Qarz-e-hasna is an Islamic term for an interest-free, benevolent loan given to those in need for welfare purposes, such as education or to start a livelihood. The borrower is only required to repay the principal amount, with no interest charged, and the goal is to help the borrower without profiting from them. This concept is used by various organizations to provide financial assistance for purposes like higher education or to support vulnerable individuals and families, as seen with organizations like Akhuwat and the Ihsan Trust. 

Key aspects of Qarz-e-hasna

• Interest-free: The most crucial aspect is that the loan is free of any interest or markup, making it compliant with Islamic principles. 
• Purpose: It is intended for welfare, helping those in need to improve their socioeconomic status by supporting education, starting businesses, or covering essential expenses. 
• Repayment: The borrower typically repays only the principal amount. Some programs may adjust repayment based on the borrower’s ability to pay after they complete their studies or start earning income. 
• Examples of programs:
  • For students: The Ihsan Trust and others provide interest-free loans for higher education to students facing financial hardship. 
  • For livelihood: Akhuwat provides microloans to help vulnerable individuals, such as widows, start small businesses so they can become self-reliant.