I have already posted this question. Question Number: 2666660 One of my relatives has taken a loan from a bank by giving gold (jewelry) as security in order to purchase a piece of land. Now they are unable to repay the loan to the bank, and within another few months, the bank will take the gold in their possession. This is an interest-based bank. My question is: can I give my zakah to them to repay their loan? Will my zakah be accepted? Please guide me. May Allah reward you.

All perfect praise be to Allah, the Lord of the worlds. I testify that there is none worthy of worship except Allah and that Muhammad, sallallahu ‘alayhi wa sallam, is His slave and Messenger.

First of all, we say that the bank has no right to seize the gold jewelry in settlement of the debt because the mortgage is not a sale contract according to which the security pledge is exchanged in return for the debt in case the debtor fails to repay it. Rather, the bank has the right to sell the gold jewelry and take the value of the debt back, and the remainder, if there is any, must be given to the debtor. If the value of the gold jewelry is less than the value of the debt, the bank has the right to claim the rest of the unpaid debt. The bank takes the value of the debt from the gold jewelry held as a security pledge, and it is considered a compensation offered in return for the debt.

The Hanbali scholar Al-Mardaawi wrote, “A mortgage is a security pledge for a debt so that the debt will be taken from it in case the debtor failed to pay it back from another source.” [Al-Insaaf]

It is impermissible to give your relative from your zakaah, because he can pay off his debt from the value of the gold jewelry. As long as the bank can take its money back from this gold jewelry, your relative is not considered among the eligible recipients of the zakaah and it is invalid to give him from your zakaah funds. An insolvent debtor is an eligible recipient of the zakaah only if he is unable to pay off his debt which he incurred in pursuit of personal needs, as is the case with your relative.

Ibn Qudaamah wrote, "The sixth category of the eligible recipients of zakaah is the debtors who have incurred overwhelming debts and are unable to pay them off. There is no scholarly difference of opinion about the fact that they are among the eligible recipients of zakaah, and their right to it is established." [Al-Mughni]

Shaykh Ibn ‘Uthaymeen said regarding the debtors who are eligible recipients of zakaah:

“The scholars divided debt into two categories: debts incurred to bring about reconciliation, and debts incurred to meet one's own personal needs. The first category of debtors should be given money from the zakaah (in appreciation of their great effort which has put an end to enmity, hostility, and bloodshed among the believers) in order to repay their debts, regardless of whether they are rich or poor. The second category of debtors should be given from the zakaah funds to pay off the debt as long as they are unable to pay them off themselves.”

Allah knows best.