Cash, savings, shares and debts

Today's money Banknotes, bank balances and electronic money have taken the place of gold and silver as a means of exchange. Contemporary bodies, including the International Islamic Fiqh Academy (Jeddah), consider that they have the same status for zakaat: they are counted at 2.5% when the nisab and hawl are met [À VÉRIFIER : référence de la résolution]. Included in the calculation, on the zakaat day: • cash at home; • the balance of chequing and savings accounts, including accounts in foreign currencies (converted into Canadian dollars at the day's rate); • money placed in term deposits or certificates, at their principal value; • money set aside for a project (marriage, home, travel) as long as it is not spent: having a purpose does not remove zakaat. Any bank interest received is not lawful wealth for the one who receives it: most contemporary scholars advise getting rid of it by giving it to a work of general benefit, without intending a reward, and not counting it as one's own zakaat [À VÉRIFIER : avis du centre]. We will return to this in lesson 13.

Money owed to you (receivables) • A "secure" debt (the debtor is solvent and acknowledges the debt, for example a friend repaying as planned): according to the majority, its zakaat is due every year; one may pay it right away with one's other money, or, according to some, wait to receive it and then pay for the past years [À VÉRIFIER : présentation des avis]. • A "doubtful" debt (insolvent debtor or one who denies it): no zakaat as long as it is not recovered; on recovery, some require the zakaat of a single year, others nothing until a new hawl [À VÉRIFIER]. • A security deposit (for example a lease deposit): it is discussed, because you cannot dispose of it [À VÉRIFIER].

Shares and funds The question depends on why you hold the shares. Two cases are generally presented, recognised in particular by the International Islamic Fiqh Academy and by the AAOIFI standards [À VÉRIFIER : références]. • Shares bought for short-term resale (speculation, "trading"): they are merchandise. One pays 2.5% of their market value on the zakaat day. • Shares held long-term for the dividend: one pays zakaat on the "zakatable" portion of the company's assets (cash, receivables, inventory), not on the total value. As these figures are hard to know, some use an estimate (for example about 25 to 30% of the market value), others advise paying on the total value as a precaution [À VÉRIFIER : méthode et pourcentage]. • Mutual funds and ETFs follow the same logic; some Islamic fund providers publish a "zakaat ratio" per unit. • If the company itself pays zakaat (rare in Canada), the shareholder does not have to pay it again. Reminder: the lawfulness of the investment is a separate question (lesson 15); a share in a company whose activity is forbidden does not become lawful because one pays its zakaat.

Cryptocurrencies Their very lawfulness is debated among contemporary bodies. For those who consider them permissible, they are treated as money or as merchandise: zakaat at 2.5% of the market value on the zakaat day [À VÉRIFIER : avis du centre].

Debts you owe: are they deducted? The schools differ, and contemporary scholars have clarified the question for modern debts (25-year mortgage, car loan). • Hanafi and Hanbali position: debts are deducted from the money subject to zakaat, because someone in debt is not truly rich. • Shafi'i position (in its best-known opinion): debts are not deducted [À VÉRIFIER]. • Maliki position: debts are deducted from money (not from harvests or herds) [À VÉRIFIER]. • For long debts, most contemporary scholars deduct only what is due or falls due within the coming year (for example the next twelve mortgage payments), and not all the remaining principal [À VÉRIFIER : avis du centre]. Otherwise, almost nobody would pay zakaat. The site's calculator has a "Debts to deduct" box: enter only what the position you follow allows you to deduct.

Worked example On his zakaat date, Ahmed has: chequing account $2,400, savings account $8,600, cash $300, $1,500 lent to his brother (who is repaying), shares in an Islamic ETF held long-term worth $10,000. He owes $900 on his credit card (due this month) and his next twelve car loan payments come to $4,800. • Money: 2,400 + 8,600 + 300 + 1,500 = $12,800. • ETF, "zakatable portion" method with a 30% estimate: $3,000; "total value" method: $10,000. • Debts deducted (method of debts due within the year): 900 + 4,800 = $5,700. • Total with the first method: 12,800 + 3,000 − 5,700 = $10,100 → zakaat $252.50. • Total with the second: 12,800 + 10,000 − 5,700 = $17,100 → zakaat $427.50.

The text: Surah Al-Ḥadiid (57), verse 7 آمِنُوا بِاللَّهِ وَرَسُولِهِ وَأَنْفِقُوا مِمَّا جَعَلَكُمْ مُسْتَخْلَفِينَ فِيهِ ۖ فَالَّذِينَ آمَنُوا مِنْكُمْ وَأَنْفَقُوا لَهُمْ أَجْرٌ كَبِيرٌ ﴿٧﴾

Meaning: "Believe in Allah and His Messenger, and spend from that of which He has made you trustees. Those of you who believe and spend will have a great reward." The word "mustakhlafiina" (trustees, successors) recalls that the money in your account is entrusted to you: it passed through others before you and will pass to others after you.

Arabic text: Tanzil Quran Text (Simple, version 1.0.2), © 2008-2010 Tanzil.net, Creative Commons Attribution 3.0 licence, reproduced without any change (http://tanzil.net). Each verse is on its own line, followed by its number; the basmala, which the Tanzil file places at the start of the first verse, is written on its own line.

Understanding the lesson

Explanation The forms of wealth have changed, but the principle remains the same: zakaat concerns what you own that can grow. A bank balance, a share, a receivable are modern forms of the gold and silver of old. The difficulties come mainly from two points. Shares: you own part of a company, and scholars distinguish the person who buys to resell (a trader) from the one who holds for income (a partner). Debts: the early schools already differed, and modern indebtedness (mortgages, long loans) has led contemporary scholars to clarify, most often by deducting only what is due within the year. This lesson also shows that zakaat does not "launder" unlawful wealth: interest received, or a share in a forbidden activity, raises another question, that of lawfulness.

Lessons to draw from it • Every year, list all your accounts, including forgotten accounts and foreign currencies. • Note money lent and to whom: it is also wealth subject to zakaat. • For your investments, know whether they are short- or long-term, and ask your provider whether it publishes a zakaat ratio. • Deduct only the debts that the position you follow allows. • Set aside interest received according to the imam's opinion, without counting it as zakaat.

Key points to remember • Banknotes and bank balances = same status as gold and silver: 2.5%. • Secure receivable: zakaat due; doubtful receivable: not before recovery [À VÉRIFIER]. • Shares for resale: 2.5% of market value; long-term shares: on the zakatable portion [À VÉRIFIER]. • Debts: deducted according to Hanafis and Hanbalis; for long debts, often only the year's portion [À VÉRIFIER]. • Paying zakaat does not make forbidden income lawful.

The main message Your bank account, your investments and the money owed to you are trusts from Allah: count them all, deduct what is truly due, and pay their due every year.