Is it permissible to take a loan from the state if the competent authority pays an additional 1% to the bank on behalf of the borrower, with the borrower committed to repaying only the principal amount?

The mentioned percentage might be usurious interest or administrative fees. It is not permissible for the lending entity to take any amount except for the actual cost of the loan process without any increase; otherwise, it would be prohibited usury (riba).

It is stated in the Shariah Standards of the Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI): "It is permissible for the lending institution to take from loan services an amount equivalent to its actual direct expenses. It is not permissible for it to take any increase beyond that, and any increase beyond the actual expenses is prohibited. Care must be taken in accurately determining the actual expenses so that it does not lead to an increase that amounts to interest."

Dr. Ali Al-Qaradaghi said: "Interest on loans is prohibited. However, if the state gives loans and takes a percentage (such as 1% or 2%) in exchange for administrative matters and procedures, this is permissible as long as the increase is in exchange for administrative expenses and burdens, and not in exchange for the loans; based on the saying of the Prophet, peace be upon him: 'Whoever adds or seeks an increase, has engaged in usury.'"

Assuming the percentage is taken as usurious interest, it is not permissible to enter into the contract, even if there is a party that will bear the payment of that interest, due to the prohibition of consenting to and approving usury.