Qard Hassan Loan Agreement at the Islamic Center of Melville (ICM)
Introduction
The Qard Hassan Loan Agreement is a unique financial arrangement rooted in the principles of Islamic finance, designed to facilitate interest-free and benevolent lending for charitable purposes. This agreement is characterized by its emphasis on assisting organizations, such as the Islamic Center of Melville (ICM), in their development, expansion, and mission-driven activities without the burden of interest or profit-sharing.
ICM is currently constructing a 40,000-square-foot Islamic center in the mid-Island community of Melville. The new Islamic center is uniquely accessible to the broad Long Island communities in both Suffolk and Nassau Counties. Construction of the facility has progressed through the generous donations of the community by the Graciousness of Allah (swt). However, the pace of construction and the sooner completion of the Islamic center can be achieved with additional support. The Qard Hassan is an important tool for achieving this goal.
Key Features
۞ Charitable Purposes: The primary intent of the loan is to serve charitable purposes. The funds are earmarked for the development, expansion, and activities aligned with ICM’s mission and goals.
۞ Repayment upon Request: The repayment structure is flexible, allowing the lender to request repayment after 24 months, sufficient time for ICM to utilize the funds for construction purposes.
۞ Periodic Updates: ICM will provide periodic updates on the progress of construction activities to ensure that the lender remains informed about how the funds are contributing to the charitable initiatives.
۞ Interest-Free and Profit-Sharing Exclusion: The fundamental principle governing the Qard Hassan Loan is the absence of interest or profit-sharing. This distinctive feature aligns with Islamic financial principles, promoting benevolence and charitable giving.
۞ Unsecured Nature: The loan is unsecured by any property or assets, emphasizing the trust and goodwill between the lender and borrower. This characteristic reflects the commitment to supporting charitable endeavors without creating financial encumbrances.
Mechanics
۞ Lender’s Autonomy: The lender can choose the loan amount based on their capacity and willingness to contribute to the charitable cause.
۞ Witnessed Signatures: The lending process involves the lender’s signature, which two persons must witness. Similarly, the borrowing process by ICM is witnessed by two trustees, adding a layer of accountability.
۞ Flexible Repayment Options: The borrower has various repayment options, including the full repayment of the loan principal, partial repayment with forgiveness of the remaining amount, or complete forgiveness of the entire loan.
۞ Exclusive Utilization: The agreement explicitly states that the loan shall be used exclusively for purposes related to ICM’s development, expansion, and activities, ensuring alignment with the center’s mission.
۞ Commitment to Repayment: ICM is committed to repaying the loan to the lender on demand after the specified 24-month period, or longer if the lender chooses. The Lender may expect repayment within two months of the lender’s request.