Qur'an and the Sunnah on Loan
General Rules in the Light of the Qur'an and the Sunnah
Duties of Debtors
Duties of Creditors
I- The Qur’an and the Sunnah
Before dealing with
the subject of loan in detail and discussing its various aspects,
we shall reproduce the verses of al-Qur’an and traditions of
Prophet Muhammad (PBUH) relating to this subject.
Verses of the
1. O ye who believe
! Observe your duty to Allah, and give up what remaineth due to
you) from usury, if ye are (in truth) believers. And if ye do not,
then be warned of war (against you) from Allah and His Messenger.
And if ye repent, then ye have your principal (without interest).
Wrong not, and ye shall not be wronged.
2. And if the
debtor is in straitened circumstances, then (let there be)
postponement to (the time of) ease; and that ye remit the debt as
almsgiving would be better for you if ye did but know.
3. O ye who
believe! When ye contract a debt for a fixed term, record it in
writing. Let a scribe record it in writing between you in (terms
of) equity. No scribe should refuse to write as Allah hath taught
him, so let him write, and let him who incurreth the debt dictate,
and let him observe his duty to Allah his Lord, and diminish
naught thereof. But if he who oweth the debt is of low
understanding, or weak, or unable himself to dictate, then let the
guardian of his interests dictate in (terms of) equity. And call
to witness, from among your men, two witnesses. And if two men be
not (at hand) then a man and two women, of such as ye approve as
witnesses, so that if the one erreth (through forgetfulness) the
other will cause her to recollect. And the witnesses must not
refuse when they are summoned. Be not averse to writing down (the
contract) whether it be small or great, with (record of) the term
thereof. That is more equitable in the sight of Allah and more
sure for testimony, and the best way of avoiding doubt between
you; save only in the case when it is actual merchandise which ye
transfer among yourselves from hand to hand. In that case it is no
sin for you if ye write it not. And have witnesses when ye sell
one to another, and let no harm be done to scribe or witness. If
ye do (harm to them) lo! it is a sin in you. Observe your duty to
Allah. Allah is teaching you. And Allah is Knower of all things.
4. If ye be on a
journey and cannot find a scribe, then a pledge in hand (shall
suffice). And if one of you entrusteth to another let him who is
trusted deliver up that which is entrusted to him (according to
the pact between them) and let him observe his duty to Allah. Hide
not testimony. He who hideth it, verily his heart is sinful. Allah
is Aware of what ye do.
5. Allah chargeth
you concerning (the provision for) your children: to the male the
equivalent of the portion of two females, and if there be women
more than two, then theirs is two-thirds of the inheritance, and
if there be one (only) then the half. And to his parents a sixth
of the inheritance, if he have a son; and if he have no son and
his parents are his heirs, then to his mother appertaineth the
third; and if he have brethren, then to his mother appertaineth
the sixth, after any legacy he may have bequeathed, or debt (hath
6. The alms are
only for the poor and the needy, and those who collect them, and
those whose hearts are to be reconciled and to free the captives
and the debtors, and for the cause of Allah, and (for) the
wayfarers; a duty imposed by Allah. Allah is Knower, Wise.
Prophet Muhammad (PBUH) :
1. Abu Qatadah
reported: I heard the Holy Prophet say: Whoso gives respite to a
debtor or grants him remission, Allah will save him from the
calamities of the Resurrection Day.
2. Abu Hurairah
reported that the Messenger of Allah said: Whoso takes loan of the
properties of men intending to pay it back, Allah gives him means
to pay it, and whoso takes loan intending to destroy it, Allah
will destroy him on its account.
3. Abu Qatadah
reported that a man enquired: O Messenger of Allah inform me that
if I be killed in the way of Allah, patient, hopeful of reward,
advancing forward without retreating, whether Allah will forgive
my sins, “Yes” replied the Apostle of Allah. When he retraced his
steps, he called him and said: Yes, except debt. Thus said
4. Abu Hurairah
reported: If any dead body with debts due was brought before the
Messenger of Allah, he used to ask: Has he left any source of
payment for his debt? If he was informed that he left means for
payment, he used to say his funeral prayer, but of not, he used to
address the Muslims: Say prayer for your companion. When Allah
granted him victories, he stood and said: I am an object of love
of the Muslims more than their ownselves. So whoso among the
believers dies and leaves debt, its payment devolves on me, and
whoso leaves property, it is for his heirs.
-(Bukhari and Muslim)
5. Osamah bin Zaid
reported that the Messenger of Allah said: Usury is in promise.
And in another narration he said: There is no usury in what is
hand to hand.
-(Bukhari and Muslim)
6. Abdullah bin
Hanjalah reported that the Messenger of Allah said: A dirham of
usury a man devours with knowledge is greater than thirty six
7. Abu Musa
reported from the Prophet who said: Verily the greatest of sins to
Allah with which a man shall meet Him after the great sins which
Allah prohibited is his debt outstanding at death but leaving
nothing for its payment.
-(Ahmad, Abu Daud)
8. Anas reported
that the Messenger of Allah said: When someone of you gives a
loan, and then he (debtor) sends present to him or carries him
upon a beast – don’t ride on it, nor accept it unless it was
prevalent between them previous to it.
-(Ibn Majah, Baihaqi)
reported that the Messenger of Allah said: Whoso has his dues from
a man and then gives time to him (for payment), he will get his
reward of charity every day.
Muhammad-b-Abdullah reported that the Prophet of Allah said: “And
by One in Whose Hand there is the life of Muhammad, if a man be
killed in the way of Allah and then raised to life, and again be
killed in the way of Allah and again raised to life, and again be
killed in the way of Allah and again raised to life with debt due
from him, he shall not enter Paradise till his debt is satisfied.
11. Abu Hurairah
reported that the Messenger of Allah said: There was a man who
used to give loan to the people. He used often to say to his son:
When you come to a needy man, grant him remission, so that Allah
may remit us (of sins). He said that he then met Allah and He
granted him pardon.
-(Bukhari and Muslim)
reported: I heard the Messenger of Allah say: Whoso gives respite
to a debtor or grants him remission, Allah will give him shade
under His shade.
13. Abu Hurairah
reported that a man demanded of the Holy Prophet for repayment of
a loan and was greatly harsh to him. His companions were about to
attack him, but he said: Leave him, as the creditor has got a
demand. Buy a camel for him and give it to him. They said: We
don’t but find senior to it in years. He said: Then buy it and
give it to him, and verily the best of you is he who is the best
of you in repayment of loan.
reported : I heard the Messenger of Allah say: Areeat loan must be
paid back, and Minha present must be returned, and debt must be
paid, and the surety is a debtor.
-(Abu Daud, Tirmizi)
reported that he made demand to Ibn Abi Hadrad within the mosque
of a loan which he owed to him at the time of the Holy Prophet.
Their voices were so loud that the Prophet heard it while he was
within the mosque. The Holy Prophet came out to him till the
screen of his room was exposed. He called Ka’ab-b-Malek. He asked
: O Ka’ab ! ‘present’ replied he ‘O Messenger of Allah! Then he
hinted with his finger : Remit half of your debt. Ka’ab said: O
Prophet of Allah ! I have just done,’ He said (to debtor) : Get up
and pay it (remaining half).
reported that the Apostle of Allah said: Every sin of a martyr
shall be forgiven except debt.
17. Abu Hurairah
reported that the Messenger of Allah said: The soul of the
believer remains hanging with his debt till it is paid.
-(Ahmad, Tirmizi, Ibn Majah)
18. Jaber reported:
I had a debt due from the Apostle of Allah. He paid it back and
paid me excess.
Burdah-b-Musa reported : I came to Medina and met Abdullah-b-Salam.
He said : Verily you are in a land wherein usury is prevalent. So
when you have got dues from a man, and the latter gives you
present of wheat or a load of grass, don’t accept it as it is
20. And it has been
narrated by Bara’a bin Arib that Mu’az was indebted, and his
creditor came to the Holy Prophet. So the Prophet purchased all
his properties in exchange of his debt till Mu’az stood penniless.
21. Abu Sayeed al-Khudri
reported that a dead body was brought to the Messenger of Allah
for his funeral prayer. He enquired : Is there any debt due from
your companion? ‘Yes’ said they. He asked: Has he left anything
for payment? ‘No’ said they. He then said: Pray for your
companion. Ali-b-Abi Taleb said: O Messenger of Allah ! his debt
is upon me. Then he stepped forward and offered his funeral
prayer. In a narration of the same meaning he said: May Allah save
your surety from Hell as you saved the loan of your brother
Muslim. There is no Muslim who pays off the debts of his brother
but Allah will save his surety on the Resurrection Day.
Sa’ad-b-al-Atwal reported: My brother died and left one third of
one hundred dinars and left behind minor children. I wished to
spend (it) for them. The Messenger of Allah said to me : Your
brother is confined for his debt, so pay it off. He said: Then I
went, paid it, returned and said: O Messenger of Allah ! I have
paid it, and there remains none except a woman who claims two
dinars without any proof. He said : Pay her, as she is truthful.
23. Abu Hurairah
reported that the Messenger of Allah said: Whoso becomes insolvent
and afterwards a man (creditor) takes hold of his exact property,
he is more entitled to it than others.
24. Abu Sayeed
reported that a man suffered damage during the time of the Holy
Prophet in respect of fruits which he had purchased. His debt
became heavy. The Messenger of Allah addressed: Give alms to him.
So the people paid him alms but that did not come up towards
satisfaction of his (entire) debt. Then the Apostle of Allah said
to his creditors: Take what you find, and there is nothing besides
that for you.
25. Sharid reported
that the Messenger of Allah said: For a solvent man, his honour
and punishment become lawful. Ibnul Mubarik said: “His honour is
lawful” – means to treat him harshly is lawful and his punishment
by confining him is lawful.
-(Abu Daud, Nisai)
26. The Messenger
of Allah is reported to have said: “Three kinds of people cry out
to Allah for help but are not answered : first, those who have
ill-tempered wives but do not divorce them; second, those who are
entrusted with the property of orphans but return it to them
before they attain maturity; third, those who lend money to others
without any document or evidence.”
27. Anas reported
that the Messenger of Allah said: when someone of you gives a loan
and then he (debtor) sends present to him or carries him upon a
beast do not ride on it, nor accept it unless it was prevalent
between them previous to it.
28. Ayesha reported
that the Holy Prophet died while his coat of mail was in pledge to
a Jew for thirty Sa’as of barley.
29. Abu Hurairah
reported that the Messenger of Allah said: A back may be ridden
upon with his expense when it is a pledge, and the milk of the
udder may be drunk with his expense when it is a pledge. And on
one who rides on or drinks is the expense.
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II- General Rules in the Light of the
Qur’an and the
principles flow from the verses of the Qur’an and Ahadith of the
Prophet of Islam:
Islam recognises Qard Hasanah (gratuitous loan)
only. Loan may be in any form i.e. in cash or in commodity, it may
be big or small, it may be for personal needs of the debtor or for
purpose of business, the loan shall be given without interest.
Interest has been prohibited by Islam and so it cannot be charged
on any loan in any form. The Prophet (PBUH) has even forbidden the
creditor to accept any gift or any favour from the debtor after
giving him loan as it would be considered usury unless the
practice of exchanging gifts or accepting favours was prevalent
between them previously.
No loan should be contracted except in case of
extreme necessity. Borrowing for purpose of luxurious and
extravagant living is not permitted. It can only be resorted to if
one’s basic needs are not being fulfilled. indebtedness has been
discouraged by Islam as it ruins the individuals as well as
nations. This can be easily known from the severe warnings that
have been given in case of debts left unsatisfied. All the sins of
a martyr are forgiven except debt. The Prophet did not offer
funeral prayer of a debtor who did not leave behind provision for
payment of his debts. The greatest of sins with which a man shall
meet Allah on the Day of Judgement is his debt outstanding at
death for payment of which he leaves nothing. Keeping in view
these warnings, great precaution should be taken in contracting
Since the verbal agreements regarding loans lead to
disputes, feuds and litigations, the revealed book of Islam has
made it obligatory on both the parties, creditor as well as
debtor, to reduce the contract of debt into writing in the
presence of two witnesses and settle terms and conditions
regarding its repayment. The scribe is to write the contract
according to the dictation of the debtor and in case the debtor is
of unsound mind or minor, according to the dictation of his
guardian. But in case a debt is contracted during a journey and no
scribe is available, then the debtor should give some of his
property in pledge to the creditor. The scribe and the witnesses
owe duty to be fair in writing and giving evidence, while the
creditor and debtor owe duty not to harm them in any way. Writing
down of contracts of loan is so much important that the Prophet of
Islam is reported to have said that those who lend money to others
without any document or evidence are not helped by Allah when they
cry for help in case of non-recovery of such loan.
The lender can ask for some security in the shape
of any asset or property from the debtor as a guarantee of
repayment of loan. It is technically called mortgage or ‘Rahn’.
The creditor is, however, strictly prohibited to make any profit
out of mortgaged property because it would be usury. But he is
allowed to drink the milk of or ride on the animal which is a
pledge if he incurs expenses of its fodder.
Payment of debt is a first charge upon the estate
of deceased before the estate is divided among its legal heirs.
In the absence of any such contract, the repayment
of debt voluntarily with excess amount is lawful. It is not riba.
According to Jaber, the Prophet owed him some debt and when he
paid it back he paid excess.
Loan should be contracted with an intention of
repaying it. According to a Hadith, whoever takes a loan with an
intention of not returning it is a thief.
Creditor has right to use harsh words against a
debtor who does not pay back his loan. Even a debtor can be
imprisoned for non-payment of loan by a court when suit for
recovery is filed by the creditor before such court.
If a debtor is in straitened circumstances and is
not in a financial position of repaying his debt, then the
creditor should postpone his demand to the time when the financial
position of the debtor improves and he is able to repay it.
However, if the creditor remits the debt as almsgiving, it would
earn him high rewards from God.
A debtor is eligible for Zakat for discharging
burden of his debt. Islamic state is obliged to help the debtors
out of its Zakat revenues as freeing the debtors of their debt
liabilities is one of the heads prescribed by the Qur’an on which
Zakat collected by the state should be spent.
When there is dispute between the creditor and the
debtor regarding repayment of loan and the debtor is unable to
satisfy the demand of the creditor, the ruler or the judge should
try to make settlement between them. The creditor should be asked
to remit part of the debt while the debtor should be asked to make
prompt payment of the remaining debt.
To free the neck of a poor debtor is very virtuous
act which carries great reward. The Prophet of Islam is reported
to have said: There is no Muslim who pays off the debt of his
brother but Allah will save his surety on the Resurrection Day.
If a poor person dies with unpaid debt leaving no
property for its discharge, Islamic state is responsible for its
payment provided the debt is genuine and the Islamic state is
financially in a position to do so. It can repay such debts from
its Zakat funds also. The Prophet, as first head of the Islami
state accepted this responsibility when the state under him
attained sound financial position.
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III- Duties of Debtors
A person should avoid indebtedness because debt is
a great burden and responsibility. Debt destroys peace of mind and
in case of non-payment it destroys one’s prospects of salvation in
the Hereafter. One must try to refrain from incurring debt and
should always pray: “Allah ! I seek refuge to thee from
overwhelming debt and oppression of men’’. The Prophet himself
used to pray like that so often.
Debt should be incurred only when it is
unavoidable. It may be incurred to satisfy basic needs or to
discharge an essential responsibility such as marriage or
education of children, medical treatment of a member of
family or building a house. In no case debts should be contracted
for unlawful purposes or for luxurious living.
Debt should be taken with a clear intention to pay
it back. If one takes loan intending to repay it, God gives him
means to do so, but if he takes it with the intention to destroy
it, God will destroy him on its account.
It a creditor demands for some security in shape of
property or asset, the debtor is bound to provide him the same. In
case the creditor asks for some surety or guarantee of a third
person, the debtor should provide such surety or guarantee.
However, the debtor is duty-bound to honour his promise of
repayment of loan and in no case he should place the dignity of
his surety at stake.
Debtor should pay back the debt promptly on the
promised date or earlier. In any case debt should be discharged
even if he has to sell all his property and he is left with
nothing. Repayment of loan is so much stressed in Islam that the
debtor has been given permission to beg for alms or seek Zakat in
order to discharge his burden.
If the debtor does not honour his pledge and does
not make the payment of loan despite persistent demand of the
creditor, the creditor has the right to use harsh words and sue
him in a court. Confinement of the debtor in a prison or auction
of his properties is lawful for satisfying his debt.
Non-payment of debt is a great sin. If a man is
killed in the way of Allah many times but dies without paying his
debt, he shall not enter paradise till his debt is satisfied. All
the sins of a martyr are forgiven except his debt. Therefore, the
debtor is duty-bound to clear his debts before his death.
Otherwise his legal heirs should clear his debts.
Contract of loan should be reduced in writing in
the presence of two witnesses. The debtor has the right to give
dictation to the scribe when the contract of loan is being
written. He should, however, give dictation according to the terms
settled and should not diminish anything.
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IV- Duties of the Creditors
A Muslim who advances loan should know that
interest is forbidden in Islam. So he should help his brother is
need with a gratuitous loan (Qard-e-Hasan). He should not charge
any interest, neither he should expect any gift or any other
unusual favour from his debtor. Acceptance of present or even
riding upon the beast of debtor amounts to ‘Riba’ (interest)
according to a tradition. Qard-e-Hasan (loan without interest) in
itself is an act of great virtue and Allah rewards the lender out
of His infinite bounty who helps Allah’s creatures. A well-to-do
Muslim, therefore, should not hesitate to give Qard-e-Hasanah to
another needy Muslim.
Loan should be advanced to a genuinely needy person
who requires the loan for his genuine needs and not for the
purpose of luxuries or extravagant expenses on marriages and
festivities or for unlawful activities like drinking and gambling.
If a non-genuine person requests for loan, you have every right to
turn down such request because you have no social responsibility
under Islamic Shariah to help those who indulge in extravagance
and illegal activities.
When a creditor lends money to someone, he should
make a contract in writing with the debtor settling terms and
conditions of loan and the time for its return. Such contract or
document should be executed in the presence of two witnesses.
According to a Hadith of the Holy Prophet, a person who lends
money without any document or evidence is not helped by Allah when
he cries for such help in case of non-recovery of loan.
The creditor should be generous enough in extending
the time of repayment of loan if the debtor is in straitened
circumstance and is unable to meet his demand. Giving respite to a
debtor or postponing recovery of loan till the debtor is in easy
circumstances is an act of great virtue which gets reward of
charity from Allah every day till the date of final recovery.
If the debtor has become insolvent and is not in a
position to pay back the loan, the creditor is enjoined upon to
remit the debt. Remission of loan amounts to almsgiving and is an
act of great virtue which carries many rewards. According to
Prophet Muhammad (PBUH), whoso gives respite to a debtor or grants
him remission, Allah will protect him from the calamities of the
Resurrection Day and will give him shade under His shade.
According to another Hadith, a man was given pardon by Allah as he
used to say to his son : “When you come to a needy person, grant
him remission so that Allah may remit us of our sins.”
If the debtor is not able to make full payment, the
creditor shall accept partial payment and remit the balance or
accept payment in installments. In case debtor’s property is sold
and the sale proceeds thereof are not able to fully satisfy the
claim of the creditor, the creditor should content himself with
the sale-proceeds and remit the remaining debt.
Although a creditor is allowed to use harsh words
in case of a solvent debtor who does not repay the loan despite
persistent demand, but still he is instructed not to lose his
cool. He should kindly treat his debtor and should not injure
dignity of the debtor by indecent course of recovery. Allah
enjoins justice and kindness in mutual dealings.
If the debtor
has surrendered some property or asset as security to the
creditor, the creditor is not entitled to take any undue profit or
benefit out of that because, according to jurists, it would amount
to usury. However, he can ride the animal or get its milk if it is
in pledge and he maintains it on his own expense.
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