Question
Please comment if the following answer is correct: "The basic principle is that loans should be in the same currency as they were taken by the borrower, unless the two parties agree at the time of repayment to repay it in a different currency. There is nothing wrong with that, so long as that is done at the rate of exchange on the day of repayment, not the rate of exchange that existed on the day when the loan was given. This applies to every payment; it is permissible for the two parties to agree at the time of repayment that it may be paid in a different currency, at the current rate of exchange."
Answer
The view propounded in the loan issue is incorrect. At the time of giving a loan, it may not be stipulated that the loan be repaid with another currency. This amounts to riba. When a currency is exchanged for another currency, it is a sale. Whilst exchanging one currency for another currency is permissible, the deal has to be compulsorily cash. Thus you may exchange any amount of rands for any amount of dollars, etc. But both parties have to hand over their respective amounts in the same session where the transaction is concluded. This deal can not be executed by credit.
The rate of exchange has absolutely no bearing on this deal. Irrespective of what the rate of exchange is or may be, the parties in the transaction have the right to fix their own rate. If at the time of repayment, the original currency which was loaned is no longer in existence, then of course, circumstances compel another mutually accepted arrangement for repayment.
- Source
- themajlis.co.za
- Published in
- The Majlis Vol 21 No 06
- PDF page
- 5
Appears under Questions and Answers (approximate).