Just came across this issue, and although both charity and loan have been recommended in Islam and are part of our Ibadah (worship), it looks that given a nice loan in Islam has greater rewards than giving charity, and Allah Knows Best.
First of all, let us look at some definitions:
Loan: an amount of money given to somebody on the condition that it will be paid back
later
Charity: the voluntary provision of money, materials, or help to people in need
Examples of Charity (sadaqah):
- Monetary donations
- Donations in kind
- Endowments
- Feeding the poor
- Supporting orphans and widows
- Spending on family expenses
- Providing assistance to somebody
- Saying a cheerful word or smiling
- Advising or counseling
- Volunteering in the community
- Removing rubbish from the paths
Loan in Quran:
245 Who is it
that would loan Allah a goodly loan so He may multiply it for him many times
over? And it is Allah who withholds and grants abundance, and to Him you will
be returned.. Al-Baqarah [2:245]
Spending in the cause of
Allah is called metaphorically "a beautiful loan". It is excellent in
many ways: (1) it shows a beautiful spirit of self-denial; (2) in other loans
there may be a doubt as to the safety of your capital or any return thereon;
here you give to the Lord of All, in Whose hands are the keys of want or
plenty; giving, you may have manifold blessings, and withholding, you may even
lose what you have. If we remember that our goal is Allah, can we turn away
from His cause?
11. Who is he that will Loan to Allah a beautiful loan?
for ((Allah)) will increase it manifold to his credit, and he will have
(besides) a liberal Reward. Al-Hadid [57:11]
18. For those who give in Charity, men and women, and loan to
Allah a Beautiful Loan, it shall be increased manifold (to their credit),
and they shall have (besides) a liberal reward. Al-Hadid [57:18]
17. If ye loan to Allah, a beautiful loan, He will
double it to your (credit), and He will grant you Forgiveness: for Allah is
most Ready to appreciate (service), Most Forbearing,- Al-Taghabun [64:17]
When we give a loan to Allah, it not only increases our
credit account manifold, but obtains for us the forgiveness of our sins, and
the capacity for increased service in the future.
The following quote is from Islamqa.com, ref: http://islamqa.com/en/ref/38161
There are some reports which speak of what is written on the gate of Paradise. The strongest report that we have found is that which was narrated by al-Tabaraani and al-Bayhaqi from Abu Umaamah (may Allaah be pleased with him), that the Prophet (peace and blessings of Allaah be upon him) said: “A man entered Paradise and saw written on its gate ‘Charity receives a tenfold reward and a loan an eighteenfold reward.’”
Classed as hasan by al-Albaani. See Saheeh al-Targheeb wa’l-Tarheeb, 1/537.
Although some scholars were inclined to accept the attribution of this hadeeth to the Prophet (peace and blessings of Allaah be upon him), others – including Ibn al-Jawzi, al-‘Iraaqi, al-Manaawi and others – classed it as da’eef (weak), because the narrators who transmitted it from the Prophet (peace and blessings of Allaah be upon him) include a narrator who is very weak.
[note: Islamqa website did not put the rest of the hadith, where The Prophet said: "O Jibril, how can the loan be more meritorious than charity?" He replied: "Because one asking for charity may still have some need left, while the borrower does not borrow except his need is fulfilled."
What if the people I lend to will not return the money?
Many have lent money to people who never returned it. If we base on the above, Allah will still replace you the loan value by 20 times. By own experience, we have always found Allah to Help us even though the money we lent to different people was not returned.
We must not forget also that this case is described in the Quran, where Allah recommends us to give delay to any person who is in difficulty, then He (SWT) recommends to transform that loan into Charity
"And if any man, in debt, should be in difficulties, then, let him have, respite, a postponement, till things are easier (read maysara or maysura, meaning ‘a time of ease’); but that you should give (tassaddaqū, where the second tā’ of the softened form, tatasaddaqū, has been assimilated with the sād), the one in difficulty, a voluntary almsgiving, by waiving his debt, is better for you, did you but know, [if you know] that it is better for you, then do it." Al Baqarah [2:280]
In a hadīth it is said, ‘Whoever gives respite to one in difficulty, or waives his debt, God will place him under His shade, on a day when there shall be no shade except God’s’, as reported by Muslim.
Conclusion:
If you give one dinar sadaqah (charity), Allah replaces it with 10 dinars (this is the minimum amount, it could go to unlimited reward that only Allah Knows).
If you give one dinar loan, Allah replaces it with 20 dinars (18 dinars in some versions, which was debated by Shaikh Shaarawi and reconciled the two version by highlighting that your dinar in charity is replaced within the 10 received back in the reward, so in fact you get 9 bonus, and the loan is double the reward of charity, i.e you will get 9 x 2 = 18, there are thus no discrepancies in the reports, whether you consider 18 dinars or 20 dinars it will be the same).
There are certainly good in both of Charity and in Loan. Allah Will make different people crossing your life, the main thing is that you do not stay apathetic and greedy when facing these people.
So the next time someone rings your bell asking for charity, make sure you remember that it is Allah Who Sent him/ her to you.
And next time someone approaches you for a loan, make also sure to remember that it is Allah Who put him/her in your path, you must thus study what you could do to help without harming yourself financially of course, and do not be scared to ask for guarantees, and then lend the amount of money you judge satisfactory for both parties. (important: any loan must be logged and written down and signed by both parties).
One last comment: if you reject the one asking you for loan, you may put that person in a very difficult situation, as he/she might not have approached you only after having exhausted all the other resources available to him/her, so do not let this person left with no choice but to get a riba loan, or a shark loan, or something more evil..In the same time, do not put yourself in trouble by helping others and sleeping with no funds not knowing how you will do your groceries the following morning, the best matters are the middle ones always.