Q. We are often asked by friends and relatives to give them loans, particularly when they are in need to help finance house purchase. However, a loan given in this way may often remain outstanding for a very long time, or remain unpaid. Since it is imperative to help others in need, do we commit a sin if we refuse to lend our money?
F.J
A. Unfortunately, it is often the case that friends or relatives abuse the kindness given to them. In financial dealings, people often do not honor their promises. Many of us can relate stories that we or some close relatives of ours experienced, and all confirm that many people are ready to request loans and credits, but they shy away when it is time for them to settle such debts. At times, the borrower is ready to insult the creditor who asks him for repayment.
The kindness he received does not stop him from being aggressive. This has led many people to refrain from extending loans even to their immediate relatives.
Since God knows human nature, He made extensive legislation covering the loan procedure. Verses 282-283 of Surah 2 give these details, requiring the writing down of the loan agreement and the time agreed for repayment. Such a document must be witnessed by at least two witnesses.
Unfortunately, some of us think that if they are requested to write down the loan agreement, then such a request means that the creditors do not trust them, when it is God that has made this necessary.
Because of the risks involved in giving loans, the creditor receives a generous reward from God for helping others. A Hadith mentions that a charitable donation is rewarded at ten times its value, but a loan is rewarded at 18 times. He explains that a borrower asks for a loan only when he is desperate for money, while a charity is given at all times.
What all this leads to is to encourage people who are well placed to help others who are less fortunate than them with advancing money to them as a loan. They should sign a written agreement specifying the terms and method of repayment. A loan should be returned as soon as possible because the Prophet says: “Delaying debt repayment by someone who is able to settle it is an act of injustice.” Borrowers must appreciate the help they receive and try as best as they can to ensure repayment on time.
As for the specific question of refusing to make an advance when one suspects that money would not be repaid easily, this is perfectly acceptable. Indeed, if you fear that the borrower will not honor his promises of prompt repayments, then you should not advance money to him.
