Excuses for interest deals : charging interest in self-help micro-credit non-profit organizations

Fatawa Question

A friend of mine got a job in a non-governmental voluntary organization where most of the functionaries are Muslims. This organization works in partnership with the government for the uplift of the poor and disadvantaged women mainly belonging to minorty communities which comprise of Hindus, Muslims and Christians. One program is formation of self-help groups of women where thrift is taught to women. Once sizable amount is saved the women are encouraged credit activities through internal borrowings by the group members. The groups are free to charge interest. However, the groups do not charge interest for women in distress, like for women who borrow for medical expenses, funerals, and the like. They charge very nominal interest for trade and business activities. While the general pattern is like this the organization where my friend works has advised women not to charge interest. They have asked them to charge service charges on actual expenditure basis. for example, the leader of the group has to go to the bank, maintain accounts and other incidental expenses have to be borne by the group. Therefore these are calculated and charged as service charges. There is no penalty etc. The groups may also borrow from the banks for which they have to pay bank interest. But it is left to them to borrow or not to borrow. Now my friend who has taken training in this activity (he is also a Muslim) saying that as he has to teach credit activities to the groups who might borrow money from the banks on interest he does not want to be a party to it and wants to leave the job. Everyone including his mother has tried to convince him that he should not leave the job as he is neither charging nor paying interest. Of course he may be collecting the loan amount including interest from the group and remitting to the bank. The organization is also getting credit from the government for lending to the groups but they do not charge interest to the groups only the actual transaction costs. However the groups have to pay interest to the government through the organization. They (the organization) just collect the loan + interest amount and remit it in the Government account. My friend is not convinced and wants to leave the job. Please advise.

Fatwa

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Publication Date

2002-12-21

Main Subjects

Financial and Accounting Sciences
Religion
Islamic Studies

Topics

• Islamic jurisprudence
• Profits
• Organizations
• Bank loans
• Usury
• Deals

No. of Pages

2

Data Type

Fatawa

Language

English

Record ID

BIM-726734

• APA
• MLA
• AMA