Can a debt be repaid in a different currency?
Ibn Umar sold camels for gold coins and took silver instead, and the Prophet allowed it at the rate of the day, provided nothing was left owing when they parted. That sets the rule for repaying a euro debt in dollars or lira: today’s rate, settled in full, on the spot.
The guidance
I owe euros but want to repay in another currency. How is the rate set?
- On repayment day we agree that day’s rate, and I pay it all at onceHalal · Exchange · Ibn Umar hadithIbn Umar sold camels for gold coins and took silver instead. The Prophet allowed it at the rate of the day, provided nothing was left owing when they parted. So settle the whole converted amount on the spot.
- The exchange rate was fixed when I borrowed, for repaying in the other currencyHaram · Riba · Deferred exchangeFixing now the rate for a currency swap that happens later is a delayed currency exchange, which is not allowed. It can also hide interest in the rate.
- We settle a loan at a rate better for the lender than that day’s rateHaram · Riba · Qur’an 2:275Using a rate above the market to repay a loan gives the lender more than was lent. That extra is riba.
People also ask
I borrowed euros and want to repay in Turkish lira. What rate applies?
The market rate on the day you repay, agreed then, with the whole converted amount handed over at once. Nothing may be left outstanding after the conversion.
Can we fix the exchange rate in the loan contract?
No. Fixing now the rate for a currency swap that happens later is a delayed currency exchange, which is not allowed, and it can hide interest in the rate.
The lender wants a “round” rate above the market. Is that riba?
Yes. A rate above the market gives the lender more than was lent, and that extra is riba.
Related questions
All questionsThe four schools on riba
This guidance follows the Hanafi school as applied today by Mufti Taqi Usmani and the AAOIFI standards. Notes mark where the Maliki, Shafi’i or Hanbali schools differ. The four schools on riba →