I am a web developer and I was recently asked by an old client to add interest calculating functionality on a monthly recurring membership app.

Basically he wants me to add functionality which will add interest on late payments as well as add late payment fees on invoices.

I wanted to ask that can I do it? Is it allowed according to the Shariah law?

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Based on this topic

It is not permitted to delay what is due to others and take too long to pay it. The person to whom the money is owed has the right to demand his money and to cancel the contract for the remaining time. But it is not permissible for the one who is affected by the late payment to add more to the amount that he is owed, as when a person owes a payment by a specific date and does not pay it, it becomes a debt upon him. And any extra fee taken for the lateness of this debt would be considered riba and is haraam. The exception is in the case of a penalty that is stipulated as a condition in a construction contract (e.g., for lateness in completing a building or structure), if both parties have agreed to that or it is imposed by a shar’i judge as a deterrent and rebuke for taking other people’s rights too lightly. .

Allah knows best

  • late fee can be seen as a deterrent as mentioned in the quote. I don't see why it is allowed only in construction contract or as imposed by shari' judge
    – Shafeek
    Jul 29, 2022 at 13:41

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