What is the ruling on the subsidized loan from a government institution with zero percent interest, the supplementary loan with a preferential interest rate, and the non-refundable financial aid, provided to employees for acquiring or building property, knowing that banks deal with usury?
First: A benevolent loan () that does not stipulate an increase is permissible, whereas an interest-based loan (qard ribawi) that stipulates an increase is forbidden. Scholars have reached a consensus on this. Accordingly, a loan with 0% interest is permissible, but a supplementary loan or a gratuitous assistance conditional on an interest-bearing loan is not permissible.
Second: Bank financing for purchase or construction can take different forms. If the bank provides money with the condition of an increase, it is a forbidden interest-based financing. However, if the bank purchases the property and sells it to the customer at a profit, or participates in the construction of the property and then sells its share in installments at a profit, this is permissible.
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