• Debt: Comments on a bad debt
In an earlier answer on Zakah and bad debts, you mentioned that we do not own our money. It belongs to Allah and we are placed in charge of it. With this concept in mind, how can we explain "loss" or "profit"? The way I would look at it is that when you do not receive your money back, you are losing money that belongs to Allah but at the same time you are gaining Allah's reward for not demanding it and for writing it off. If the money is returned, you have the chance to use it for a good purpose as well as Allah's reward for doing a good deed. Please comment.
I like your comments, but I would not go as far as you have. If you lend money to someone and he does not return it, though he is able to do so, you certainly have lost it. It is true that you will gain reward from Allah for doing a good turn to someone in need, but it is Allah who has placed you in charge of something that He owns. He also allowed you the privilege of putting your money to a good purpose of your own choice, including every legitimate matter which brings you, your family and other people comfort and happiness. If someone defrauds you of that privilege by borrowing some of your money and deliberately refusing or neglecting to return it, then he is taking away from you something that Allah has given you. It is not for any human being to do that.
On the other hand, Allah urges us to postpone repayment dates of loans other people may owe to us, if we know that the borrower is insolvent. If we do so, or, better still, write the loan off, we certainly earn generous reward from Allah. He has also made it clear that we may ask for any legitimate guarantees that what we lend to others is returned to us. The longest verse in the Qur'an deals with the need to write down the terms and conditions of loans that we may make. It requires believers to write down these terms and to have witnesses to the contract. The Prophet also describes as an injustice the action of a person who delays repayment of a debt when he is able to repay it.
• Debt: Compensation for late payment
I gave money on loan to a friend for a specified period of time. When the payment was due, my friend, though acknowledging the debt, claimed that he was not in a position to pay. What sort of sanctions has Islam prescribed in such a situation? Am I entitled to any compensation for late payment?
When a case of unpaid debts is referred to an Islamic court, the judge is required to look at the financial position of the debtor. If he finds out that debtor appears to have money in hand, he will order him to repay immediately. If he refuses, the judge may order that he be imprisoned until he has paid his debts. If, however, he claims to be insolvent, the lender is required to wait until he has funds to repay. This is not something that he does by choice. Order to delay payment in such cases is given by Allah in the Qur'an. If the lender foregoes his money in such a case, he will be highly rewarded by Allah, and the reward will outweigh by far the benefit he may receive from regaining the money he had lent. Such an action of forgoing an unpaid debt because of the insolvency of the debtor must be voluntary. No pressure needs to be placed on the lender to relinquish his rights.
I should perhaps remind you that an insolvent debtor is one of the beneficiaries of zakah. Islam recognizes the difficulty of one who finds himself in a position when he cannot repay his debts. The system of social security which Islam establishes takes care of such people who may have tried hard not to get to such a position. They are helped with zakah funds so that they are relieved of the pressures of being in debt and unable to repay.
Compensation to the lender for late payment is unacceptable in Islam. It is akin to usury which Islam strictly forbids. What is the difference between a moneylender who determines beforehand that he will receive a certain amount or percentage over and above the amount he has lent, and one who exacts a financial punishment for late payments? Perhaps I should add that lending to a person in need is an act of kindness. Therefore, you must not waste your reward which you are sure to have from Allah by insisting on having compensation for the late payment, especially if the borrower is truly insolvent.
• Debt: Incurred to help parents perform pilgrimage
In order to call my parents to perform the pilgrimage, I am arranging a loan from my employers. How far is this acceptable?
Your keenness to help your parents perform pilgrimage is highly commendable. You are prepared to incur a debt for that purpose. That is a genuine mark of dutifulness. However, you are under no obligation to do that, either as a gesture of dutifulness or for any other reason. Incurring a debt is not something that Islam encourages, even when the reason for it is to perform a religious duty.
Having said that, I wish to add that a pilgrimage financed by partially borrowed money remains valid. Therefore, if you go ahead and borrow from your employers in order to help your parents come for pilgrimage, their pilgrimage will be valid.
Not all loans are the same. For example, if you are borrowing a relatively small amount which will be deducted from your salary over a few months and what is left from your salary is sufficient for your needs, then that is all right. Such an arrangement is definitely better than obtaining a personal loan, the repayment of which may represent a heavy burden. Moreover, if your position with your employers is such as to earn you a decent sum of money on the termination of your employment, either at the expiry of your contract or in the case of early termination, and that payment is enough to settle any outstanding part of your loan, then to borrow from your employers in order to help your parents do the pilgrimage is perfectly appropriate.
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