A qard is a non-interest paying loan that gives the borrower the right to use the loan amount for a period of time with the understanding that an equivalent amount would be repaid at the loan’s maturity date (i.e., the end of the specified period). In this sense, a qard fund is a special purpose fund that an Islamic bank sets up as a means of serving social or communal objectives.
In other words, Islamic banking, in line with its broader raison d’être, helps develop individuals and entities in communities and economies where Islamic banks operate. This may be attainable by performing social services through providing for local communities’ needs for financing on the basis of interest-free lending.
This fund may also be referred to as a good-faith-loan fund or a benevolent-loan fund (on in Arabic al-qard al-hasan fund).
