A qard hassan is a loan that is granted on a goodwill basis, primarily for the purpose of promoting welfare.
The borrower is only required to repay the borrowed amount in full, without any interest, as the Islamic principle prohibits the charging of interest.
If the borrower experiences any difficulty in repayment, the lender must extend the repayment period. Additionally, the lender may voluntarily choose to waive repayment of a portion or all of the loan.
In the Qur’an, Muslims are encouraged to offer qard hassan, which are benevolent loans, to “those in need.”
“Who is he that will give Allah Qard Hasan? For Allah will increase it manifold to his credit.” (Qur’an 57:11)
“If you give Allah Qard Hasan … he will grant you forgiveness.” (Qur’an 64:17)
“Establish regular prayer and give regular charity and give Allah Qard Hasan.” (Qur’an 73:20).
In Islam, providing cash loans is permitted as a means of social service among the wealthy to assist the financially disadvantaged and those in need of financial assistance. Qard hasan can be considered as a middle ground between providing charity and giving a loan.
As a gesture of gratitude, a borrower may choose to pay an additional amount to the lender, beyond the borrowed amount. However, the borrower must not make any promises to do so. As the only loan that does not accumulate interest over time, qard hassan does not violate the prohibition on riba, or interest.
Non-profit Islamic microfinance institutions, such as those established by Al Huda Way Organization, currently offer Islamic social lending services worldwide.