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How do long term halal loans work with inflation in Islam?

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2 answers
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I have a series of questions about Islamic loans. My first question is this: If person 1 loans 100k to person 2 and creates a contract which states that the agreed payback date is 25 years from now. How much does person 2 pay back person 1? We all know that the value of money reduces due to inflation. For example, 35 years ago, my dad bought a house for 5k, now to buy a similar house you have to pay 200k. So my question is, should inflation be taken into account according to Islam? What confuses me is that if person 1 is only entitled to 100k after the 25 years, he will in effect be at a huge disadvantage, i.e. in real terms, he will not get back what he loaned person 2. At the same time, if person 2 gives back person 1 more than 100k, that is potentially interest which is haraam. So just to clarify, how do long-term halaal loans work in Islam when it comes to inflation?
Asked by nami (1035 rep)
Dec 11, 2012, 07:17 PM
Last activity: Dec 3, 2018, 03:22 AM