Question # 383: When should zakaah be paid on money that is loaned out?

bismi-llahi r-raḥmani r-raḥīm,

Assalamu ‘laikum warahmatullahi wabarakatuh,

All praise and thanks are due to Allah (سبحانه و تعالى), and peace and blessings be upon His Messenger (صلى الله عليه و سلم).

Dear questioner,

First of all, we implore Allah (سبحانه و تعالى) to help us serve His cause and render our work for His sake.

Shorter Answer: The lender has to pay zakah annually on the money lent, if the borrower is rich and is known to repay debts promptly or if paying off the loan is guaranteed. However, if the borrower is in difficulty or is known to delay repayment, then the lender has to pay zakah only after the passage of one full year after recovering the money and he does not have to pay zakah during or before the time, he gets his money back according to Imam Malik, Imam Abu Hanifah and Shaykh Ibn ʻUthaymeen. However, according to the Hanbalis, the creditor should pay the zakah on that loan money upon the repayment for all the past years it has been with the debtor, while the Shafi’is maintain that the creditor should pay zakah after the passage of one lunar year even before the debt repayment.

Long Answer: The scholars of the Standing Committee said: “If the debtor is in difficulty or he has sufficient funds but he is taking a long time to pay back the loan, and the lender cannot get his money back from him – either because he does not have proof that will help him get it back through the authorities or he has proof but he cannot find any authority figure to help him get his rights – as happens in some countries where there is no support for people’s rights – then the lender does not have to pay zakah until he gets his money back and one full hijri year has passed since he got it.

But if the debtor has sufficient funds and it is possible to get the money back from him, then the lender has to pay zakah every time a full hijri year has passed, if the loan reaches the nisaab by itself or when added to other money, etc.(Fataawa al-Lajnah al-Daa’imah li’l-Buhooth al-‘Ilmiyyah wa’l-Ifta)

According to the opinion of the majority of the scholars, when the debt is repaid, you are obliged to pay zakah on that money for all the years during which it was with the borrower. Imam Malik on the other hand, held that the person is only obliged to pay zakah on the loan money for one year only after the repayment. This view is held as the preponderant one by the well-versed scholar Ibn ʻUthaymeen. Abu Hanifah held the opinion that you should not pay zakah for that money upon receiving the debt repayment; rather, one lunar year after that… The Kuwaiti Encyclopedia of Fiqh reads: “The Hanbalis maintained that the deferred debt is the same as the debt to which an insolvent debtor is liable because the creditor cannot get his money back right away. In this case, the creditor should pay the zakah on that loan money upon the repayment for all the past years it has been with the debtor. This is the preponderant view of the Shafiʻis as well. The outweighed view of the Shafiʻis suggests that the creditor should pay zakah after the passage of one lunar year even before the debt repayment.” (Islamweb.net, a web site belonging to the Ministry of Awqaf and Islamic Affairs in the State of Qatar)

According to Dr. Main Khalid Al-Qudah, Member of the Fatwa Committee of Assembly of Muslim Jurists in America: “You do not have to pay Zakah on what you lend to others till you actually get your money back. However, paying Zakah on the lent money is preferred, especially when paying off the loan is guaranteed.”

[In summary, according to Islamqa.info,]

  1. The lender has to pay zakah annually on the money lent, if the borrower is rich and is known to repay debts promptly. In this case, because it is possible to recover the money readily, it is like money that is in one’s possession.
  2. The lender has to pay zakah one full year after recovering the money if the borrower is in difficulty or is known to delay repayment. He does not have to pay zakah before he gets the money back, because it is not readily accessible and this is not like money that is in one’s possession.

[As a side note,] …if the debtor is in difficulty, then the lender must give him more time until Allah makes things easier for him. Allah (سبحانه و تعالى) says in the Qur’an: “And if the debtor is in a hard time (has no money), then grant him time till it is easy for him to repay, but if you remit it by way of charity, that is better for you if you did but know”  (Soorah al-Baqarah 2:280). Shaykh ‘Abd ar-Rahmaan as-Sa‘di (may Allah have mercy on him) said: “That is, if the one who owes the debt is in difficulty and is not able to pay it off, the lender must give him more time until things get easier, and if he acquires enough to pay it off by any permissible means, then he must pay off what he owes. If the lender does him a favor, by waiving the entire debt or part of it, that is better for him.” (Tafseer as-Sa‘di (p. 959)

Allahu A’lam (Allah (سبحانه و تعالى) knows best) and all Perfections belong to Allah, and all mistakes belong to me alone. May Allah (سبحانه و تعالى) forgive me, Ameen.

Wassalaam