Repaying a loan in a different currency

Joe Bradford

| 05/13/2012

A questioner asks:

I purchased something for someone in US dollars equaling 6k in Airline tickets. Now he wants to pay me back, but we live in the Emirates and he can only pay in UAE dirhams.
Can I take dirhams as payment? What if he pays me off in installments?


In the name of Allah, Merciful benefactor, Merciful redeemer

Whenever you are recovering a debt, you have the right to demand payment in the original currency if you choose. However, you have the option to accept payment in any other currency with two conditions:

1-     That the debt is calculated according to the spot exchange rate for that currency.

2-     That there is no debt liability that is left after payment.

For example:

Above, you mentioned that you loaned dollars and now will accept dirhams. Let’s say you loaned this amount a year ago today

  • On May-16-2011 6000USD = 22038.99AED
  • On May-16-2012 6000USD = 22037.88AED

Despite the decrease of 1.11AED, you would take 22037.88AED as payment for your debt today, and the debtor should pay you in total. Even if the amount went up, you would still take whatever amount resulted from the current exchange rate. Paying off part of the debt and leaving off part of it is not permissible. By paying off the debt in part, you allow endless speculation on currency prices, which could lead to exploitation of currency fluctuations.

The proof for this is the hadith of Ibn Umar found in the Sunan where he says “there is no harm in doing so if it is at market price and no debt remains between you.”

And God knows best.



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