Definition of Gharz Al-Hasanah
The term Gharz Al-Hasanah (al-qard al-hasan) means benevolent loan, gratuitous loan, interest free loan, no Interest-bearing loan and also beautiful loan which is returned at the end of the agreed period without any interest in the profit or loss of the business.
The word "Gharz” or “qard" is derived from Arabic "qirad" which means 'to cut'. It is called Gharz or qard, as it cuts certain part of the lender's property by giving loan to the borrower. Hasan is also an Arabic word, which originates from 'ihsan'. Ihsan means kindness to others.
Accordingly, Gharz Al-Hasanah is a kind of gratuitous loan given to the needy people for a fixed period without requiring the payment of interest or profit. The receiver of Gharz Al-Hasanah (qard al-hasan) is only required to repay the original amount of the loan.