All praise is due to Allāh:

The mere presence of a guarantee to the principal deposited amount does not make the money a loan. Examples of this are:

1. Guarantee Contract (kafālah):

This involves the guarantor assuming responsibility for the guaranteed party’s obligations in a legitimate commitment. The guarantor’s obligation is to guarantee what is guaranteed, and it (i.e., the guarantor) bears liability just as the guaranteed party does. However, this does not fall under the category of a loan.

2. Sale Contract (bayʽ):

In this contract, the seller delivers the sold item to the buyer, the price and sold items are free from defects and neither of them (price and sold item) belongs to other than its owner. If any disruption occurs in this arrangement, the defaulting party shall guarantee the loss under the obligations of the contract.

3. Guarantee involved in Salam Transaction (Bayʽ as-Salam).

4. Guarantee of leased property.

There are other examples as well.

Similarly, the guarantee of certain types of money due to failure or negligence does not make it a loan. Examples of this are:

1. Trust money.

2. Mortgage money.

3. Money involved in profit-loss sharing.

4. Money involved in agency.

There are other types of money that are guaranteed due to failure in protecting them.

Therefore, the mere presence of a guarantee does not make the money a loan, let alone a usurious loan.

After all, Allāh knows best.

Fatwa issued by Dr. Khālid Naṣr