Question:-
I have recently inherited a family business from my late father. Unfortunately, the business has a large overdraft with the bank which I have to now settle. I do not have sufficient funds to settle the overdraft immediately. I have applied at many Islamic institutions for assistance in the way of loans, with an additional amount to assist in trading, without having to fall back into the overdraft. To date, I have been unsuccessful and applications have been ignored or declined. Someone has advised that the fastest way to settle this overdraft is to apply for a home loan from a bank and, if approved, use that money to settle the overdraft and pay off the home loan, as the interest charged on a home loan is considerably lower than the interest payable on an overdraft. In this way, I will be able to settle it faster and, at the same time, pay less interest than the interest I am currently being charged. Will this approach be acceptable in order to get out of this interest situation as fast as possible? I am quite desperate but I am hopeful to find some guidance from the Darul Ifta.
Answer:-
We do not approve of borrowing funds on interest from the bank or any other financial institute due to the prohibition of interest found in the Quraan and Hadith. We suggest that you borrow funds (interest free) from a few family members and make proper arrangements to pay them back.
Alternatively, you could sell a portion of the business to a potential buyer, and use the funds (accrued from the sale) to pay off the overdraft amount. When you have sufficient funds at a later stage, then you may purchase the sold portion of the business again, if the owner is willing to sell his portion to you. Due to selling a portion of the business, the purchaser will become a joint partner with you in the business.
Also, if you own additional items of value such an extra motor vehicle (which is not really required), then you may sell it and use the funds to settle the overdraft account. These are some of the options that come to mind.
ALLAH TA’ALA KNOWS BEST!
ANSWERED BY:
Mufti Mohammed Desai
Date: 12 Dhul Hijjah 1443 / 12 July 2022
