Mon - Fri 09:00-19:00
Law Firm in UAE

Is it lawful for an Individual to lend money in the United Arab Emirates?

In most countries, lending money is a fairly regular practice that is frequently carried out. It’s not as easy as it looks in the United Arab Emirates, though the nation is still renowned for its affluence and wealth. Additionally, it imposes stringent rules on loans and other financial contracts. Serious fines may be imposed for breaking these laws. This article will discuss the legality of money lending in UAE.

The Central Bank of the UAE (Central Bank) and the Securities and Commodities Authority (SCA) are the major regulatory bodies for financial services in the UAE (except in the DIFC and ADGM). All forms of lenders, including commercial banks, investment banks, investment enterprises, finance companies, Islamic banks, and Islamic financing firms, are subject to Central bank regulation and licensing requirements.

Is it permissible for an individual to lend money?

An individual can give friendly loans to his friends and family without charging interest. However, a formal agreement detailing the repayment terms should be signed by the borrower and the lender.  Lenders have the right to file a lawsuit in the relevant civil court if borrowers do not repay the loans.

Lending money on interest

Lending money to someone else on interest is illegal in the United Arab Emirates. For example: usury transactions, unlicensed lending, personal lending for interest etc.

In the UAE, it is completely forbidden to borrow money from anyone with interest who does not have a license issued by the Central Bank.

Interest based lending is mentioned under Articles 458 and 459 of the Federal Decree- Law No. 31 of 2021 on the Issuance of Crimes and Penalties.

According to the law, interest-based lending without proper license in any type of civil or commercial transaction whether the interest is explicit or hidden, shall be punished by imprisonment for a period of not less than 1 year and a fine of not less than AED 50,000.

If the debtor’s need, weakness, innocence, or whimsy is exploited by the offender to conduct the above-mentioned offence then, the likelihood of receiving a severe punishment increase.

If the individual habitually lends at interest shall be punished by temporary imprisonment for a period not exceeding (5) five years and a fine not less than (100,000) one hundred thousand dirhams.

The UAE law highlights both the lenders and the borrowers, emphasizing shared accountability and the shared responsibility of both parties involved in such transactions. Borrowing money from someone with interest who does not possess a Central Bank license is strictly prohibited in the United Arab Emirates. The law does, however, provide an exception wherein individuals may lend money to their dear ones (without charging interest) within permissible limits provided that they have a written agreement.

Contact us

Let us help you!

If you need any helps, please feel free to contact us. We will get back to you with 1 business day. Or if in hurry, just call us now.

Call : +971 4 2278125 / +971 50 509 3949 Suite # 109,
Arzoo Building Al Twar 2, Near Al Twar Center, Al Qusais, Dubai, UAE

Our Corporate Video