- Legal Framework: UAE law (Federal Decree Law No. 31 of 2021) prohibits individuals from lending money with interest.
- Authorized Lenders: Only licensed banks can lend with interest.
- Penalties (Article 458): Up to one year in jail and a fine of at least Dh50,000 for lending with interest.
In response to your questions, the legal framework governing this matter falls under Federal Decree Law No. 31 of 2021 on the Issuance of Crimes and Penalties Law.
Exclusive authorization to lend money on interest-based terms is reserved for licensed banks and financial institutions regulated by the Central Bank of UAE and other competent authorities.
It is expressly prohibited for individuals to engage in lending money to other individuals or entities with interest, as outlined in Article 458 and Article 459 of the UAE Criminal Law.
Article 458 of the UAE Criminal Law:
“Any person who lends another physical person a loan for an interest rate in return for late payments, and that is in any type of civil and commercial transactions, and whether said interest is explicit or implicit, shall be liable to a jail sentence for a period not less than one year and a fine not less than Dh50,000.”
The original debt and implicit interest may be proved by all means.
If the criminal makes use of the need, weakness, or inclination of the debtor to commit the crime set out in this Article, such matter shall be considered an aggravating circumstance.”
Article 459 of the UAE Criminal Law:
“Any physical person who is habitually engaged in practising interest lending shall be sentenced to temporary imprisonment for a period not exceeding five 5 years and a fine not less than Dh100,000.”
Considering the mentioned legal provisions, it would be against the law for your acquaintance to lend you money in the UAE with interest.
It’s advisable to communicate to your acquaintance that collecting interest is not permissible.
Alternatively, both parties can opt for an interest-free loan agreement, duly signed by both parties and witnessed.
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