Is Zakat due on livestock held as collateral (rahn) when the full year (hawl) passes while they are in the possession of the pledgee (mortgagee)?
Chapter on Zakat on Sheep
Al-Mughni
Book of Zakat
Primary text
Zakat is obligatory upon the pledgor when the full year passes and the livestock remains in the possession of the pledgee, because the ownership of the pledgor over the livestock remains complete. If the pledgor can pay the Zakat from other wealth, it is obligatory, because the expense of the collateral falls upon the pledgor, similar to the maintenance (nafaqa) required for the threshold (nisab). The Zakat cannot be paid from the collateral itself because the pledgee’s right is strongly attached to it, preventing the pledgor from disposing of it, and the designation of paying Zakat from it is not permissible for the pledgor.
Supporting text
If the pledgor has no other wealth from which to pay the Zakat except this pledged collateral, and if paying off the debt leaves sufficient remaining wealth to meet the nisab threshold, then the Zakat is taken from the livestock, taking precedence over the pledgee’s right because the pledgee returns to an equivalent (the debt repayment), whereas the rights of the poor in Zakat have no equivalent.