Qard hassan is a loan extended on a goodwill basis, mainly for welfare purposes.
The borrower need only pay back the amount they borrowed, with no interest. On principle, Islam does not allow interest.
Should a borrower encounter difficulty, the lender must extend the repayment time. They can voluntarily waive repayment of part of the loan, or all of it.
The Qur’an encourages Muslims to provide qard hassan, benevolent loans, to “those who need them”:
- “Who is he that will give Allah Qard Hasan? For Allah will increase it manifold to his credit.” (Qur’an 57:11)
- “If you give Allah Qard Hasan … he will grant you forgiveness.” (Qur’an 64:17)
- “Establish regular prayer and give regular charity and give Allah Qard Hasan.” (Qur’an 73:20).
Islam allows a cash loan as a form of social service among the rich to help the poor and those needing financial assistance. Qard hasan can be seen as something between giving charity and giving a loan.
A borrower may as a token of appreciation choose to pay an extra amount to the lender, which is over the amount they borrowed. They must not promise to do so. As the only kind of loan that does not gain interest over time, it does not violate the prohibition on riba, interest.
Non-profit Islamic microfinance institutions – including those set up by Islamic Relief – now provide Islamic social lending around the world.