Is the second loan system offered by the Palestine Monetary Authority to its employees, in which a 1% commission is deducted using the declining balance method and the employee is deprived of the profits of their savings to the extent of the loan's value, permissible or forbidden?

The commission tied to the loan amount and repayment period is usurious interest (ribā), which is forbidden by Islamic law, because it is an increment beyond the actual services rendered. It is impermissible to enter into a transaction that includes it. To rectify the contract, a known fee must be determined that corresponds to the actual cost of the transaction, irrespective of the loan amount and its repayment period. Furthermore, it is not permissible to participate in the savings fund unless its operations adhere to Islamic legal guidelines.