Every Loan that brings some Benefit is Riba
Question :
A man borrowed some money from another man, but the lender stipulated a condition that he takes a piece of farmland from the borrower as collateral for the sum of money. Then he (the lender) began planting on the land and taking its complete yield or half of it, and he would leave the other half for the owner of the land until he repaid the entire loan as he took it. At that time the lender would return the land to him that was under his control. What is the Islamic ruling in your view concerning this stipulated loan?
Answer:
Verily, the loan is among the contracts of kindness that has as its objective gentleness with the borrower and kindness to him. It is from the desired matters that are loved by Allâh, because it is an act of kindness to the servants of Allâh. Indeed Allâh said:
"And do good (i.e., acts of kindness), for verily Allah loves those who do good."
So, in reference to the lender it is a legislated and recommended act, and in reference to the borrower it is a permissible and allowed act.
Indeed it has been confirmed from the Prophet that he borrowed a young camel from a man and he returned one better than it. So, since this contract - meaning the contract of a loan- is from the contracts of gentleness and kindness, it is not permissible to change it to a contract of compensation and profit. When I say profit, I mean worldly material profit. This is because by this it leaves its context and becomes a matter of sale and compensations. For this reason you find a difference in a man saying to another: "I will sell you this dinar for another dinar to be paid after a year," or: "I will sell you this dinar for another dinar," and they separate before payment is made. For verily, in both of these situations the sale is forbidden and it is Riba. However, if he lend him a dinar and he repaid him after a month or a year, that is permissible as long as the lender does not take the payment until after a year or more or less due to putting the aspect of kindness first.
Based on that, verily if the lender stipulates a condition of material benefit on the borrower, then he has removed the loan from the matter of kindness and therefore it is forbidden.
The well-known principle with the people of knowledge is that every loan that brings some benefit (to the lender) is Riba. Based upon this it is not permissible for the lender to stipulate a condition on the borrower that he give him some land to use for planting, even if he gives the borrower a share of the crop. Because that is a form of bringing some benefit to the lender and it removes the loan from its fundamental matter, which is gentleness and kindness.
Source:
Ash-Shaykh Ibn 'Uthaimin
Fatawa Islamiyah, Vol. 3 Pages 422-423
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