Is a transaction considered usury if it involves a group of friends agreeing to pool their money equally to give it to one person to start a project, which he then returns after a period to be given to another person?

It is permissible to collect money and lend it to someone who can benefit from it in a permissible project without any increase. This is a benevolent loan (qard hasan), and its doer is rewarded. It might even be better than charity, as the Prophet, peace and blessings be upon him, said: "There is no Muslim who lends a Muslim a loan twice but that it is like giving charity once." However, if an increase is stipulated in the loan, then it is forbidden usury (riba).

If the lending is done in rotation among the group members, where the money is given to the second person after the first has repaid, there is no harm in that. This is similar to employee cooperative societies (jam'iyyat al-muwazzafin) which many scholars have permitted.