Q: If an individual lends £2,000 to his relative on the basis of qarḍ ḥasana (gratuitous loan) and the £2,000 is still outstanding. How should the lender treat the outstanding £2,000 for the purposes of zakāh?
الجواب حامدًا و مصليًا و منه الصدق و الصواب
A: A personal loan is categorized as a ‘strong debt’. Thus, the lender remains liable to pay zakāh on the loan throughout the period of the loan. However, the obligation to pay zakāh only matures upon receipt of the value of 40 dirhams (or the equivalent thereof). Thus, for each 40 dirhams (or the equivalent thereof) received one dirham will be payable as zakāh. The lender may also choose to pay zakāh on the loan each year even prior to recovery of the loan or a portion thereof and thus avoid the accumulation of payable zakāh.
14th Rabīʿ al-Awwal 1431
1st March 2010
For a detailed breakdown, please see The Categorisation of Debt for Zakah Purposes research paper on the Al Qalam website.