Loans are among the irregular public resources or revenues that the Islamic state resorts to in exceptional or unusual circumstances. They are included in its annual budgets to cover public expenditures and financial rights tied to its sovereignty. Al-Mawardi states: “If two claims are due upon the public treasury and the funds are insufficient to cover both, the ruler may, if he fears corruption, borrow on the treasury to meet the obligations.”
Abu Rabi’a Al-Makhzumi narrated from his father, from his grandfather, that the Prophet (peace and blessings be upon him) borrowed thirty or forty thousand dirhams during the Battle of Hunayn, and when he returned, he repaid it, saying: “May Allah (SWT) bless your family and your wealth for you. The reward for lending is repayment and words of paradise.”
It is also narrated by Abu Hurairah that the Messenger of Allah (peace and blessings be upon him) borrowed a camel from a man. When the man came to collect it, the Prophet said: “Look for a camel for him to repay.” When they only found a camel of a better age, they informed the Prophet, and he said: “Give it to him, for the best among you are those who are best in repaying debts.”
Islam only recognizes benevolent loans and has no place for interest-based loans, which are categorically prohibited. However, contemporary reality shows the widespread indulgence of states in usurious loans, leading to a swelling of public debt. These are justified under various pretexts, such as covering budget deficits, accelerating economic growth, or curbing inflation by absorbing excess liquidity through loans.
The concept of public loans in their current form emerged in the late 18th century, initially under the personal name of a prince or king before evolving into government-backed loans. Governments do not offer specific collateral but instead pledge their overall resources. Loans later took the form of treasury bills and bonds.
Interest-based public loans are, in essence, an economic plague. They absorb a significant portion of funds available to the private sector, hindering its investment role and driving up interest rates, which in turn obstructs development. Additionally, these loans burden current and future generations with debt servicing costs, effectively imposing deferred taxes on them. Public borrowing also contributes to inflation by deteriorating production levels and increasing unproductive public expenditures, forcing governments to resort to printing money or issuing treasury bills to meet obligations, further worsening income distribution.
Although borrowing may address budget deficits, it often encourages reckless and corrupt governments, particularly when they continuously roll over debts. Moreover, excessive external public debt undermines state sovereignty.
Hence, Islam’s warning against debt is not unfounded. While this warning primarily concerns personal debt, it extends to state borrowing as well. Aisha (may Allah be pleased with her) reported that the Prophet (peace and blessings be upon him) used to supplicate during prayer: “O God, I seek refuge in Thee from the punishment in the grave, I seek refuge in Thee from the trial of the antichrist, I seek refuge in Thee from the trial of life and the trial of death. O God, I seek refuge in Thee from sin and debt.” Someone said to him, “How often you seek refuge from debt!” He replied, “When a man is in debt he talks and tells lies, makes promises and breaks them.”
Muhammad ibn Jahsh reported that the Prophet (peace and blessings be upon him) said: “By the One in Whose hand is my soul, if a man were to be killed in the cause of Allah then brought back to life, then killed, but he owed a debt, he would not enter paradise until his debt was paid off.”
Thawban reported that the Prophet (peace and blessings be upon him) said: “If anyone dies free from pride, unfaithfulness regarding spoil, and debt, he will enter paradise.” Abu Hurairah also narrated: “A believer‘s soul remains suspended according to his debt until it is settled or paid off on his behalf.”
Debt is a serious matter and should only be resorted to in cases of necessity. How then can a state justify drowning in debts that compromise its ability to repay, force it to roll over obligations, accept usurious terms from lenders, and ultimately lose its sovereignty and dignity?
Islam does not prohibit the legitimacy of the ruler borrowing from the citizens or permitting an unconditioned increase in repayment as a gesture of goodwill. However, it emphasizes several conditions: the loan must be interest-free, the state must have the capacity to repay it, and repayment should not rely on currency issuance that devalues money unjustly. Moreover, the state should prioritize its revenues and only resort to loans when the public treasury is empty and voluntary donations are insufficient.
Muslim scholars throughout history have offered in-depth analyses of state borrowing. Imam Al-Haramayn provides a profound examination of this issue in his book “Al-Ghayathi.” He says: ‘Some people believe that the imam, in all cases, takes what he takes in the context of borrowing from the public treasury. Consequently, if the purpose of borrowing is well-defined and its terms are clear, the loan must be repaid, and the lender has the right to demand repayment. Others, however, argue that if the imam extends his authority over the wealthy people of the land in general, there is no prospect of repayment. But if he restricts his collection to certain individuals, then it is considered a loan. We will discuss the arguments of each group and then address the path of proper investigation.
Those who say the imam borrows base their opinion on the principle that the obligations imposed by the religion are defined by clear sources within the foundations of Islam and the views of the Muslims. The Prophet Muhammad (peace and blessings be upon him) would, when the needy and poor were in great difficulty, borrow from the wealthy or sometimes request the advance payment of zakat. If it were permissible to take wealth without borrowing, the Prophet (peace and blessings be upon him) would have clarified this for those who came after him to follow in similar situations.
Furthermore, these scholars argue that if the collection of funds were allowed beyond the prescribed paths and explicitly clarified methods in the Shari’ah, then people would take liberty with wealth. This would lead to various forms of chaos, and wealthy individuals would lose confidence in the safety of their wealth both in the present and the future. Such practices would undermine the structure of the religion and dissolve the protective system of Islam regarding the wealth of Muslims.
However, my preferred view is that this opinion reflects weakness and fear, as well as a failure to adhere to the methods of sound reasoning. The imam is permitted to take from the sources we have mentioned what he deems necessary to address communal needs, as outlined in the methods we have previously explained. It is not obligatory for him to borrow, whether the collection is from specific individuals or from wealthy people as a group.
The evidence for this is that if we imagine a time when there is no ruler, it would still be obligatory for the individuals to fulfill collective obligations without awaiting a specific authority. When an imam is appointed over them, it is as if they have entrusted him with the responsibility of managing their affairs explicitly and decisively in matters that were previously a general obligation. Without an imam, people would likely neglect these duties and shift responsibility onto one another, resulting in collective sin. The imam, as the one entrusted with governance, prevents this neglect and enforces shared obligations, ensuring that individuals take turns in fulfilling what is incumbent upon the community as a whole.’
The discussion of Imam Al-Juwayni’s views and those of other Islamic scholars on public borrowing will continue in the second part of this article.
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