Borrowing from relatives in Libya: rules and precautions
In Libya, lending between individuals relies on family, tribe and savings circles called jamaiya, because no peer-to-peer lending platform is authorised and Law No. 1 of 2013 also bans any interest on money lent between private persons.
The weight of family solidarity in Libya
Faced with banks that require a domiciled salary, many Libyans first borrow from a brother, a cousin or a friend. These loans pay for a wedding, a used car or building work, and are repaid on a schedule that is often only verbal.
The jamaiya, savings circle of Libyan neighbourhoods
In a jamaiya, a group of colleagues or neighbours pays a fixed sum in dinars each month, and each member receives the pot in turn. This interest-free system is common in government offices in Tripoli and Benghazi.
Interest is banned between individuals too
The 2013 law on usurious transactions does not target banks alone. A loan of money between two private persons cannot include interest, and such a clause could be declared void by a Libyan court.
No authorised P2P platform
The Central Bank of Libya reserves lending to licensed banks and has created no digital lending licence. Apps or pages presenting themselves as peer-to-peer lending platforms therefore operate entirely outside any Libyan legal framework.
A written IOU in dinars, even within the family
Even between relatives, a dated and signed document stating the amount in LYD, the due date and the identity of both parties prevents conflict. Witnesses, customary in local tradition, strengthen the evidence if a disagreement arises later.
Lending in foreign currency and the exchange rate
Lending dollars or euros bought on the parallel market exposes both parties to the gap between the official and street rates. It is better to state in writing the exact currency of repayment to avoid any dispute.
Money from the Libyan diaspora
Libyans settled in Tunisia, Turkey or Europe often help relatives who stayed at home. These funds move through bank transfers or informal money changers, which raises real questions of traceability and security for both sides.
When the bank remains the better option
For a large purchase backed by a domiciled salary, the murabaha offered by Libyan banks provides a clear contract and a fixed price. It also avoids placing a heavy debt on family relationships.
Small traders and supplier credit
In the souks of Misrata or Zawiya, wholesalers often give their resellers time to pay. This informal trade credit plays a role similar to microcredit in Libya, which is still very underdeveloped.
Peer-to-peer loan scams targeting Libyans
Profiles on Facebook or Telegram offer fast personal loans against processing fees paid upfront. This classic scheme also targets Libyans, often using fake bank documents or forged certificates to look credible and trustworthy.
Mediation and settling disputes
When a loan is not repaid, the extended family, tribal elders and local notables frequently step in before any court action. A signed document nonetheless remains essential if the matter later has to go before the Libyan civil courts.
Neighbouring Morocco, another informal lending scene
In Morocco, peer-to-peer lending in Morocco also remains largely informal. What sets Libya apart is the legal ban on interest, which makes the free loan the only lawful form between two individuals.
Setting up a loan between relatives in Libya
- Agree together on the amount in LYD, the repayment date and any instalments.
- Draw up a dated IOU signed by both parties and by witnesses.
- Pay the sum by bank transfer or LyPay rather than in cash to keep a record.
- Decide what happens in case of delay, without any interest clause contrary to the 2013 law.
- Keep proof of every repayment and hand back the document once the debt is settled.
Costs and risks of a private loan in Libya
| Item | Situation in Libya | Watch point |
|---|---|---|
| Interest | Banned by Law No. 1 of 2013 | Interest-free loans only |
| Bank transfer or LyPay | Fees depend on the bank | Keeps proof of payment |
| Jamaiya | No interest or fees | Risk of a member defaulting |
| Foreign-currency loan | Gap between official and parallel rates | State the repayment currency |
Useful papers for a private loan in Libya
- Copies of both parties' ID cards with national number
- Signed and dated IOU
- Names and signatures of the witnesses present
- Transfer records or repayment receipts
What goes wrong in Libyan private loans
- Paying insurance or processing fees to a stranger on Telegram who promises a personal loan in dinars or dollars.
- Lending a large sum to a relative with nothing in writing, then having no proof if a family disagreement arises.
- Hiding interest in the contract, a clause contrary to the 2013 law and a source of disputes.
- Joining a jamaiya with strangers and no reliable organiser, at the risk of seeing the pot vanish before your turn.
Lenders to contact
- National Commerce Bank (NCB): Libyan commercial bank offering individual customers a murabaha instalment financing service to fund personal purchases through scheduled repayments.
- Aman Bank: Libyan commercial bank with an Islamic banking offer, providing murabaha financing to its individual and business customers.
- Aman Bank: Libyan commercial bank whose website presents its Islamic banking offering and explains what Sharia-compliant finance means for its customers.
Questions about peer-to-peer loans in Libya
Can an individual lend with interest in Libya?
No. Law No. 1 of 2013 banning usurious transactions also applies to loans between private persons. The loan must therefore be free of charge; an interest clause could be cancelled and expose the lender to legal difficulties.
Are there peer-to-peer lending websites in Libya?
No platform is approved by the Central Bank of Libya, which reserves lending to banks. Sites and pages offering this service operate without authorisation and are often linked to advance-fee frauds.
How does a jamaiya work?
Each member pays the same amount on a fixed date and the whole pot goes to a different participant at each round. It is a collective, interest-free form of saving, very widespread among Libyan public-sector colleagues, and it rests entirely on trust.
Must a Libyan family loan be signed before a notary?
It is not compulsory for a small amount, but a notarial deed or an IOU signed before witnesses makes proof easier. For a large sum, an authenticated deed is recommended to limit challenges.