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Islam is a religion of mercy, kindness, and cooperation for the entire world. One of its common teachings for human beings is to be beneficial to others. As mentioned in the Hadith: "خَيْرُ النَّاسِ مَنْ يَنْفَعُ النَّاسَ" "The best of people are those who benefit others."
The best and most beloved person to Allah is the one who is useful and helpful to others. That is why Islam emphasizes mutual cooperation.
One form of such cooperation is providing a loan. Every human being may need financial assistance at some point in life.
Therefore, Islam greatly encourages giving loans and promises a great reward for the lender, while also placing several limits and conditions on loan transactions to ensure fairness.
There are various verses in the Holy Qur’an that refer to Qard Hasanah (benevolent loan), in which Allah (S.W.T) promises immense reward for the lender both in this world and the Hereafter. For example: "مَنْ ذَا الَّذِی یُقْرِضُ اللَّہَ قَرْضًا حَسَنًا فَیُضَاعِفَہُ لَہُ أَضْعَافًا کَثِیرَةً وَاللَّہُ یَقْبِضُ وَیَبْسُطُ وَإِلَیْہِ تُرْجَعُونَ" (Surah Al-Baqarah: 245)
Translation: Who is it that will lend to Allah a goodly loan, and He will multiply it many times over? And Allah is the One Who withholds and grants abundance, and to Him you will all return.
And in another verse: "إِنْ تُقْرِضُوا اللَّہَ قَرْضًا حَسَنًا یُضَاعِفْہُ لَکُمْ وَیَغْفِرْ لَکُمْ وَاللَّہُ شَکُورٌ حَلِیمٌ" (Surah At-Taghabun: 17)
Translation: If you loan Allah a good loan, He will multiply it for you and forgive you. And Allah is Most Appreciative and Forbearing.
Read more about: Al Qard al Hasan (benevolent loan)- All You Need to Know
The Accounting and Auditing Organization for Islamic Financial Institution has defined the procrastinating debtor as, “ A debtor who is solvent but refuses to pay a debt that is due,
without any legitimate reason, after receiving the normal demand for payment.”
The difference between one who is unable to pay and one who is able but unwilling to pay lies in intention and circumstance.
A person who is unable to pay genuinely wishes to repay the debt but, due to financial hardship, is not in a position to do so.
Islamic teachings emphasize compassion toward such individuals and instruct that they should be granted additional time until they are able to repay. As mentioned in the Holy Qur'an:
"وَإِنْ كَانَ ذُو عُسْرَةٍ فَنَظِرَةٌ إِلَىٰ مَيْسَرَةٍ ۚ وَأَنْ تَصَدَّقُوا خَيْرٌ لَكُمْ إِنْ كُنتُمْ تَعْلَمُونَ" (Surah Al-Baqarah: 280)
Translation: But if he is in hardship, let there be postponement until [a time of] ease. But if you remit [the debt] by way of charity, it is better for you, if you only knew.
On the other hand, a person who is able but unwilling to pay does not suffer from financial difficulty and is solvent, yet deliberately refuses to repay the due amount without any legitimate excuse.
Concerning such a debtor, there are several hadiths reported from the Prophet Muhammad (peace be upon him): "مَطْلُ الْغَنِيِّ ظُلْمٌ"“Default in payment on the part of a solvent debtor is unjust.”
The Prophet (peace be upon him) also said:
“Delay in payment by a solvent debtor would be a legal ground for his being publicly dishonored and punished.”
Moreover, the Prophet (peace be upon him) approved the statement of Salman Al-Farisi to Abu Al-Darda’, saying: “Give everyone his right.”
From a Shariah perspective, it is strictly prohibited to delay the payment of a debt without a valid reason. As stated in the AAOIFI Shariah Standards regarding the procrastinating debtor:
“Default in payment by a debtor who is capable of paying the debt is ḥaram (prohibited).”
Yes, it is a sin to delay in the payment because the Prophet (peace be upon him) said:
"مَطْلُ الْغَنِيِّ ظُلْمٌ"“Default in payment on the part of a solvent debtor is unjust.”
According to the AAOIFI clause related to the rights of the creditor in the case of a procrastinating debtor “The creditor is entitled to apply for the sale of any asset mortgaged as collateral for the debt, for the liquidation of the debt.
He is equally entitled to stipulate that the debtor must give a mandate to the creditor to sell the mortgaged asset without recourse to the courts.”
It is not permissible for the creditor to charge the procrastinating debtor by penalty or late fees whether such arrangements are made at the beginning or at the maturity of the contract,
since this would constitute Riba and such arrangement and stipulation will be deemed as null and void. This is because of the Prophet (peace be upon him) Hadith: “Muslims are bound by their contractual conditions, except those that render impermissible what is permissible or render permissible what is impermissible.”
The creditor has the right to warn other related to the procrastinating debtor by including his name in the undesirable customer (black list) and to send the warning admonition to other creditors either when there is an inquiry from other creditors or such black lists are exchanged between the creditors directly.
According to the statement of the International Islamic Fiqh Academy, “It is impermissible from the Sharia perspective to stipulate a condition of compensation in the case of delay in the settlement of a debt”. International Islamic Fiqh Academy Resolution No. (51); and “Majallat Majma’ Al-Fiqh Al-Islami”, No. 6 [1: 193]; and No. 6 [2: 9].
1- “It is not a sin to delay a debt”
From a Shariah perspective, it is a sin to delay a due payment without a genuine reason, as it is described as zulm (injustice) in the Hadith: "مَطْلُ الْغَنِيِّ ظُلْمٌ"“Default in payment on the part of a solvent debtor is unjust.”
2- “Shariah forbids any action against the debtor”
Shariah entitled the creditor to take an action against the debtor.
3- “All late fees are Haram”
Late fees fall under gharamah māliyyah (financial penalties), which are not permitted according to the majority of scholars. For more detail please refer to the fatwa: حكم فرض غرامة مالية على من يتأخر عن الاجتماعات
1- Documentation: The loan amount should be documented along with the agreed payment duration. As mentioned in the Surah Al Baqarah: يَا أَيُّهَا الَّذِينَ آمَنُوا إِذَا تَدَايَنتُم بِدَيْنٍ إِلَىٰ أَجَلٍ مُّسَمًّى فَاكْتُبُوهُ translation: "O you who have believed, when you contract a debt for a specified term, write it down."(Surah Al-Baqarah, 2:282)
2- Offering payment plan:The overall transaction should be properly divided into installments to facilitate an easier repayment process for the debtor.
3- Use of Wasta (mediation) or tahkeem (arbitration): If a dispute arises between the debtor and the creditor, it can be resolved by involving a mediator or an arbitrator. The mediator or arbitrator will work to ensure that both parties receive their due rights in accordance with Shariah principles. For further details, refer to AAOIFI Shariah Standard No. 32: “Arbitration.”
1- Can I refuse to lend someone who previously delayed my money?
Yes, it is permissible to refuse lending to someone who previously delayed repayment. This is because a loan contract in Shariah is voluntary, and one is not obligated to lend—especially when the borrower has a history of delayed payments.
2- How do Islamic banks deal with defaults?
Islamic banks are imposing the charity on the procrastinating debtor as mentioned in the AAOIFI standard,
“The permissibility of stipulating a condition, whereby the debtor in case of default is obliged to donate a sum of money (in addition to the amount of the debt) to be spent by the creditor (the Institution) on charitable causes,
is because this has been considered as an instance of the commitment to make a donation, which is well established in the Maliki school of law. This is the opinion of Abu Abdullah Ibn Nafi’ and Muhammad Ibn Ibrahim Ibn Dinar, two Maliki jurists.”
3- Are there Shariah-compliant contracts to prevent procrastination?
yes, there are different Shariah-compliant contracts, like “Rahn”, “kafala”, “ tahkeem”, due to which the procrastinating can be prevented.
References:
https://aaoifi.com/ss-3-procrastinating-debtor/?lang=en
حكم فرض غرامة مالية على من يتأخر عن الاجتماعات
قرض کا اسلامی تصور اور موجودہ دور کی خرابیاں - جامعہ فاروقیہ، کراچی
Disclamer:
This post is for educational purposes only, and does not constitute investment advice or a solicitation to take any financial action. It should not be relied upon when making investment or financing decisions.
