Credit, Loan, Interest and Repayment: An Islamic Perspective

“O you who have believed, when you contract a debt for a specific term, write it down” — Quran 2:282.

Taking credit is permissible in Islam, as is the case with unintentional default becoming a debt. However, interest and failure to repay are strictly prohibited.

The Prophet’s Example on Debt Repayment

A historical account recounts that a Jewish man named Zaid ibn Sanah once rudely demanded repayment of a loan from Prophet Muhammad (Peace Be Upon Him, PBUH). The man even seized the Prophet by the cloak. The companions, including Umar ibn Al-Khattab, were incensed, but the Prophet remained calm, stating:

“Leave him, for the one who has a right due to him has the right to speak.”

He ordered the loan to be repaid immediately, adding a camel and extra compensation for the inconvenience caused. The Prophet’s patience and generosity moved Zaid to embrace Islam.

The Prophet further emphasized the moral duty of debt repayment, stating:

“The best among you are those who repay their debts in the most handsome manner.” — Bukhari

He also warned that:

“The soul of a believer remains suspended until their debt is settled.” — Muslim

Debt in Islamic Traditions

A well-known narration recounts that Prophet Muhammad (PBUH) refused to lead the funeral prayer for a deceased person who had outstanding debts until someone offered to settle the debt. These hadiths highlight the seriousness of debt and the obligation to repay.

However, the Prophet also showed mercy, stating that he would pay the debts of a deceased believer who left insufficient funds, reflecting Islam’s balance between justice and compassion.

Credit and Interest in Islam

Islam permits taking loans or credit but strictly prohibits interest (riba). Quran 2:275-278 explains:

“Those who consume interest cannot stand [on the Day of Resurrection] except as one stands who is being beaten by Satan into insanity… Allah has permitted trade and has forbidden interest.”

Interest is considered an exploitative gain that burdens both lender and borrower. It is unjust and attracts severe divine consequences.

Permissibility Under Necessity

In situations of necessity, if no Shariah-compliant alternative exists, taking a loan with interest is permissible under the principle of necessity, though it remains discouraged.

The Way Forward

The writer commends the Bank of Ghana for efforts to regulate Islamic banking and urges financial institutions and credit unions across Africa to consider interest-free Islamic finance models. Such systems promote fair, ethical, and Shariah-compliant lending to individuals and corporations.

“May Allah grant us means to repay our debts.”

The writer is a member of the Greater Accra Regional Peace Council and a Consultant on ADR, Human Rights, and Islamic Affairs.

By Alhaji Khuzaima Mohammed Osman

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