The UAE has implemented strict penalties for individuals charging interest on loans without proper licensing.
Federal Decree Law No. 31 of 2021, specifically Articles 458 and 459 of the UAE Criminal Law, mandates that only licensed banks and financial institutions can provide interest-based loans. Applicable to civil and commercial transactions, the law imposes significant penalties for violations, including a minimum one-year jail term and fines starting at AED50,000.
Repeat offenders may face up to five years of temporary imprisonment and a minimum fine of AED100,000. The legislation aims to protect consumers from predatory lending practices and maintain financial stability.
Legal expert Ashish Mehta suggests opting for interest-free loan agreements with all parties duly signing to ensure legality, addressing concerns about the legality of private lending practices in the UAE.
