Islamic Social Finance Instruments: Qard Hasan

Qard hasan (good loan) is given without expecting a return by the creditor with the pure intention of helping the debtor. Since Qard hasan is a gratuitous contract, no profit should be gained from the transaction making it an Islamic social finance instrument. In Qard hasan, the debtor is expected to return to the creditor only the principal amount. Charging any amount over the principal amount extended to the debtor by the creditor can fall under interest. Qard hasan is a common tool used by Islamic microfinance institutions, and it is an effective way of enhancing for financial inclusion.

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