Answered by Shaykh Ilyas Patel
Could you please go over the rules of taking loans in order to seek knowledge of Islam? AND
The rules of entitlement of Zakat, in order to seek knowledge of Islam?
In the Name of Allah, the inspirer of all good:
Entitlement of Zakat
Zakat can be given to those who do not have ‘Excess wealth equal to Nisab’ whether is relative or non-relative. Zakat can be given to the following relatives who are the ‘furu’ e.g. brother, sister, nephew, niece, uncle, aunt, step father, step mother. It cannot be given to the ‘usul’ grand parents, parents, husband-wife, children, grand children.
Rulings on taking Loans
There are two words that are used in Arabic for loan or credit or debt. One is Qardh, the other is Dayn. The literal meaning of Dayn is recompense. So this word carries the implication that when he gives a loan, a man may only take back only the same amount, not less and not more. The meaning of Qardh is cutting and severing. In Arabic scissors are called miqradh. The person giving someone credit or a loan is cutting a part of his income or savings. Perhaps also it would mean if the lender and borrower do not stay in the limit of shari’ah their relationship would be severed. Thus, it has become a proverb, Al-qardh miqradh ul-mahabba’ a loan cuts off love like a pair of scissors.
The word Dayn is more general. Qardh is more specific and particular. So dayn refers to any kind of outstanding obligation.
Loan is a refuge in which people can turn to in times of individual, collective, economic, and political necessity. But a man should only take to this refuge as a last resort, when he is under the most extreme economic and social pressure, or when his life or honour is in danger.
Allah states in the Qur’an, Who is there who will lend Allah a friendly loan which he will double many times over.’
The Prophet (Allah bless him and give him peace) said, ‘if a Muslim gives another Muslim a loan twice, then he gets the same reward as giving (that amount in) sadaqa once.’
The actual responsibility of a Muslim who is wealthy is that he should see to the needs of a needy Muslim without him having to come back twice. This is called Sadaqa. But if he is not able to do this, then at least he should give him a loan without any interest.
Also one should give time and respite to the debtor. Allah says in the Qur’an, ‘And if he is in difficulty then he should be given deferment to make it easy for him, And if you let him off, that is to your benefit.’
The Prophet (Allah bless him and give him peace) said, if anyone would like to be saved from the agonies of the day of Qiyamah, he should give respite to a debtor who is in difficulty or remove the burden (of the debt) from him completely.’
Condemnation of taking loans without necessity
If one takes a loan for the purpose of luxury, extravagance, public reputation, or takes a loan out of necessity and does not worry about repaying it, or having the means to repay, he makes excuses and avoids paying.
The Prophet (Allah bless him and give him peace) said, O’ Allah, I seek your protection from sin and from the burden of debt.’
The following dua is recommended for everyone:
‘Allahummakfini bihalalika an haramika wa agninee bifadhlika anman siwaka’
‘O Allah, protect me with halal livelihood from haram livelihood and from your generosity make me independent of anyone other than yourself.’
Loan and Credit Transactions should be written
It has been emphasized both in the Qur’an and hadith that loans and credit transactions should be set down in writing. However it is not a a sin because the emphasis has been put down for the purpose of both parties being at ease. The longest verse (2:282) of the Qur’an was revealed concerning this.
Below are two forms 1) loan agreement form and 2) paid money form.
LOAN AGREEMENT
In the Name of Allah, The Most Compassionate, The Most Merciful
I, ________________ agree to lend/ have lent (delete as appropriate) to _____________________ the sum (in figures and words) of: _________________________________________
The borrowed sum is to be paid back in the following manner (delete as appropriate):
- As soon as it is practicable for the borrower
- In full by the date:_ _/_ _/_ _
- In weekly/monthly/annual instalments of ____ until the debt is cleared/until the date: _ _/_ _/_ _
Lenders full name: _______________________________
Lenders full address:______________________________
Lenders contact details: ____________________________
Lenders signature: ________________________________
Borrowers full name: _______________________________
Borrowers full address: _____________________________
Borrowers contact details: ___________________________
Borrowers signature: _______________________________
Witness 1 full name: ________________________________
Witness 1 full address: _______________________________
Witness 1 signature: _________________________________
Witness 2 full name: _________________________________
Witness 2 full address: _______________________________
Witness 2 signature: _________________________________
Date of Agreement: _________________________________
(In case of there being 2 female witnesses)
Witness 3 full name: _________________________________
Witness 3 full address: ________________________________
Witness 3 signature: _________________________________
Date: ____________________________________________
RECEIPT OF PAID MONEY
In the Name of Allah, The Most Compassionate, The Most Merciful
I, ___________________ acknowledge the receipt of the sum (in figures and words) of: _______ _______________________________ from ________________________ in part payment/ full payment (delete as appropriate) of the debt of ____ which was agreed on _ _/_ _/_ _.
Lenders full name: ________________________________
Lenders full address: ______________________________
Lenders contact details:_____________________________
Lenders signature: ________________________________
Borrowers full name: _______________________________
Borrowers full address: _____________________________
Borrowers contact details: ___________________________
Borrowers signature: _______________________________
Witness 1 full name: ________________________________
Witness 1 full address: ______________________________
Witness 1 signature: ________________________________
Witness 2 full name: ________________________________
Witness 2 full address: ______________________________
Witness 2 signature: ________________________________
Date of Agreement: ________________________________
(In case of there being 2 female witnesses)
Witness 3 full name: ________________________________
Witness 3 full address: ______________________________
Witness 3 signature: ________________________________
Date: ___________________________________________