is referred to as Ribā an-Nasee’ah (Usury of Delay): This is where one type of currency is sold for the same [or another] type of currency without any increase, however taking possession of the currency is delayed. That is because the condition for exchange of currency [from one to another] is that it must be done hand to hand, there and then. Selling gold and silver for delayed payment is forbidden by ijmā’ (consensus) of the scholars because it is Ribā an-Nasī’ah (usury of delay). It is allowed to sell silver for gold (or vice-versa) on the spot. The Prophet (ﷺ) said: “Gold for gold, silver for silver, equal amount for an equal amount.. but if the types differ (i.e., gold for silver) then sell them however you wish as long as it is hand to hand (i.e. paid on the spot).” (Muslim 1587) Currency exchange takes the same ruling as exchanging gold and silver.

It is however, permitted when it comes to repaying the loan, for both parties to agree [when repayment is due] to make it in another currency as stated by Imām Ibn Bāz – but it must be at the exchange rate according to the day of repayment, not by the rate of exchange on the day the loan was taken. Furthermore, the lender cannot ask for any increase in payment because that is Ribā Al-Fadl (Usury of Increase). ‘Ubādah Ibn As-Sāmit said, “The Messenger of Allah forbade selling gold for gold, silver for silver, dates for dates, wheat for wheat, barley for barley, and salt for salt unless it is an equal amount for an equal amount, and like for like. Whoever gives more or takes more has engaged in usury. And the Messenger permitted us to sell gold for silver, silver for gold, wheat for barley and barley for wheat, hand to hand (there and then) however we wanted.” (Reported by An-Nasā’ī, no. 4561)

When it comes to the day of repayment, and both parties agree to another currency, the whole amount must be repaid without anything outstanding. However, if repayments are being paid by pre-arranged instalments (e.g., monthly payments), then at each payment date, the lender and borrower can decide the currency together.

Arabic:

اقترضت من صديق مبلغًا من المال بالدولار، هل يجوز سداد هذا المبلغ بما يساويه من عملة أخرى كالريال اليمني مثلًا، أو الجنيه؟

نعم لا بأس أن يكون الإنسان اقترض عملة، ثم يسددها بعملة أخرى بالتراضي، إذا رضي صاحب العملة الأولى أن يأخذ عنها عملة أخرى فلا حرج في ذلك، يدًا بيد من غير تأخير، فقد ثبت عن رسول الله ﷺ أنه قيل له: يا رسول الله! إنا نبيع بالدراهم ونأخذ الدنانير، ونبيع بالدنانير ونأخذ الدراهم؟ فقال -عليه الصلاة والسلام-: لا بأس أن تأخذها بسعر يومها ما لم تفترقا وبينكما شيء. 

فإذا اقترضت مثلًا مائة دولار، وأعطيت صاحبها عنها عملة أخرى، كالريال السعودي أو اليمني، أو الدينار الأردني أو العراقي؛ يدًا بيد، بحسب القيمة، فلا بأس بذلك، أو زدته زيادة على ذلك؛ لأنك تراه محسنًا إليك، زدته على ذلك، فلا بأس؛ لقوله ﷺ: إن خيار الناس أحسنهم قضاء .

وهكذا لو باع عليك سيارة بعشرة آلاف -مثلًا- دولار، ثم أعطيته عنها ما يقابلها من دنانير أو الريال السعودي أو اليمني، أو ما أشبه ذلك من العمل الأخرى؛ فلا بأس، لكن بشرط التقابض في المجلس، وأن لا تتفرقا وبينكما شيء، وأن تعطيه إياها بسعر يومها، حين المعاوضة، نعم.