"What is the correct way to conduct lending (debt) transactions, and is the lender sinful for not bringing witnesses?"
The correct method for debt transactions is explained in the Verse of Debt in Al-Baqarah (282-283), and it includes: specifying the term of the debt and writing it down, with the debtor dictating or his guardian if he is incapacitated, and having it witnessed by two men or one man and two women. It is also permissible for the creditor to request the documentation of the debt with collateral he takes possession of.
Documenting debt by these methods (writing, witnessing, collateral) is by way of recommendation and preference according to the majority of scholars, and is not obligatory. The wisdom behind this is to preserve rights from loss and forgetting. If the debt is not documented, there is no sin, especially when there is trust between the two parties. However, if the debtor denies the debt or delays its repayment, the creditor blames himself for exposing his right to loss. It has been reported that the supplication of the creditor will not be answered if he did not have the debt witnessed. The emphasizes the preservation of rights and their documentation, no matter how small they may be.
Summary from Ftawy's records · added here
Reviewed by El Fatwa's sharia committee.
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