Question ID: 25402

Can gold be made basic criteria to get or to give loan instead of paper currency? For example, a person is ready loan to a needy but says that:
I do not believe in paper currency and you can get desired amount of loan from me. But I will equate this amount with quantity of gold I can purchase. Whenever you return me the loan I will get the amount from you from which I can purchase the same quantity of gold. Our basis of this transaction will be gold and not the paper currency.
a. Can we make gold as a basis for loan transaction?
b. Can paper currency be termed as a commodit?
In conventional banking, banks attract people and get money from them under various schemes and grant profit on monthly, quarterly of six monthly or any other pre determined basis. In some of the schemes, remaining within certain limits, the rate of profit is slightly varied as well (Profit Loss Share Account). These banks are involved in grant of loans to individuals to companies for personal or business purposes respectively. For example, loan is granted for purchase of car, motorcycle or construction of house or for businesses activity etc:
a. Is getting loan on fixed rate from banks permissible under Islamic la?
b. Is taking profit from Profit Loss Share Account permissible?
c. Is such loan allowed for construction of house; purchase of car or for routine commoditie?

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Asked on July 8, 2011 12:01 am
Private answer
a - Yes
b - Yes
a) Sign a document stating how much you owe, how much you have to pay, should have a option of settlement.
b) Yes
c) Yes
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Answered on July 8, 2011 12:01 am