The ethics of debt: what Muslims need to know about debt
Nowadays, many people are forced to be both debtors and lenders. Because of this, they distance themselves from each other, forgetting the rules of etiquette in such situations.
Some mistrust others and fear for their property, while others try to delay repayment as long as possible, unwilling to part with their money.
Lending is a noble deed, a Sunna of our Prophet ﷺ. However, repaying a debt is an obligation. No matter how righteous a person, a debt is not forgiven until it is repaid or the lender forgives it.
Let us recall the adab (ethical norms) associated with debt, which will help us cultivate the excellent moral character inherent in true believers. First of all, it is worth noting that there is a general provision regarding debt for borrowers and lenders, set out in the Koran.
The Holy Scriptures state that when entering into a debt agreement, it should be recorded and two pious Muslim witnesses should be invited. If two men are unavailable, one man and two women can be invited. This is necessary to avoid future disputes between the borrower and lender. The debt may be recorded, so that witnesses can confirm the transfer of funds and the amount of the debt.
The Koran also recommends setting a collateral that the lender can receive in exchange for the money lent. This is done so that, if the debtor is unable or unwilling to repay the debt, the collateral can be used to compensate for the loan. By setting a collateral, we obtain the best possible deal. The debtor will not abscond from the lender if they are unable to repay the debt. The lender, in turn, will not be exposed to the risk of potential losses.
This way, the borrower and lender will not be resentful of each other, and outstanding debts will not become a heavy burden on relatives in the event of the borrower’s disappearance or death.
Reminder for those who borrow
- A believer should strive to live debt-free, be content with what he has, and only resort to loans in extreme cases.
- If a believer borrows, he should be prepared to repay the funds on time or even earlier.
- When borrowing, collateral should be left, if possible.
- The debtor should not give alms or perform other good deeds that require financial outlay.
- The debtor should not spend money on things that are not necessary.
- The first thing a God-fearing believer should be concerned about is the prompt repayment of a debt.
- If a believer has the ability to repay a debt, he or she should do so.
- The debtor must understand that the debt is sacred and cannot be forgiven.
The Prophet Muhammad ﷺ advised to show gratitude to those who helped you in difficult times and lent you money. This could be expressed as a small gift upon repayment of the debt. However, such a gift cannot be negotiated during the transaction; it should be left to the discretion of the debtor.
A reminder for lenders
- Lending is Sunna - an action recommended by the Messenger of God ﷺ.
However, depending on the situation, a debt can be either recommended or obligatory, as well as disliked (makruh) or forbidden (haram). Before lending, the lender should clarify the purpose for which the person is asking for the money:
- If the person needs a small amount of help, then this is Sunna;
- If it is a matter of life and death, for example, if a person is asking for money for a life-threatening operation, then lending is obligatory if possible;
- If the person is asking for money for unnecessary things, then lending is disliked;
- Finally, lending for purposes such as buying alcohol, gambling and the like is clearly haram.
- The lender should have mercy in his heart and be willing to forgive the debt in certain situations. It is not for nothing that they say it is better not to lend if you are not prepared to forgive. After all, whoever does not show mercy will not be shown mercy.
- The Messenger of God ﷺ called for supplication for those who repay their debts, asking for blessings for their faithfulness.
Islam, through its system of norms, teaches believers high moral standards, which contribute to a peaceful and harmonious life in society. By sincerely following the precepts of our religion, we find peace and a clear conscience.
What could be more beautiful for society than love, trust and mutual understanding between people! However, this can only be achieved by respecting and upholding the rights of everyone. We must realise that it is better to be oppressed than to oppress others.
