(F 103) A friend from Egypt asked me this question, and I promised to present it to you. He said: he lent his neighbor a sum of money without specifying a due date for repayment. After a period, his neighbor said to him: “I will repay the amount in three equal installments at the end of each Gregorian year, which means over three years.” My friend agreed, and his neighbor repaid the first installment, but then the second currency floatation occurred, and the value of the currency decreased significantly to almost half its value. His question is: Can he demand that the borrower pay back the remaining amount in an equivalent value of dollars to compensate for the currency depreciation? Or is he obligated to pay back the remaining amount in Egyptian pounds even if its value has decreased further? He also asks if he can make a condition when lending someone in the future to repay the amount in gold or dollars? – International Institute of Islamic Studies

(F 103) A friend from Egypt asked me this question, and I promised to present it to you. He said: he lent his neighbor a sum of money without specifying a due date for repayment. After a period, his neighbor said to him: “I will repay the amount in three equal installments at the end of each Gregorian year, which means over three years.” My friend agreed, and his neighbor repaid the first installment, but then the second currency floatation occurred, and the value of the currency decreased significantly to almost half its value. His question is: Can he demand that the borrower pay back the remaining amount in an equivalent value of dollars to compensate for the currency depreciation? Or is he obligated to pay back the remaining amount in Egyptian pounds even if its value has decreased further? He also asks if he can make a condition when lending someone in the future to repay the amount in gold or dollars?

This is one of the issues that we will discuss in detail in the research conducted by the International Institute of Islamic Studies, and we will present a purposeful opinion on it.
However, I can quickly say that if the difference in the exchange rate is small and known, either an increase or a decrease, it does not affect the value of loans that do not stipulate an increase. The borrower must repay the principal in the equivalent value, and whoever benefits from any increase has committed riba.
If the difference in the exchange rate is arbitrary and significant, as mentioned by the questioner in their question, then the principle we refer to in this case is the rule of “no harm and no reciprocating harm” and the saying of Allah Almighty: ” you may have your principal” [Al-Baqarah 2:279].
Therefore, it is not permissible to harm the lender in their loan, and repaying the money with the decreased value is an unjust and oppressive risk to the right of the lender. It contradicts the principle of doing good that the Prophet (peace be upon him) commanded us to follow, where he said: “May Allah have mercy on a person who is easy-going when he sells, when he buys, and when he demands his rights in qada’a.” [Sahih Al-Bukhari].
What we have mentioned is the opinion of Imam Abu Yusuf from the Hanafi School of law, which is the applicable rule in the School, as well as the opinion of some of the Maliki scholars.
The debtor is obligated to repay the value of the currency that has depreciated on the day it becomes due, in the same currency that is commonly used, such as gold or silver.
Therefore, the borrower should consider the value of the loan in gold on the day of borrowing and repay it in the market value of the currency on the day of repayment.
As for stipulating that the loan be repaid in gold, it is necessary to specify the amount of gold on the day the loan is made and to pay it at its value. It should not be left to estimation due to the uncertainty and ignorance surrounding it. Therefore, it should be written that the lender gave ten thousand and their value is in gold, for example, with the condition that the borrower will repay the same amount of gold or its value on the day of repayment.
Fatwa by Dr. Khālid Naṣr