Bank loses case for “prohibited” loan interest

A local bank has won a court case to force a client to pay an outstanding debt but its demand for interest was turned down by the federal supreme court on the grounds interest is prohibited in Islam, a newspaper reported on Thursday.

The unnamed bank had filed the case at a court against a client who defaulted on paying a debt of around Dh211,000 and demanded payment of that sum plus 11.5 per cent interest from December 2007, the Arabic language daily Emarat Alyoum said.

The court turned down the bank’s demand for interest payment, prompting it to appeal. The appeal court supported the earlier sentence, pushing the bank to the federal supreme court (FSC).

“The FSC supported the earlier sentenced and ordered the client to pay the principal loan to the bank,’ the paper said.

“It also supported the sentence against payment of interest on the grounds interest is prohibited in Islam.”

The paper quoted the presiding judge, Amin Al Hajri, as saying in his sentence:” Out of necessity, small interest has been allowed in bank transactions in the country…this interest is enforced as long as there is a need and until an alternative is found.”
 

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