UAE is one of the few countries in the world where 80 % of the population is from other countries and only 20% is indigenous. 50 percent of foreigners on work visas do not qualify the bank requirements for a personal loan, so they borrow money in the UAE from individuals.
Today, in this post, I will cover the practice on the ground as well as the legal provisions for lenders and borrowers.
What are the consequences of borrowing money from friends or lending money to them? It is common practice in the UAE to borrow money from friends and send it to their home country.
When my salary is insufficient to cover the one-time cost of a certain event in my home including children’s education, the marriage of family members, medical emergencies, and so on, I borrow money from a coworker and send it to my house.
Okay, these are the normal things among the expatriate workers in the country. Suppose you lend the money and What is the legal provision if the Brower does not pay back you?
According to UAE law, lending money without a license from the country’s central bank is prohibited for any individual or institution.
However, in the Sariah law lending money to friends or others is not haram but taking the interest is haram. According to Sharia law, helping others, including financial support, is not considered sinful but rather honorable behavior.
Sharia is the primary law of the UAE, which means that you can give and borrow money just for the purpose of helping others, not for personal gain.
According to the UAE Center Bank, borrowers and lenders in the country without its approval are illegal, therefore both borrowing and lending activities are punishable under the country’s legislation.
What to do when you lend money in the UAE?
If the borrower does not repay your money, you may have no option except to pursue the borrower through bullying, which is unlawful under UAE law.
Anticipating this scenario, you should prepare a legal document signed by both you and the borrower. This document is critical because it will serve as evidence in the event of a court hearing.
Furthermore, you can request a bank cheque for a specific period of time, and if the borrower fails to repay it, you can bounce the Cheque. Issuing a Cheque without a balance carries severe penalties in the UAE, therefore, the borrower will honor the Cheque’s issued date and maintain the balance.
Is this permissible to borrow money in the UAE?
Although the UAE central bank prohibits private lending and borrowing without a license from it, local citizens have engaged in these activities.
From a Shariah, legal perspective, it is permissible to assist individuals financially in their needs. However, the majority of people have already developed a money-oriented mindset.
If you have not assisted them with a pure heart, you have lent them to earn financial gain they may not repay you.
If the borrower does not repay you, you must have evidence and witnesses to pursue legal action; consequently, I recommend that you not engage in such transactions in the UAE; but, if you do, you must have documentation or an issued cheque.