Thoughts from Iraj Toutounchian’s Islamic Money & Banking, Integrating Money in Capital Theory
From the legal point of view, the main ingredient of a Qard-ul Hassan contract is a loan that is not contaminated in any way by Riba. There is a lender and a borrower, with no reference to a market, which might give one the impression that there should be a ‘price’ for it. The relationship between lender and borrower is one of creditor and debtor, and the principal of the money loaned out remains the responsibility of the borrower. The lender cannot demand his dues before the end of the contract period.
Funds in this form are advanced to both real and legal entities with the aim of providing humanitarian assistance and creating financial strength for members of society who lack the wherewithal to meet their general and essential needs. When Qard-ul-Hassan is given to a…
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