Query: I'm considering borrowing money from someone I know. They have agreed to lend the amount but with an interest payment. Is this legally enforceable? If so, how?

Response: In response to your inquiry, the guidelines outlined in Federal Decree Law No. 31 of 2021 on Crimes and Penalties Law are applicable. Solely licensed banks and financial institutions regulated by the Central Bank of the UAE and other relevant authorities are authorized to offer loans with interest-based repayment schemes to individuals or entities. Moreover, it's deemed illegal for an individual to lend money to others with an interest clause. This aligns with Article 458 and Article 459 of the UAE Criminal Law, stating:

Article 458 of the UAE Criminal Law:

"Any individual lending another individual money with an interest rate, whether explicitly or implicitly, for late payments in any civil or commercial transactions, will face a jail term of no less than one year and a fine not less than Dh50,000. 

The original debt and implicit interest can be substantiated by any means. 

Exploiting the need, vulnerability, or inclination of the debtor in committing this offense will be considered an aggravating circumstance."

Article 459 of the UAE Criminal Law:

"An individual habitually engaging in interest lending will face temporary imprisonment not exceeding five years and a fine not less than Dh100,000."

Considering these legal provisions, lending money with an interest clause in the UAE is unlawful. Therefore, it's advisable to inform your acquaintance not to charge interest if they lend you money. Instead, consider entering into an interest-free loan agreement, signed by both parties along with witnesses.

Ashish Mehta is the founder and Managing Partner of Ashish Mehta & Associates. He is qualified to practice law in Dubai, the United Kingdom, and India. For further information about his firm, visit www.amalawyers.com. For inquiries, contact news@khaleejtimes.com or address Legal View, Khaleej Times, PO Box 11243, Dubai.