Interest on Borrowed Money: Understanding the Legal Consequences Under UAE Law


In the UAE, the regulation of charging interest for borrowed money is governed by Federal Decree-Law No. 31/2021, also known as the Crimes and Penalties Law. This recently enacted legislation aims to shield individuals from unfair lending practices.

The law explicitly defines the consequences for individuals involved in interest lending outside financial institutions. The objective is to ensure fair and transparent financial transactions, safeguarding the interests of borrowers.

 Article 458: The Prohibition of Interest in Civil and Commercial Transactions

Federal Decree-Law No. 31/2021 outlines the consequences for individuals lending money with interest rates. Article 458 of Federal Decree-Law No. 31/2021 clearly prohibits the charging of interest on loans in civil and commercial transactions.

According to this provision, any person who lends money to another individual with an interest rate in return for late payments, regardless of the nature of the transaction, can face severe penalties.

 The Punishments

People found guilty of lending with interest under Article 458 may face imprisonment for at least one year and have to pay a fine of at least AED 50,000. Hidden charges, called implicit interest, are also part of this rule. This means asking for any extra money or benefit that is not linked to a real and legal service provided by the lender.

To prove the original debt and implicit interest, the people involved have to show evidence, and different ways can be used to do that. If proven not to be in return for a genuine and lawful benefit or service, it can lead to prosecution.

 Aggravating Circumstances

Article 458 recognizes that if a lender takes advantage of a borrower’s need, weakness, or situation to charge interest, it is considered making things worse. This makes the legal consequences even more serious. This part of the rule shows how important it is to protect people from being taken advantage of in financial deals.

 Penalties for Repeat Offenders

Article 459 of the same decree-law addresses individuals who are repeatedly engaged in interest lending. Such persons, those who repeatedly engage in the practice, face more severe penalties. According to this article, repeated lenders may be sentenced to temporary imprisonment for a period not exceeding 5 years and a fine of not less than AED 100,000.

Federal Decree-Law No. 14/2018 on the Central Bank and the Organization of Financial Institutions and Activities, under this law, grants authority to the Central Bank of UAE over licensed financial institutions, including banks, and other financial entities. As per federal law, only the licensed financial institution has the authority to engage in the financial operation.


In summary, the UAE’s legal framework, as outlined in Federal Decree-Law No. 31/2021, strictly regulates the charging of interest for borrowed money. The law aims to protect individuals from unfair lending practices and ensures transparent financial transactions.


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