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Fatwa CenterAdjusting loans according to inflation is forbidden
Question
The charging of interest is forbidden on loans. Can an adjustment be made to what is owed to take into account inflation, to ensure what is being paid back is the same as what has been borrowed?
Answer
Praise be to Allah, the Lord of the Worlds; and may His blessings and peace be upon our Prophet Muhammad and upon all his Family and Companions. The right procedure concerning fixed debts incurred on someone in a given currency is that they should be paid off by the same currency, and not by value. They should be returned back in the same currency; linking such fixed debts to the price level is not allowed. This is according to the verdict issued by the Islamic Judicial Assembly during its session held in Kuwait in December 1988. So, the decrease in the value of the currency is, by no means, an excuse for imposing any additional amount to the fixed debts. Allah knows best.
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