Qard al-Hasan: Hezbollah's social banking arm explained

In the shadow of Lebanon's economic collapse, Qard al-Hasan was hailed as a lifeline offering affordable financing for crisis-hit families in line with Islamic principles. But it has also been sanctioned by the U.S., accused of financing terrorism – and now has become a target in the ongoing Israeli-Lebanese conflict. 

With recent strikes on its offices, Israel's focus on this non-traditional financial institution marks an escalation that raises questions over the distinction between military tactics and economic warfare.

What is Qard al-Hasan?

Qard al-Hasan is an Islamic financial institution established in 1983 that offers interest-free loans compliant with Sharia law against basic collaterals, such as gold or jewelry, or against guarantees by a third party. The institution, which operates under a license granted by the government, serves as the largest provider of microcredit loans in Lebanon. 

The name Qard al-Hasan itself translates to "benevolent loan" — a concept in Islamic finance where the borrower only repays the principal amount, free of interest or additional fees. With over 30 branches, Qard al-Hasan operates predominantly in Shi'ite areas of Beirut, southern Lebanon, and the Bekaa Valley, providing critical financial services to those unable to access traditional banking.

Unlike many conventional banks, Qard al-Hasan will offer small, flexible loans for everything from education to home repairs.

When was Qard al-Hasan founded?

Founded in the 1980s during Lebanon's tumultuous civil war, Qard al-Hasan quickly became linked to Hezbollah. Over the years, Hezbollah has integrated the institution into its network of social services, portraying it as a tool of financial empowerment for Lebanon's marginalized Shi'ite population.

Qard al-Hasan gained greater prominence as Lebanon's financial crisis deepened in 2019. Hezbollah leader Hassan Nasrallah encouraged all Lebanese, regardless of political or sectarian affiliation, to turn to Qard al-Hasan as a reliable alternative.

The U.S. Treasury Department sanctioned Qard al-Hasan in 2007, claiming it serves as a financial cover for Hezbollah's activities. 

Who borrows from Qard al-Hasan?

Primarily serving Lebanon's Shi'ite population, Qard al-Hasan has an estimated hundreds of thousands of clients, according to regional financial sources. Many borrowers are ordinary citizens who have been left out of the traditional banking system, particularly after Lebanon's economic collapse.

Hezbollah's constituency is the core of Qard al-Hasan's user base, but its reach has expanded, with the organization encouraging Lebanese from all sects to use its services. 

What is Lebanon's economic situation?

Lebanon's economic collapse, which began in 2019, has plunged the country into one of the worst financial crises in modern history. 

In a report published in August 2024, prior to the Israeli incursion, the World Bank estimated that 73 percent of Lebanese and nearly all non-Lebanese residents lived in multidimensional poverty — i.e. lacking access to essential services like electricity, healthcare, and education.

Monetary poverty, defined by the World Bank as living on less than $3 per day, has tripled in Lebanon over the past decade, affecting 44 percent of the population even before the war. 

Compounding this grim picture has also been Lebanon's currency crisis: since 2019, the Lebanese pound has lost 98 percent of its value, rendering the local currency nearly worthless. Inflation soared to 40 percent pre-war, and public-sector salaries were drastically slashed.

As the country's dollarized economy faltered, the banking system has all but collapsed, freezing many Lebanese citizens out of their savings and leaving them unable to secure loans. With the central bank under pressure, and the traditional banking sector effectively inoperable, many citizens have turned to alternatives like Qard al-Hasan to meet their financial needs. 

Civilians' plight and the grim economic situation has only worsened since Israel's attacks, which have already destroyed much of the critical infrastructure and further crippled the already fragile economy. 

Airstrikes have disrupted trade, devastated local businesses, and displaced thousands, adding to the already high unemployment and poverty levels.

Why is Israel targeting Qard al-Hasan?

On the evening of October 20, 2024, at 8:55 pm, Israel's military spokesperson announced via X (formerly Twitter) that it would soon be targeting Hezbollah's financial institution, Qard al-Hasan, and advised civilians to avoid its branches. 

Within 35 minutes, the first airstrike hit, followed by a series of attacks across Beirut's southern suburbs and other regions, including southern Lebanon and the Bekaa Valley. In total, 11 strikes were reported that night, aimed directly at Qard al-Hasan facilities.

Israel and the U.S. have long accused the institution of acting as a financial arm for Hezbollah, funneling money to support its military operations — the U.S. Treasury has accused it of moving funds through shell accounts and exposing Lebanon's financial system to sanctions. Israel's strikes follow a pattern of attempting to disrupt Hezbollah's infrastructure.

Is it legitimate for financial institutions to be military targets?

Under international law, civilian infrastructure is generally protected, unless it is being used for direct military purposes. 

While Israel and the U.S. argue that Qard al-Hasan is closely tied to Hezbollah's military activities, the institution also serves hundreds of thousands of Lebanese citizens, many of whom rely on it for basic financial needs.

This raises the issue of whether targeting Qard al-Hasan constitutes a legitimate military action or whether it could be seen as economic warfare.

International law strictly limits what can be classified as a legitimate military target: the target must have a direct and concrete contribution to military operations, and attacks must distinguish between civilian and military objectives to avoid unnecessary harm to civilians and civilian infrastructure.