All perfect praise be to Allah the Lord of the Worlds. May His peace and blessings be upon Prophet Mohammad and upon all his family and companions.

 

It isn`t permissible to create a fund to offer student loans and the like because the Holy Qur’an (9:60) specifies eight categories for the distribution of Zakat. Allah Says (What means): "The alms are meant only for the poor and the needy and those who are in charge thereof, those whose hearts are to be reconciled, and to free those in bondage, and to help those burdened with debt, and for expenditure in the Way of Allah and for the wayfarer. This is an obligation from Allah. Allah is All-Knowing, All-Wise.” {At-Twabah,60}.  In addition, narrated Ziyad ibn al-Harith as-Suda'i: I came to the Messenger of Allah (PBUH) and swore allegiance to him, and after telling a long story he said: Then a man came to him and said: Give me some of the sadaqah (alms). The Messenger of Allah (PBUH) said: "Allah is not pleased with a Prophet's or anyone else's decision about sadaqat till He has given a decision about them Himself. He has divided those entitled to them into eight categories, so if you come within those categories, I shall give you what you desire." {Sunan Abi Dawud}.

Creating the above-mentioned family fund violates Sharia. The (لل) in the word (للفقراء) in the above verse indicates that the Zakah should be made into the possession of the poor while giving it in the form of a loan negates this purpose.

Moreover, it isn`t permissible to delay giving Zakah. Al-Shirbin (May allah have mercy on him) says: "Zakah should be given once its time is due because the recipients are in need for it." {Moghni al-Mohtajj, Vol.2:P.129}. Therefore, giving Zakah in the form of a loan leads to delaying it unnecessarily.

We (Iftaa` Department) commend the idea of creating a family fund, but prefer doing that from voluntary charities and donations made by family members since solidarity funds rest on the principle of donation and kindness. If this fund is intended to please Allah and is governed by the rules of Sharia, then Allah will reward participants for that.

It is better that donations and charities collected from families are given to their poor members because this is both charity and upholding the ties of kinship. The evidence on this is that it was narrated from Salman bin 'Amir that the Prophet said: "Giving charity to a poor person is charity, and (giving) to a relative is two things, charity and upholding the ties of kinship." {Related by Tirmithi}. And Allah the Almighty knows best.