Repaying a debt in a different currency
24 Aug 2011 10:34 GMT
 
Is it permissible in Islam to pay back a debt in a different currency than the one you borrowed in? For instance, if I borrowed dollars from someone when we were living in Canada can I repay the debt in Pounds Sterling now that we are living in Britain? If it is permissible, then how should I figure the exchange rate? Should I determine it at the time I borrowed the money or at the present time

Answered by

Sheikh Sâlih b. `Abd Allah al-Lâhim, professor at al-Imâm Islamic University, Riyadh

I see no prohibition in repaying a debt in a different currency than the one that was originally borrowed. For instance, a person can borrow Saudi Riyals and pay back Yemeni Riyals or Kuwaiti Dinars without committing any violation of Islamic Law.

What matters is that the sum paid back is the equivalent of the sum owed according to the current exchange rate at the time the debt is paid. It should also not be deliberately carried out as a covert means of conducting a currency exchanging over an interval of time.

Evidence for this permissibility is where Ibn `Umar relates:

We used to sell a camel at the Baqî` for a price stated in gold coins but later accept a equivalent of silver coins in payment instead. Likewise, we would make a sale stated in terms of silver but later accept an equivalent payment in gold.

We asked the Prophet (peace be upon him) about it, and he said: "There is no problem, as long as when you take the price, it is according to that day’s prevailing market value and no account remains outstanding." [Sunan al-Tirmidhī, Sunan Abī Dāwūd, Sunan al-Nasā’ī, and Sunan Ibn Mājah]

And Allah knows best.

Source: Islam Today



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