UAE: It’s illegal for individuals to lend money on interest; stringent fines, imprisonment apply

However, an individual may lend cash to his or her friends or acquaintances without interest



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Ashish Mehta

Published: Sun 15 May 2022, 11:19 AM

I have saved up some money over the years. Is it legal for me to loan some of this cash to acquaintances for interest? If yes, what should I do if the person fails to make the repayments?

Response: Pursuant to your queries, the provisions of Federal Law No. 31 of 2021 on Penal Code of UAE (the ‘UAE Penal Law’) pertaining to an individual lending money to other individuals on interest apply.

In the UAE, it is illegal for an individual to lend money on interest. Only licensed banks and financial institutions in the UAE are allowed to lend money on interest in accordance with the regulations determined by the regulators in the UAE. An individual engaging in lending money on interest is considered a crime in the UAE and is punishable with imprisonment and fine as mentioned in Article 458 and Article 459 of the UAE Penal Law, which reads as below:

Article 458 of the UAE Penal Law:

“Shall be punished by imprisonment for a period of not less than one year and a fine of not less than Dh50,000 every natural person who lends to another natural person with an interest in return for deferring the repayment, in any kind of civil and commercial transactions, whether this interest is explicit or hidden.

“Shall be considered as hidden interest, any commission or benefit of any kind that the creditor requires, if it is proven that this commission or benefit is not matched by a real legitimate benefit or service that the creditor has performed.

“The truth of the origin of the debt and the hidden interest may be proven by all means.

“If the offender takes advantage of the debtor's need, weakness, or whimsy to commit the crime stipulated in this article, this shall be considered an aggravating circumstance.”

Article 459 of the UAE Penal Law:

“Every natural person who used to lend with interest shall be punished by temporary imprisonment for a period not exceeding five years and a fine of not less than Dh100,000.”

Based on the aforementioned provisions of law, if an individual is convicted on charges of lending money on interest, he or she may have to serve one year of imprisonment along with fine which is not less than Dh50,000.

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However, an individual may lend cash to his or her friends or acquaintances without interest. But it is prudent on the part of such lender to enter into a written agreement with the borrower pertaining to repayments to safeguard his or her cash. In such an event if the borrower does not repay the money, the lender may file a civil case.


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