What is the ruling on borrowing from a bank that repays the loan with a 5% increase as administrative fees?
It is not permissible to borrow from interest-based banks. If it is from an Islamic bank, then the transaction must be examined. If the financing transaction involves the bank purchasing a commodity and selling it to the customer for a profit (Tawarruq), then this is permissible, subject to guidelines. However, if the bank gives the customer a loan and imposes an increase on it, calling it "administrative fees," then these fees are evaluated: if they are proportionate to the actual work and effort expended by the bank in processing the loan, then they are permissible and considered as a fee for a service, not usury. But if these fees are in reality an usurious interest, then their naming does not change their ruling of prohibition, for every loan that draws a benefit is usury.
Summary from Ftawy's records · added here
Reviewed by El Fatwa's sharia committee.
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- 168235
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- Summary from Ftawy's records, reviewed by El Fatwa's sharia committee.
- Read the full ruling
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