Question Summary:
A donation given the name of Qardh-e-Hasnah.

Question Detail:

A Company known as ABC Ltd gave Qarze Hasna (“QH”) to some its redundant employees with the intention that they can establish their business and can enhance their financial position. The purpose of this QH was not to earn any profit or commercial gain, instead the only reason why it was called QH because the company wanted to ensure that there is some sort of obligation on the receivers to utilize their funds in an effective manner. This amount was reflected in the co.s accounts as loan by the auditor and the same was mentioned in the audit report.
This raised flag in the regulatory body, hence they issued a show cause notice demanding the co. to explain why they gave QH (loan) as it was not permitted by their charter. In this scenario, the co.’s lawyer explained that the amount given was not a loan at all, instead it was only given to aid the needy individuals with no intent of any commercial gain. The current year auditor had advised to write off the amount as donation expense since it was not a loan (according to the new auditor) In this scenario, I would like to know that the funds given at the time of disbursement should be classified as QH. Please also define the concept of Qarze Hasna ?

Answer :

In the Name of Allah, the Most Gracious, the Most Merciful.
As-salāmu ‘alaykum wa-rahmatullāhi wa-barakātuh.
Qardh-e-Hasanah is an interest free loan. In qardhul hasan, the borrower only repays the principal amount.
In principle, it is permissible to waive of a loan as a gift or donation.¹
In the enquired scenario, since the loan was a donation given the name as a Qardh-e –Hasan for the purpose of utilising the funds in an effective manner, it will be considered as a donation at the time of disbursement.² The auditors advise to write of the Qardh-e –Hasan as a donation is in order.
And Allah Ta’āla Knows Best
Huzaifah Deedat
Student Darul Iftaa
Lusaka, Zambia 
Checked and Approved by,
Mufti Ebrahim Desai.
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بدائع الصنائع في ترتيب الشرائع-دار الكتب العلمية (6/ 92)1
القرض تبرع في الحال، إذ لا يقابله عوض للحال
مجلة الأحكام العدلية (ص: 230)- نور محمد، كارخانه تجارتِ كتب، آرام باغ، كراتشي
 كُلٌّ يَتَصَرَّفُ فِي مِلْكِهِ كَيْفَمَا شَاءَ. لَكِنْ إذَا تَعَلَّقَ حَقُّ الْغَيْرِ بِهِ فَيُمْنَعُ الْمَالِكُ مِنْ تَصَرُّفِهِ عَلَى وَجْهِ الِاسْتِقْلَالِ
 الأشباه والنظائر لابن نجيم (ص: 23)- دار الكتب العلمية22
 الْأُمُورُ بِمَقَاصِدِهَا