Zakah on the funds of a cooperative fund established solely to lend to its members
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Fatwa No. ( 21471 )
Q: We, a group of 14 people, agreed to establish an association we named (The Cooperation Fund). The idea is based on each person paying an amount of (500 five hundred riyals), which is the founding amount for the fund, and then each person paying 100 riyals monthly. This began in the 4th month of the year 1420 AH, continuing without any interruption from anyone. There is a clause that permits anyone who wishes to join us, on the condition that he pays the same amount that each of us has paid, so that his balance equals the balance of each of us, for the sake of ease in accounting.
The work and operations, and our goal is to pool the money, and thereby lend to whoever needs a loan from the fund, on the condition that he repays it in monthly installments, backed by guarantors and documents proving this, and so on. In other words, the amounts circulate within the fund, as loans to the fund's members, and in the end, they are returned to the fund. Anyone who wishes to withdraw has the freedom to do so, but only after completing one year. No amounts are spent except what is needed for the fund's expenses, based on documented receipts. We are still confused about the issue of zakah: Do we pay it from the amounts inside the fund, and how is that done? Or does each person pay according to what he contributed, meaning: each person pays from his own money for the money he has inside the fund? I hope you will inform us of what is correct, and how much and how the payment is made. Knowing that there may be some delay in payment, do we calculate zakah on what is inside the fund for the full lunar year, or on all the loaned amounts and those inside the fund? We hope you will inform us. May Allah reward you with good.
A: Each person pays zakah on the money he contributed to the fund when the lunar year has passed, whether what he contributed remains in the fund or is in the debts of the borrowers. And if everyone appoints one person to act on their behalf in paying the zakah when it becomes obligatory, there is no harm in that. And success is from Allah, and may Allah send prayers and blessings upon our Prophet Muhammad, his family, and his Companions.
Q: We, a group of 14 people, agreed to establish an association we named (The Cooperation Fund). The idea is based on each person paying an amount of (500 five hundred riyals), which is the founding amount for the fund, and then each person paying 100 riyals monthly. This began in the 4th month of the year 1420 AH, continuing without any interruption from anyone. There is a clause that permits anyone who wishes to join us, on the condition that he pays the same amount that each of us has paid, so that his balance equals the balance of each of us, for the sake of ease in accounting.
The work and operations, and our goal is to pool the money, and thereby lend to whoever needs a loan from the fund, on the condition that he repays it in monthly installments, backed by guarantors and documents proving this, and so on. In other words, the amounts circulate within the fund, as loans to the fund's members, and in the end, they are returned to the fund. Anyone who wishes to withdraw has the freedom to do so, but only after completing one year. No amounts are spent except what is needed for the fund's expenses, based on documented receipts. We are still confused about the issue of zakah: Do we pay it from the amounts inside the fund, and how is that done? Or does each person pay according to what he contributed, meaning: each person pays from his own money for the money he has inside the fund? I hope you will inform us of what is correct, and how much and how the payment is made. Knowing that there may be some delay in payment, do we calculate zakah on what is inside the fund for the full lunar year, or on all the loaned amounts and those inside the fund? We hope you will inform us. May Allah reward you with good.
A: Each person pays zakah on the money he contributed to the fund when the lunar year has passed, whether what he contributed remains in the fund or is in the debts of the borrowers. And if everyone appoints one person to act on their behalf in paying the zakah when it becomes obligatory, there is no harm in that. And success is from Allah, and may Allah send prayers and blessings upon our Prophet Muhammad, his family, and his Companions.
Source
www.alifta.gov.sa
The Arabic text is copied verbatim from the original source, without any edits.