Dayn is any obligation to pay money or deliver a fungible item that one person owes another, whether it arises from a loan, a credit sale, overdue rent or a duty to compensate damage, and it rests on the debtor personally.
Where a debt comes from in Islamic law
A debt may arise from a loan, from a sale with deferred price, from an undelivered salam, from rent that has fallen due or from an obligation to repair harm. In every case it attaches to the debtor personally.
Dayn versus 'ayn: a founding distinction
An 'ayn is a specific, existing item such as an identified car; a dayn is a value owed, described only by quantity and characteristics. This distinction explains why a monetary debt cannot be traded in the way a real asset can.
Why qard is only one kind of debt
Qard is a benevolent loan: the borrower returns exactly the same quantity with no agreed extra. Not every debt is a qard; a murabaha price payable later is also a dayn, but it includes a lawful trading margin agreed at the outset.
A debt does not grow with time
Once fixed, the amount owed stays fixed: neither delay nor rescheduling can increase it. Demanding more in return for extra time reproduces the pre-Islamic riba al-jahiliyya that the texts explicitly condemn, whatever name the increase is given.
Writing the debt down: the instruction of verse 2:282
The longest verse of the Quran asks believers to record deferred debts in writing, before witnesses, stating amount and due date. This documentation principle still inspires Islamic financing agreements, which spell out every payment obligation in careful detail.
Pledge (rahn): securing repayment
The creditor may hold an asset as security, such as property or securities. It must not take free benefit from it during the loan, and on default it has the asset sold to recover what is owed, returning any surplus to the debtor.
Guarantee (kafala): a third party stands surety
A person may undertake to pay if the debtor defaults. Tradition views kafala as a charitable act, which is why charging a fee for a bare guarantee is disputed; bank guarantees therefore tend to charge the actual cost of issuing them.
A debtor in hardship: the grace period
The Quran urges giving a struggling debtor more time and praises writing the debt off. Islamic banks therefore separate genuinely insolvent clients, who receive extra time, from those who deliberately delay a payment they are able to make.
Late payment charges given to charity
To deter wilful defaulters, many contracts include an undertaking to pay a sum if payment is late. Common standards require that amount to go to charity rather than to the bank, which may only recover its actual costs.
Bankruptcy (iflas) and ranking among creditors
When debts exceed assets, a judge may bar the debtor from dealing with his property and share it among creditors pro rata. The essential needs of the debtor and his family are protected during this liquidation process.
Zakat and receivables: who pays on what?
Many scholars hold that a collectable receivable forms part of the creditor's zakat base, while a doubtful one counts only once actually collected. How the debtor's own liabilities are treated differs between schools and calls for a specialist's opinion.
Debt on an Islamic bank's balance sheet
Murabaha, istisna and salam financing create receivables from clients, whereas ijara and musharaka leave the bank owning an asset or a share. This mix determines the credit risk that regulators and the IFSB require banks to measure.
Specialist external source
IFSB standards cover credit risk management at Islamic banks, meaning the risk that customers fail to pay the debts created by their financing contracts.