finance religious-law saudi-arabia uae
Are there countries that prohibit charging interest?
<p>Is it true that Saudi Arabia prohibits charging interest? What about UAE? Are there any states actually prohibit interest rates?</p>

<p>In Saudi Arabia, it is legal to charge (and pay) interest. However, <a href="http://www.saudilegal.com/saudilaw/02_law.html" rel="nofollow noreferrer">according to this source</a>, a contract clause requiring interest is not enforceable. An interest clause is severable, so the contract is not at risk if interest is charged. <a href="https://www.clydeco.com/insight/article/kingdom-of-saudi-arabia-law-an-overview" rel="nofollow noreferrer">This source</a> indicates an exception, that the Saudi Arabian Monetary Authority Banking Disputes Settlement Committee may enforce interest clauses in banking transactions. In UAE, <a href="https://lexemiratidotnet.files.wordpress.com/2011/07/uae-civil-code-_english-translation_.pdf" rel="nofollow noreferrer">Article 204 of the UAE Civil Code</a> says</p>

<blockquote>
  <p>If the subject matter of the disposition or the consideration therefor
  is money, its  amount and type must be specified without any increase
  or decrease in the value of that money at the time of payment having
  any effect.</p>
</blockquote>

<p>and Art. 714 says</p>

<blockquote>
  <p>If the contract of loan provides for a benefit in excess of the
  essence of the contract otherwise than a guarantee of the rights of
  the lender, such provision shall be void but the contract shall be
  valid.</p>
</blockquote>

<p><a href="http://uaeahead.com/wp-content/uploads/2014/10/commercial.pdf" rel="nofollow noreferrer">Art. 76 of the Commercial Code</a> explicitly allows charging interest for commercial transactions</p>

<blockquote>
  <p>A creditor shall have the right to demand interest on a commercial
  loan in accordance with the rate stipulated in the contract. If the
  rate of interest is not stipulated in the contract it shall be
  calculated in accordance with the rate prevailing in the market at the
  time of the transaction on condition that in this case it should not
  exceed (12%) per cent, until full settlement is made.</p>
</blockquote>

<p><a href="https://www.jstor.org/stable/3382162?seq=1#page_scan_tab_contents" rel="nofollow noreferrer">This article</a> from 2002 (behind the paywall, sorry) provides further analysis for Abu Dhabi. <a href="http://www.arazzaqlaw.com/civil-and-commercial-law-kuwait/" rel="nofollow noreferrer">This page</a> discusses similar rules for Kuwait, where again commercial transactions are exempt from the civil prohibition against interest. It is not clear where the line is drawn, but I think "commercial" refers to borrowing money for a business purpose, as opposed to buying your house.</p>
