Subject : Elaboration on the Relationship between the Borrower and the one Commanding the Borrowing
Fatwa Number : 3805
Date : 19-09-2023
Classified : Usury (interest) &Loans
Fatwa Type : Search Fatawaa

Question :

A person borrowed a sum of money on my behalf from a usurious bank, then this person passed away, and the insurance paid off the debt. Am I still indebted to him or the debt is waived?

The Answer :

All perfect praise be to Allah the Lord of the Worlds. May His peace and blessings be upon our Prophet Mohammad and upon all his family and companions.

Borrowing with interest (usury) is prohibited, and it is one of the major sins. It is also one of the most significant causes of economic destruction in the long run. Anyone who has been involved in usurious loans should sincerely repent to Allah. This repentance should include remorse for their actions and a firm determination not to return to such practices. We ask Allah for forgiveness for ourselves and for them.

The relationship between the deceased borrower and the man who instructed him to borrow can take two scenarios:

The first scenario is the agency in borrowing. In this case, the person instructing the borrowing has appointed the borrower to obtain a bank loan on their behalf. This situation takes on the legal framework of agency (wakala) because the deceased agent (the borrower) did not intend to borrow for themselves; rather, they acted as an agent for the person who instructed them, who is the actual borrower. The established principle among Islamic jurists is that the actions of an agent are bound by the best interest of the principal (the one who appointed the agent). This principle has been explicitly stated by Islamic scholar Sheikh al-Islam Taj al-Din al-Subki, may Allah have mercy on him, who said: "Every agent acting on behalf of another must act in the best interest of the principal." [Al-Ashbah wal-Nazair, Vol. 1, Page 310].

The agent (the deceased person) is not obligated to add the contract to the principal (the person who instructed the borrowing), nor does the agent need to inform the bank from which they borrowed that they are acting as an agent rather than the principal in this contract. Therefore, the agency is valid in this case. Similarly, it is not a requirement to add the contract to the principal in the context of buying and selling, and ownership is established for the principal. As stated in [Durar al-Hukkam Sharh Majallat al-Ahkam, Vol. 3, Page 550)]: "It is not a requirement to add the contract to the principal in buying and selling... and ownership is established for the principal."

Based on this, if the bank forgave a portion of the loan, the principle is that the forgiveness benefits the principal (the one who instructed the borrowing) as well. It appears that if the bank forgives its claim against the borrower, who is acting as an agent, then the claim against the principal is also forgiven. Therefore, the principal is not obligated to pay the remaining debt to the heirs of the deceased.

The second scenario involves the first man requesting a loan from the deceased. The deceased then borrowed from the bank. In this scenario, there are two separate contracts. The first man is considered a borrower from the deceased, and the deceased is considered a borrower from the bank. If the bank's loan is forgiven for the deceased, it does not automatically mean that the loan is forgiven for the first man because the two contracts are separate and distinct from each other.

The Iftaa` Council issued Resolution No. (251) (2/2018) with a fatwa closely related to this scenario.

In conclusion, if the one instructing the borrowing had requested the deceased to borrow from the bank on their behalf, and the bank forgave the loan for the deceased, then the loan is waived for the one instructing the borrowing as well. However, if the first man requested a loan from the deceased without specifying the source of the loan, and the deceased borrowed from the bank and lent it to the first man, and the bank forgave the loan for the deceased, the loan is not waived for the first man. And Allah the Almighty knows best.



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