Q: What is the Islamic way of giving and receiving a loan to a needy person when lender and borrower are in different countries and therefore have different currencies? For example lender in USA gives $100 to borrower in Pakistan. Borrower converted the money at market rates of 60Rs and got Rs.6000. Later, the dollar rate is changed to 85Rs. Now should the borrower give the $100 back i.e. pay the new rate of Rs.8500 or should he return Rs.6000 so that the lender will receive $70.5? The same transaction could have done in reverse order i.e. lender in Pakistan and borrower in USA. The lender send Rs.6000 that got converted to $100, but at the time of repayment should the borrower return $70.5 so that lender get Rs.6000 back or should he return $100 and the lender will get Rs.8500? What if at the time of loan it was not decided in which currency loan will be returned?
A. The exact currency that was borrowed will be returned. If dollars were borrowed, then dollars will be paid back, and if rupees were borrowed, rupees will be paid back, regardless of which country the parties were in at time of the deal. You will not pay back in any other currency nor will you reduce the amount borrowed according to current rates. (Raddul Muhtaar V13 P176)
Mufti Siraj adds:
The Jurists of Islam have mentioned a principle that says debts are payable in its like, i.e. the exact item that was borrowed must be returned. Fluctuation of currencies won’t be taken into consideration. Likewise, what the parties agreed upon at the time of the transaction will not affect the basic Islamic ruling. (Raddul Muhtaar V20 P79).
Moulana Yusuf Laher
Checked by: Mufti Siraj Desai