My brother borrowed five thousand riyals from me, and my sister borrowed five hundred riyals. I always pay my zakaah in Ramadaan. Should I pay zakaah on these two debts? Is it permissible for me to use it to feed fasting people or to establish a charitable waqf for a library for da’wah?.
The scholars of the Standing Committee said:
If the debtor is in difficulty or he has sufficient funds but he is taking a long time to pay back the loan, and the lender cannot get his money back from him – either because he does not have proof that will help him get it back through the authorities or he has proof but he cannot find any authority figure to help him get his rights – as happens in some countries where there is no support for people’s rights – then the lender does not have to pay zakaah until he gets his money back and one full hijri year has passed since he got it.
But if the debtor has sufficient funds and it is possible to get the money back from him, then the lender has to pay zakaah every time a full hijri year has passed, if the loan reaches the nisaab by itself or when added to other money, etc.
Fataawa al-Lajnah al-Daa’imah li’l-Buhooth al-‘Ilmiyyah wa’l-Ifta, 9/191
If zakaah is due on a person’s wealth, it is not permissible for him to dispose of it except in the ways prescribed in sharee’ah, which are explained in the answer to question no. 6977. It is not permissible to use zakaah to feed the fasting or to establish a charitable waqf, because these are not among the eight areas in which zakaah is to be spent, as defined by Allaah, may He be exalted.
And Allaah knows best.