Subject : Ruling on Personal Advances System of the Social Security Corporation
Fatwa Number : 3531
Date : 04-09-2019
Classified : Usury (interest) &Loans
Fatwa Type : Search Fatawaa

Question :

What is the Islamic ruling on the personal cash advances made by the Social Security Corporation to pensioners in return for (4.5%) as declining interest?

The Answer :

Praise be to Allah the Lord of the Worlds.

Having reviewed the system of the personal cash advances, which the Social Security Corporation grants to pensioners, we concluded that it is unlawful since, in principle, every addition to a loan is usury. Terms and conditions of the above system included the following: "Interest will be calculated on the amounts loaned by the Corporation to finance personal advances.

The aim is to improve the living conditions of the pensioners through extending payment time limits or re-compensating late payments. They will have to pay (4.5%) per year as a declining interest and (1%) per year as a risk insurance for the whole amount of the advance." In conclusion, the interest stipulated in the above advances system is usurious, so it is unlawful since Allah the Almighty says, "O ye who believe! Fear God, and give up what remains of your demand for usury, if ye are indeed believers."{Al-Baqarah, 278}. And Allah knows best.



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