Answered by: Imam Abdul-Malik Sheikh
Can zakat be used as microfinance?
In the name of Allah, the Most Gracious, the Most Merciful
Microfinance is a type of financial service provided to unemployed or low-income individuals or groups who otherwise would have no other access to financial services. It is not a charity rather it is a type of loan. Zakat cannot be given as a loan.
Secondly, according to Quran, there are eight categories of people who are eligible for Zakat:
- The poor (Faqir who has very little wealth below Nisab)
- Destitute (Miskin who has no wealth)
- Those who are to be reconciled
- Those who collect Zakat
- Emancipation of slaves
- For those in debt
- For those in the way of Allah
- For the travelers
(See Surah at-Tawbah verse 60)
If you are referring to helping people who in debt exceeding the Nisab threshold, then this is permissible as it falls under the fifth category. If it is anything other than the above categories, then it will not be allowed.
Al-Lubab Fi Sharh al-Kitab, Vol.1, p.122, Dar al-Ma’rifah
Only Allah knows best
Written by Imam Abdul-Malik Sheikh
Checked and approved by Mufti Mohammed Tosir Miah
DarulI fta Birmingham