Q. Is it permissible for a person to write off the debt owed to him by an insolvent relatives, adjusting it against zakah? Should one tell the debtor of such adjustment?
M.E. Hossain, Madinah
A. The standard ruling in this case is that it is not permissible to make the adjustment by the creditor, without actually paying the money to the debtor and putting him in possession of it.
However, a ruling by Sheikh Mustafa Al-Zarqa, one of the top scholars in the Muslim world in the twentieth century, makes the following distinction: If the creditor is able to retrieve his loan from the debtor, then it is permissible for him to make such an adjustment, writing off some or all of the loan amount against payment of his own zakah. In this case, he does not need to tell the debtor more than that he is writing off such debt.
On the other hand, if the debtor is not in a position to pay back any part of his loan, and the creditor has no way of retrieving his debt, then he may not make any adjustment against his own zakah. If he does, it is as if he is paying his zakah back to himself. Thus, he deprives poor people of what is due to them in his wealth.
Q. I refer to your answer on “Zakah on investment”, asked by one C. H. Mukhtar (Nov. 25). I want further explanation as to whether it is not usury to receive fixed profits on one’s investments. Is this not the same as keeping money in the bank with a view to receiving fixed interest within a particular period? In order words, is it permissible to take interest on the money kept in the bank?
Basiru Busari, Al-Baha
A. Most scholars consider bank interest to be a type of usury and it is forbidden in Islam. However, every transaction or contract is viewed on the basis of its form and substance. If you give money to your bank and agree with the manager, or with the bank, to act as your agent in investing your money, giving them authority to use it in the form they think suitable, provided it does not involve anything forbidden, and you agree to take only a fixed rate of profit, allowing the bank to retain the remainder, then this is acceptable according to an old ruling by Al-Azhar. Here the bank is your agent whom you have given authority, and it invests your money in a halal way, giving you a sum of money as profit. This is a different contract from that of having a savings or deposit account.
Arab News Islam 29 November 2002