First: It is important to clarify that the term qarḥ asan (benevolent loan) is a Qur᾽ānic term referring to spending for the sake of Allāh — in acts of righteousness such as jihād, charity, and constructive efforts for the good of both this world and the next.
The term qarḍ ḥasan in the Qur᾽ān does not mean a loan without an interest for the lender.

However, it is mentioned in the Sunnah that the reward for giving a loan is greater than the reward for giving charity on the Day of Judgment. As in the ḥadīth of ᾽Anas (reported by Ibn Mājah and al-Bayhaqī), the Prophet (peace and blessings be upon him) said: “On the night of my ascension to heaven, I saw written on the gate of Paradise: charity is rewarded tenfold, and a loan is rewarded eighteenfold. I said: O Jibrīl, why is the loan more virtuous than charity? He replied: Because the one asking for charity may still have some wealth, but the one asking for a loan only asks out of need.”

A similar narration from Ibn Mas῾ūd (reported by Ibn Mājah) states: “No Muslim lends another Muslim a loan twice except that it is as if he gave it in charity once.”
So, restricting the term ḥasan to a specific type of loan is questionable.

Second: Regarding Zakāh on loans, the jurists have differed on whom the Zakāh on a loan is obligatory. Here is a detailed breakdown of their views:

1. The majority of scholars from the four schools (Ḥanafī, Mālikī, Shāfi῾ī, Ḥanbalī)

They hold that Zakāh on a loan is obligatory upon the lender, because the wealth remains his in reality, and the borrower only possesses it as a kind of ῾āriyah (a loaned item).
However, they differentiate between different types of loans:

• Loan to someone who admits the debt and is able to repay:
  • If repayment is expected within the same year, then Zakāh is due on it by the lender.
  • If repayment is postponed for years, the four schools agree that Zakāh is still due on the lender, but they differ on how it is paid:
    • Ḥanafīs and Ḥanbalīs: Zakāh is paid for all past years after the money is received.
    • Mālikīs: Zakāh is paid for one year only after receiving the money.
    • Shāfi῾īs: Zakāh is due every year, [even if the money is not yet received].
• Loan to someone who is admits the debt but he is insolvent, or someone who denies the debt and there is no proof against him:
  • Ḥanafīs, one opinion among the Ḥanbalīs, and a view within the Shāfi῾i school (though not the strongest view): No Zakāh is due on this type of loan, as it is considered akin to lost or usurped wealth. If it is eventually repaid, a new year begins from that point.
  • Mālikīs: Same as above, but if it is repaid, Zakāh is due for one year only.
  • Stronger opinion within the Shāfi῾ī school and another view among the Ḥanbalīs: If the money is recovered, Zakāh must be paid for all past years.

2. The Ẓāhirīs (Literalists) and a view attributed to some Companions like ῾Aā᾽ishah and Ibn ῾Umar, and some Tābi῾īn like ῾Ikrimah:

They say that no Zakāh is due on debts — neither upon the borrower nor the lender — due to the lack of complete ownership on either side.

3. ᾽Ibrāhīm al-Nakha῾ī’s opinion:

Zakāh is on the lender, unless the borrower delays repayment unfairly — in which case the borrower is responsible for the Zakāh.

Our view:

We must differentiate between two types of loans:

• A loan from which the lender intends to gain a benefit (any kind of benefit): In this case, Zakāh is due on the lender, because it resembles investment or profit-and-loss-sharing money.
• A loan intended purely as a form of kindness and support without any return: In this case, Zakāh is due only upon receipt of repayment. The lender may then choose:
  • The Mālikī opinion, paying Zakāh for one year only, or
  • The opinion of the majority, paying Zakāh for all the years since it was given.

After all, this is the detailed position of the jurists on the issue of Zakāh on loans.

Fatwā issued by Dr. Khālid Naṣr