Does the Hanafi school permit debtors to profit from loans?
The Hanafi school of thought generally prohibits any form of profit from loans, as this would constitute usury (riba), which is strictly forbidden in Islam. The Qur'an affirms this position in several verses, stating that Allah hath blighted usury and made almsgiving fruitful
2:276. This verse highlights that while engaging in usury is detrimental, charitable giving is rewarded.
The Hanafi perspective aligns with the interpretations found in various hadith and scholarly commentaries. For instance, Ibn Kathir explains that those who engage in usury will face significant consequences, indicating that loans must not generate profit for the lender. The Prophet Muhammad ﷺ emphasized that any form of financial transaction or loan should not involve interest or benefit to the lender beyond the principal amount.
In the context of collateral and the benefits derived from it, the Hanafi school may allow for some flexibility. For example, collateral that generates benefits (such as a servant or property) may be permitted as long as the primary intent remains clear and does not lead to profit derived from the loan itself. However, the fundamental principle remains that loans must be interest-free, and any attempt to profit from them would be considered riba.
In conclusion, the Hanafi school does not permit debtors to profit from loans, maintaining a strict stance against any form of usury, reflecting the broader Islamic principles outlined in the Qur'an and the teachings of the Prophet ﷺ.
Sources
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2:276 · Al-Baqara
2:276 · Muhammad Marmaduke Pickthall
يَمْحَقُ ٱللَّهُ ٱلرِّبَوٰا۟ وَيُرْبِى ٱلصَّدَقَٰتِ ۗ وَٱللَّهُ لَا يُحِبُّ كُلَّ كَفَّارٍ أَثِيمٍ
Allah hath blighted usury and made almsgiving fruitful. Allah loveth not the impious and guilty.
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Tafsir Ibn Kathir on 2:276
Tafsir Ibn Kathir · 2:276
Allah Almighty informs us that He will eliminate (wipe out) usury, meaning: He will remove it completely, either by eradicating it entirely from the hands of its possessor or by depriving that wealth of its blessing so that it will not benefit its owner; instead, the owner will be punished by it both in this world and in the Hereafter. Allah says in other verses, in a similar sense: "Say, 'The filthy and the pure are not equal, even if the abundance of the filthy pleases you'" (al-Ma'idah 100), and He says, "And He will pile up the wicked one on top of the wicked one and throw them into Hell" (al-Anfal 37), and here He says, "And whatever you give in usury to increase within the wealth of people will not increase with Allah" (Ar-Rum 39). Ibn Jarir says regarding "Allah will eliminate usury" that this aligns with a report narrated from Abdullah ibn Mas'ud from the Prophet Muhammad (peace be upon him), who said, "Usury, even if it increases, will eventually return to smallness." This hadith is recorded by Imam Ahmad in his Musnad with a chain through Hajjaj, Sharik, Ar-Rukin ibn ar-Rabi', and Ibn Mas'ud, from the Prophet, stating that though usury may multiply greatly, its ultimate consequence is loss. Similarly, Ibn Majah also recorded this narration. This teaching relates to the principle that engaging in usury is contrary to the intended purpose of earning lawful gain; it is a negation of the desired objective. Imam Ahmad also transmitted a report regarding Umar ibn al-Khattab, leader of the believers, who once found food stored and was informed it was monopolized by certain individuals. Umar called those individuals and admonished them for hoarding food from the Muslims. They replied that they bought the food with their money and were merely trading it. Umar reminded them that the Prophet (peace be upon him) said, "Whoever monopolizes food from the Muslims, Allah will strike him with bankruptcy or leprosy." One individual, named Farrukh, immediately vowed not to hoard food ever again. The other, who justified his actions as a legitimate trade, later was afflicted with leprosy. Ibn Majah narrates this hadith with similar wording. Regarding the phrase "And will increase the charities (al-sadaqat)," the verb has been read with different vowelizations implying either growth or nurturing. The understood meaning is that Allah increases and multiplies charity by blessing it and nurturing it for its owner. There is an authentic hadith transmitted on this topic where the Prophet (peace be upon him) said, "Whoever gives charity equal to the value of a date from lawful earnings— for Allah accepts only that which is good—then Allah accepts it with His right hand and nurtures it for its owner just as one of you tends a foal until it becomes like a mountain." This hadith, extensively narrated by Bukhari, Muslim, and others with varying chains, emphasizes the blessed nature and growth of good charity, contrasting it with the destruction of usury. Allah does not love the ungrateful, sinful disbeliever—meaning He does not love those who are ungrateful in heart and sinful by word and deed. The concluding part of the verse suits this description, pointing out that the usurer is never satisfied with his lawful share, nor does he accept the permissible means of earning, but rather seeks to consume people's wealth unjustly through various evil means. This attitude reflects ingratitude for the blessings he enjoys and his injustice and sinfulness in taking wealth without right. Then Allah praises the believers who obey Him, fulfill His commands, and give thanks by performing good deeds and behaving well towards His creation, evidenced by establishing prayer and giving zakat. He promises them great reward and security on the Day of Resurrection, as He says, "Indeed, those who believe and do righteous deeds and establish prayer and give zakah will have their reward with their Lord, and there will be no fear concerning them, nor will they grieve."
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