Qard Hasan

Qard Hasan (Arabic: القرض الحسن, literally 'a good loan' or 'benevolent loan') is an interest-free loan given for charitable or social purposes, where the borrower is obligated to repay only the principal. It is one of the most virtuous financial acts in Islam, frequently mentioned in the Quran (2:245, 57:11, 64:17) as 'lending to God.' Any increase in repayment beyond the principal — whether fixed or habitual — constitutes Riba and is prohibited. However, voluntary gifts (Hibah) from the borrower upon repayment are permissible as long as they are not stipulated in advance. In modern Islamic banking, Qard Hasan is used for: current accounts (deposits are technically Qard to the bank, repayable on demand), staff welfare loans, emergency facilities, and microfinance. Governed by AAOIFI Shariah Standard No. 19. It distinguishes Islamic social finance from conventional charity by creating a repayment expectation that allows capital recycling.