My sister, who is not Muslim, is going to borrow 500,000 for me from the bank with interest, and she will pay it off herself with interest. Is it permissible for me to borrow 500,000 from her, and pay back 500,000 to her, without any interest? Please note that she is going to commit herself to paying off the loan with the interest, as a favour to me.
Praise be to Allah
Dealing with riba (usury) is emphatically prohibited and is a major sin; the one who does that is subject to a warning of being divinely cursed, which means being cast out from the mercy of Allah. In that regard there is no differentiation between a believer and a disbeliever, because the minor issues of sharia are also addressed to the disbelievers, according to the more correct scholarly view. So what is prohibited for Muslims is also prohibited for them, and they will be punished for it if they do it, in addition to the punishment for disbelief (kufr) and associating others with Allah (shirk).
An-Nawawi (may Allah have mercy on him) said: The correct view, which is the view of the well-versed scholars and the majority of scholars, is that the minor issues of sharia are also addressed to the disbelievers, so silk is prohibited for them as it is prohibited for Muslims.
End quote from Sharh Muslim (14/39).
The evidence that the minor issues of sharia are also addressed to the disbelievers is the verses in which Allah, may He be exalted, says (interpretation of the meaning):
“ ‘What has caused you to enter Hell?’
They will say: ‘We were not of those who used to offer their Salat (prayers)
‘Nor we used to feed Al-Miskin (the poor)’”
“And those who do not invoke with Allah another deity or kill the soul which Allah has forbidden [to be killed], except by right, and do not commit unlawful sexual intercourse. And whoever should do that will meet a penalty.
Multiplied for him is the punishment on the Day of Resurrection, and he will abide therein humiliated”
This verse states that the punishment will be multiplied for the one who combines disbelief with murder and zina (unlawful sexual intercourse), unlike the one who combines disbelief with eating and drinking.
Al-Mustasfa by al-Ghazaali, p. 74
Similarly, Allah, may He be exalted, condemned the people of Shu‘ayb for their disbelief and giving short measure, and He condemned the people of Loot for their disbelief and homosexuality… This is the view of the Shaafa‘is and Hanbalis according to the correct view, and it is what is implied by the words of Maalik and most of his companions. It is also the view of the Iraqi Hanafi shaykhs.
Al-Mawsoo‘ah al-Fiqhiyyah (35/20).
All of this is in addition to the fact that this is also prohibited to them according to their original religious teachings, and it was one of the causes of their becoming subject to Allah’s curse and wrath, as Allah, may He be exalted, says (interpretation of the meaning):
“For the wrongdoing of the Jews, We made unlawful to them certain good foods which has been lawful to them, and for their hindering many from Allah’s Way;
And their taking of Riba (usury) though they were forbidden from taking it and their devouring of men’s substance wrongfully (bribery, etc.). And We have prepared for the disbelievers among them a painful torment”
Based on that, it is not permissible for you to tell your sister, or help her, or ask her, or approve of her taking out a riba-based loan, and you will be sinning if you do that, because in that case you will be helping her to commit something that is prohibited for her. Allah, may He be exalted, says (interpretation of the meaning):
“Help you one another in Al-Birr and At-Taqwa (virtue, righteousness and piety); but do not help one another in sin and transgression. And fear Allah. Verily, Allah is Severe in punishment”
But if she took out the loan without you telling her to do that, or against your refusal and objection, or before you came to know of the prohibition on your telling her to take out the loan, then it is permissible for you to take a loan from her – without interest – because by means of the riba-based loan the money came into her possession, and it is permissible for her to dispose of it, even though she committed a sin by dealing with riba.
And Allah knows best.