Unit 8

Shari’ah Issues in Financial Transactions
Unit 8 | 1
Shari’ah Issues in Financial

Transactions (Kafalah, Unit 8
Muzayyada, Urbun, Suftajah,
‘Umum Balwa and Qabd)
Topics in This Unit
8.1- Introduction
8.2- Kafalah contract
8.3- Credit Guarantee Corporation (Malaysia) Berhad
8.4- Danajamin National Berhad
8.5- Bay muzayyada
8.6- Bay urbun
8.7- Suftajah
8.8- ‘Umum balwa
8.9- Qabd
Unit At the end of this unit, you should be able to:

Objective
• Determine the Shari’ah issues in muzayyada
• Determine the Shari’ah issues in kafalah
• Determine the Shariah issues in urbun
• Determine the Shariah issues in ‘umum balwa
• Determine the Shariah issues in qabdh
SH5023 Shariah Issues in Islamic Finance

© INTERNATIONAL CENTRE FOR EDUCATION IN ISLAMIC FINANCE 2014/1435 AH
Unit 8 | 2
Key Terms
Muzayyada
Kafalah
Urbun
‘Umum balwa
Qabdh
SUPPORTING CONTRACTS USED IN

ISLAMIC FINANCE
There are some contracts which are not popular

in Islamic finance facilities but they have their
importance in commercial activities. These contracts
are used as supporting contracts to facilitate
certain applications in Islamic banking. This unit
covers some selected contracts which are: kafalah,
muzayyada, urbun, suftaja, ‘umum balwa and qabd.

Unit 8 | 3
Unit 8.1 INTRODUCTION
This unit addresses issues related to different contracts, namely, muzayyada, urbun, kafalah,
suftajah, ‘umum balwa and qabdh. These contracts are governed by different rules and applied
in different applications in Islamic finance. This unit will also discuss the view of the scholars
pertaining to each contract along.
Unit 8.2 KAFALAH CONTRACT
Kafalah is an age-old transaction created by man to bridge the gap that may exist in financial
dealings as a result of a lack of confidence among parties, suspicion and a lack of detailed
knowledge of one another on one hand, and to give assurance that a particular person would
discharge his obligation in certain relationships without being constrained for lack of such
assurance, on the other. The longevity of the usage of the contract is evidenced, as will be shown
later, by the age of the event in the story of Prophet Yusuf which has remained as the one major
proof of its validation in Islamic law. The practice of kafalah, however, evolved in time and with
practice. Several issues have been raised pertaining to its practice. Islam therefore adopts the
practice of kafalah within a legal framework that makes it adaptable to new transactions of a
different era. Against this background, kafalah will be treated in light of its definition, legality,
development, types and contemporary applications.
Unit 8.2.1 DEFINITION
In its literal usage, kafalah means responsibility, amenability or suretyship. It was in this literal
sense that Allah used the term in a verse in the Al-Qur’an (3: 37) which reads as follows:
“So, her Lord (Allah) accepted her with goodly acceptance. He made her grow in a
good manner and put her under the care of Zakariyya ….”

Unit 8 | 4
The term kaffalaha as used in the verse refers to the upbringing of Maryam, the mother of
Prophet ‘Isa under the responsibility of Prophet Zakariyya. In this same manner, Prophet
Muhammad (p.b.u.h.) used the term where he was reported to have said that:
“I and whoever takes responsibility of the orphan are companions in the garden of
Eden.”
Besides this, kafalah also means adding, joining or merging. In that sense, kafalah means to
add obligation to obligation in respect of a demand for something. That is to say, kafalah is
the act of someone adding himself to another person, and making himself liable to perform
the responsibility, together with the person. This definition of kafalah is very relevant to our
discussion in this unit.
Legally, the term kafalah is defined as the conjoining of the guarantor’s dhimma (faculty by
which a person bears liabilities) to that of the guarantee in a way that the debt or any other
responsibility of the original bearer is established as a joint liability between the two of them.
Ibn al-Qudamah defines it as a conjoining of the guarantor’s liability to the liability of the debtor
resulting in both of them being liable for the liability. Al-Marghinani defines kafalah as the
merging of one’s liability with another in respect of demand for performance of an obligation.
This liability may relate to a person, financial responsibility or an act of performance. Kafalah
relating to a person means to give guarantee that the person under guarantee will be surrendered
to the person of which the kafalah has been given. Kafalah relating to financial responsibilities
implies an obligation to a make certain amounts of payment due from the guaranteed person.
Kafalah relating to an act or performance guarantees the performance of a certain act, the
failure of which may render the surety liable and responsible.
Kafalah in its meaning of suretyship is synonymous with daman, even though the concept of
daman in its widest perspective has a broader coverage than kafalah, for it is also used to include
the concept of compensation and restitution for a destroyed property or infringed right, by
making it good, replacing the like or paying the value as the case may be.
Some jurists have pointed out that the term kafalah is also identical to the term himalah,
damanah and za’amah. However, Al-Mawardi maintains that even though all these terms can
be used interchangeably, the more accurate usage of these terms can be crystallised, in that, the
term kafalah is used in guaranteeing individuals, himalah in guaranteeing blood money, and
za’amah in guaranteeing substantial financial sums.

Unit 8 | 5
It should be stressed here that unlike hiwalah (transfer of debt), kafalah would not release
the principal debtor from the debt, because kafalah is only an additional obligation of the
guarantor to the existing obligation of the principal debtor. Contrary to that, in hiwalah, the
principal debtor (muhil) will be discharged from the debt that he owes to the creditor (muhal
lahu) once the debt has been transferred to the new debtor (muhal ‘alayhi). Nevertheless, the
creation of joint liability of both the guarantor and the guarantee to the debt does not increase
the creditor’s right to the original debt. This is because once the debt is claimed from either of
them, no claim can be made against the other.
Unit 8.2.2 FINANCIAL GUARANTEE
Financial guarantee, on the other hand, is a pledge given to a creditor by the guarantor that the
debtor will pay his debt, fine or any other personal liability, thereby joining the latter’s liability
to his. Having established the contract, the creditor is entitled to claim his debt from either
the debtor or the guarantor. However, the guarantor is entitled to arrange the order of liability
by stipulating in the contract agreement that the creditor shall first claim the debt from the
principal debtor and that the creditor would only have recourse to claim from the guarantor if
the principal debtor is unable to discharge his obligation.
Therefore, in consideration of the order of demand, the contract of guarantee is divided into
two,: recourse and non-recourse guarantee. A recourse guarantee is the type where the guarantor
has the right to claim back from the principal debtor whatever he used in the discharge of the
latter’s liability towards the creditor. To be entitled to the right of recourse, the guarantee must
have been created upon the request or with the consent of the principal debtor. Non-recourse
guarantee, on the other hand, is a voluntary guarantee created by the guarantor on behalf of
the debtor without been asked to do so. In this type of transaction, the guarantor cannot claim
back anything from the debtor.
The financial guarantee is further divided into the following types:
• Kafalah bi al-dayn (guarantee for debt) – It means to guarantee the payment of

debt to the creditor owed by the principal debtor.
• Kafalah bi al-taslim (guarantee for delivery) – It is a guarantee to deliver property
to its owner such as to be the surety on behalf of a lessee to transfer possession of a
leased property to the lessor or his agent upon the expiry of the lease period.

Unit 8 | 6
• Kafalah bi al-dark – It is a kind of guarantee given by a seller that he will return the
price of the object if it is taken over by someone else in the exercise of his better
right. It is also defined as a guarantee in favour of the seller that if the title of the
seller is defective, the guarantor will make good the loss suffered by the purchaser
on that account.
Unit 8.2.3 KAFALAH ON MUDARABAH CAPITAL
Mudarabah is a contract which involves the agreement between two parties, namely the rabbul
mal (investor) who provides 100% of the fund, and the mudarib (entrepreneur) who manages
the project in accordance with Shari’ah principles. Any profit from this investment will be
distributed based on the pre-agreed ratio at the inception of the agreement. However, any
losses will be fully borne by the rabbul mal.
Unit 8.2.3.1 ARGUMENT PERTAINING TO KAFALAH ON

MUDARABAH CAPITAL
According to the arguments of past Islamic jurisprudence, the jurists were unanimous in
their opinion that when losses occur in a mudarabah contract, the loss is to be borne by the
rabbul mal and not the mudarib as the latter’s status is only amin (trustee). However, if it
could be proven that the loss was clearly due to the mudarib’s negligence, then the mudarib is
to reimburse the capital to the investor. Past Islamic jurists were unanimous in their opinion
that in a situation where a loss occurs in a mudarabah contract, a capital guarantee by the
mudarib is not permissible. However, they have different opinions on the status of the contract.
The Hanafi and Hanbali schools of law were of the opinion that the contract is valid and the
conditional guarantee should be nullified. The Maliki and Shafi’i schools of law, however, were
of the opinion that the mudarabah contract is immediately nullified if there is such a guarantee.
Contemporary Islamic jurists have investigated the acceptable level of capital in mudarabah
contracts that can be guaranteed
The main issue of concern in relation to capital guarantee is whether the guarantee given will
cause the mudarabah contract to be nullified since it violates the muqtadha ‘aqd (the main
objective of a contract). They have submitted several solutions on mudarabah capital guarantee,
including:
1. Third-party guarantee based on tabarru’ (voluntarily given);

Unit 8 | 7
2. Third-party guarantee based on qardh (debts);

3. Mudarib yudarib (the entrepreneur channels the investor’s capital towards investing in
a third party); and
4. Guarantee through special funds.
Unit 8.2.3.2 ARGUMENT PERTAINING TO A THIRD PARTY

GUARANTEE BASED ON TABARRU’’
The OIC Fiqh Academy discussed on the matter of issuance of sanadat muqaradhah and
summarised that the mudarib guarantee on capital and profits are not permissible. However, the
guarantee may be issued by a third party who has no connection whatsoever with the mudharib
if it is done by way of tabarru’ and is not included as a condition in the actual mudarabah
contract sealed and signed by both parties. The Shari’ah Council for AAOIFI allowed for third
party guarantees other than by the mudarib or investment agent or business partner towards
the liability of investment losses. However, this is on the provision that the guarantee given
is not tied to the original mudarabah contract. The basis of their decision is tabarru’ which is
allowed by Shari’ah.
Husain Hamid Hassan summarised the basis of the permissibility of third party guarantees
based on the view of the Maliki school of law which allowed wa’d mulzim (promises that must
be kept). It is further strengthened by maqasid al-Shari’ah (Shari’ah’s objective) which allows
for such action.
Unit 8.2.3.3 THIRD PARTY GUARANTEE BASED ON QARDH
The Fatwa Council of Jordan legitimised third party guarantees based on qardh. This resolution
was made as the basis in drafting Section 12 of the Muqaradhah Act which pertains to the
guarantee concerned. However, the OIC Fiqh Academy, disagrees with the basis of third party
guarantees that are based on (qardth) debt and resolved that third party guarantees have to be
in the form of tabarru’. Otherwise, the contract is deemed to be an interest-bearing debt which
is not permissible.

Unit 8 | 8
Unit 8.2.3.4 MUDARAH YUDARIB
The mudarib invests the capital received from the rabbul mal to another party. In other words,
the mudarib acts as an intermediary between the first rabbul mal and the actual entrepreneur.
Wahbah al-Zuhaili summed up the views of past Islamic jurists on the issue of mudarib yudarib
that all the four fiqh school collectively agreed that the first muharib shall be responsible for
the liability of the guarantee (dhaman) if the capital is invested or handed over to another
mudharib (third party).
Generally, the mudarib yudarib concept is allowable. If it bears any profit, the profit should be
distributed between the rabbul mal and the first mudarib based on a pre-agreed rate and the
balance is to be distributed between the first mudarib and the second muharib. For financial
institutions and companies that issue financial products based on mudarabah, the concept of
mudarib yudarib may be applied if they invest part of the capital in other parties. If this happens,
the financial institutions or companies should guarantee the capital based on the views of
majority of Islamic jurists. Hence, in such a situation the interest of investors is guaranteed.
Unit 8.2.4 GUARANTEE THROUGH A SPECIAL FUND
Contemporary Islamic jurists also allow channelling a portion of the mudarabah profit to a
special fund created for the purpose of insuring against future losses. This may be done with
the consent of investors. Profit Equalization Reserve (PER)
Unit 8.2.5 DEPOSIT INSURANCE SCHEME
Public confidence is an important factor to protect deposits and ultimately, ensure stability of
any banking institution. One of the safety net arrangements to protect the banking system is
through the deposit insurance scheme. The main objective of a deposit insurance scheme in the
banking system is to minimise depositors’ risk of losing their deposit. In Islamic banking, the
implementation of a deposit insurance scheme is equally important to ensure that the Islamic
banking deposits are able to compete with the conventional deposits in attracting customers.
The main issue here is whether Islamic banking institutions can use the same facility.

Unit 8 | 9
Resolution
The Council in its 26th meeting held on 26 June 2002/ 15 Rabiul Akhir 1423 resolved that deposit
insurance scheme in Islamic banking is permissible based on the concept of mutual guarantee
among the Islamic financial institutions as participants to the scheme. The implementation
of a deposit insurance scheme does not contradict with Shari’ah principles since its objective
is to protect the public’s interest, especially the depositors and banking industry as a whole.
Nevertheless, there is a need to separate the funds in the operation of a deposit insurance
scheme for Islamic banking to ensure that the funds of the Islamic deposit insurance scheme
are invested in Shari’ah compliant instruments.
Unit 8.2.6 CREDIT (DEBT) GUARANTEE
A credit guarantee company, which provides guarantee schemes for Islamic banking, proposed
to offer Islamic Direct Access Guarantee Scheme (Skim Jaminan Laluan Terus Secara Islam).
The characteristics of this scheme are as follows:
1. The amount of financing is within the prescribed limit by the guarantee company;
2. The limit of the guarantee period is prescribed between 5 to 8 years;
3. The amount of the fees is prescribed by the company;
4. The guarantee coverage ranges from 30% to 100% from the total amount of financing;
5. A processing charge will be imposed (once); and
6. A renewal charge will be imposed.
The credit guarantee will only cover Islamic financing offered by Islamic financial institutions.
One of the Shari’ah issues in a credit guarantee facility is whether the guarantee mechanism in
which the guarantor charges a fee for the guarantee service provided is permissible in Shari’ah.
Resolution
The Shari’ah Advisory Council, in its 54th meeting held on 27 October 2005/ 23 Ramadan 1426
and in its 55th meeting held on 29 December 2005/27 Zulkaedah 1426, resolved that the above
Islamic guarantee (which charges a guarantee fee) mechanism provided by a credit guarantee
company to Islamic financial institutions offering Islamic financing products is permissible.

Unit 8 | 10
Unit 8.2.7 KAFALAH FOR A FEE
In its original form, a guarantee is a gratuitous contract for which the guarantor expects reward
only from Allah (s.w.t.) for easing the financial distress of his fellow human beings. He is not
entitled to additional payment over the amount guaranteed. However, if the debtor, on his own
willingness gives a token to the guarantor, as a way of showing his appreciation for the help of
the guarantor, the guarantor is allowed to take that gift. However, by no means, can he claim a
payment for his guarantee.
The majority of Muslim jurists from the Hanafi, Shafi’i, Maliki and Hanbali schools of law have
come up with evidence to support the non-permissibility of taking a fee for giving a guarantee,
some of which are hereunder considered.
First, they argued that the origin of kafalah is a charitable voluntary contract and making
the guarantor to pay for its offer would transform it to a contract of exchange and that is not
permissible. Second, they argued that the lawgivers place transactions of guarantee and loan
in the same category due to their closeness and the way they are known as being conducted
only for the sake of Allah (s.w.t) and as such, taking any remuneration for such a service is
prohibited. Third, they are of the view that financial transactions of exchange are permitted
by law because of the actual exchange of work or property involved. As guarantee is neither
work nor property, taking remuneration in its exchange would amount to consuming another’s
wealth in vain or taking a bribe. Fourth, the majority of jurists opined that taking a price for
offering to guarantee will take the transaction into the realm of a gharar (uncertainty) sale.
Last, they held that when a price is agreed on the guarantee given, the guaranteed would return
to the guarantor the amount of the guarantee and the agreed price in addition. This is not
permissible because it is tantamount to granting a loan which draws benefit, and that has been
prohibited by the Prophet (p.b.u.h.) as it amounts to riba.
Meanwhile, in a situation where a person requiring a guarantee could not find any guarantor
who would not take a fee for granting the same service and he is in a dire need to have one,
the person may pay the fee to meet the necessity. Such a situation arises when a person is
constrained, for instance, by the need to have a guarantee to secure his admission into a foreign
land for the purpose of education or earning a living, and so on. This permission to pay the
fee out of necessity is analogous to the jurists’ permission of payment for good acts such as
teaching the Al-Qur’an, which should ordinarily be voluntary charitable acts. It also goes with
the justification for paying a bribe to find out the truth and remove injustice and paying money

Unit 8 | 11
to enemies to protect people from danger. In these cases, the guaranteed would be considered
as paying for the benefit he derived from the guarantee.
However, Ishaq Ibn Rahawiah is of the opinion that charging a fee for a guarantee contract is
permissible.
Fee on guarantee
Ujrah refers to rental or fees charged for the usage of labour and benefits. In the current
economic context, it may be applied to salaries, wages, fees, commission and the like.
Arguments on Ujrah on Guarantees
Ujrah on Kafalah
The majority of past Islamic jurists were of the view that the charging of fees on kafalah is
not permissible. This view is based on the argument that a kafalah contract falls under ‘uqud
tabarru’at, which is voluntary and benevolent in nature. Hence, no fee should be charged.
Wahbah Al-Zuhaili was of the view that to charge ujrah on kafalah is permissible based on
maslahah and society’s needs. Syeikh Ahmad Ali Abdullah was of the view that when there is
a condition that states the kafalah bears a fee, the said condition is considered valid. He also
emphasised that a kafalah contract is not a qardh. He supported his views with qiyas, referring
to fees that are permissible to be collected upon utilising someone’s reputation and also upon
performing incantation using Quranic verses.
Some of the past Islamic jurists allowed both situations and since it is similar from the aspect
of work done. The OIC Fiqh Academy and the Shari’ah Council of AAOIFI resolved that ujrah
on kafalah/daman is not permissible. However, the guarantor may claim for actual expenses
incurred on the guarantee.
Imposition of Rahn (Collateral) on the Issuer
Rahn is defined as the act of utilising a valuable asset as collateral to amortise a debt in the
event that the debtor fails to fulfil his obligations to the creditor. Hence, rahn may be requested
as a collateral from the issuer to be applied against a guarantee given by a third party. This
permissibility is based on the resolution of the Fatwa Council of Jordan which views third party
guarantees in a muqaradhah contract as a form of qardh. As such, rahn may be imposed on each
qardh. Since a third party guarantee under this ruling is based on the fatwa in a form of qardh,

Unit 8 | 12
no element of interest may be levied as this involves riba. The only costs allowed will be the
actual expenses incurred by the creditor, who, in this context, is the guarantor.
Unit 8.3 CREDIT GUARANTEE CORPORATION (MALAYSIA)

BERHAD
Credit Guarantee Corporation (Malaysia) Berhad (CGC) was established in 1972 with the
objective of assisting small and medium businesses with no or insufficient collaterals to obtain
financing from financial institutions by providing guarantee covers for the financing, as well as
to ensure active involvement of financial institutions in the implementation of its guarantee
schemes.
Unit 8.3.1 CONCEPT OF THE CORPORATION OF ISLAMIC

GUARANTEE FACILITY BY CREDIT GUARANTEE
CORPORATION
In view of the enhanced role of Islamic financial institutions in providing financing for small
and medium enterprises, CGC proposed to offer an Islamic credit guarantee facility for asset
borrowers to obtain financing offered by the Islamic financial institutions. The credit guarantee
facility offered is a guarantee where the guaranteed party (customer) is required to pay a certain
fee to the guarantor (CGC).
In this regard, the SAC was referred to on the issue as to whether the credit guarantee facility
offered by CGC is allowed in Shari’ah.
Resolution
The SAC, in its 54th meeting dated 27 October 2005, has resolved that the credit guarantee
facility offered by CGC for financing granted by Islamic financial institutions is permissible.1
SAC BNM p. 165.

1

Unit 8 | 13
Basis of the Ruling
The permissibility of the guarantee facility with fee (kafalah bi al-ujr) offered by CGC is based
on the following considerations:
1. Some contemporary Shari’ah scholars and Shar’iah councils has resolved that the
imposition of ujrah on kafalah is permissible. A few contemporary scholars further
opined that ujrah charged on kafalah shall be permitted on the basis of maslahah and
public needs because in the current context, it is difficult and impractical to obtain a free-
of-charge guarantee. Moreover, one of the contemporary scholars, in his presentation to
the OIC Fiqh Academy, had expressed his view that ujrah charged on daman (guarantee)
is permissible. He is of the view that although daman is originally a type of tabarru’,
the condition to charge ujrah on the daman is considered valid. He further reiterated
that a daman contract is not considered as qardh as it falls under the istithaq contract.
Thus, receiving ujrah for the guarantee service is not prohibited as a daman contract is
different from a qard contract; and
2. Qiyas on akhz al-ajr ‘ala al-jah (to charge a fee for someone’s reputation) and akhz al-
ju’l ‘ala ruqyah min al-Quran (to charge fee on the treatment/medication using Quranic
verses). Some classical scholars permitted the imposition of fees in both situations and
this permissibility could be extended to the imposition of ujrah on guarantee as both
have similarities in terms of the services provided.
Unit 8.3.2 GUARANTEE ON THE SALE PRICE
The SAC was referred to on the issue as to whether the CGC may guarantee the sale price
(including the profit margin) of an Islamic financing.
Resolution
The SAC, in its 55th meeting dated 29 December 2005, has resolved that it is permissible for
the CGC to guarantee the sale price (including the profit margin) of an Islamic financing that
is based on a sale and purchase contract.2
SAC BNM p. 167.

2

Unit 8 | 14
Basis of the Ruling
As the credit guarantee offered by the CGC is based on debt or financial obligation of an
Islamic financing customer, a guarantee mechanism based on the outstanding selling price is
reasonable since it is recognised by current banking practices whereby the outstanding debt is
equal to the remaining debt or the selling price after deducting the rebate value (ibra’) due to
the customer at a certain point of time.
Unit 8.4 DANAJAMIN NATIONAL BERHAD
Danajamin Nasional Berhad (Danajamin) was established in 2009 as a national financial

guarantee institution to maintain market confidence in bond markets (including sukuk) and to
ensure that viable companies have access to financing via bond markets. Apart from providing
credit enhancements to corporations with viable businesses, Danajamin also establishes
investment grade ratings to facilitate the corporations in obtaining funds from bond markets
at a reasonable cost.
Unit 8.4.1 SHARI’AH CONCEPT FOR THE OPERATION OF A

GUARANTEE FACILITY BY DANAJAMIN
Under the guarantee facility mechanism by Danajamin, the financial guarantee institution
undertakes to pay the investors in the event the sukuk issuer fails to make good such payment.
Subsequently, Danajamin will claim the amount paid to the investors from the sukuk issuer.
In this regard, the SAC was referred to ascertain the appropriate Shari’ah concept for the
operation of the guarantee facility by Danajamin.
Resolution
The SAC, in its 10th special meeting dated 9 April 2009 and 95th meeting dated 28 January
2010, has resolved that:

Unit 8 | 15
1. The application of kafalah bi al-ujr (guarantee with fee) as the appropriate Shari’ah
concept for the guarantee facility on the sukuk issuance by Danajamin is permissible.
Under this concept, Danajamin shall act as the guarantor (kafil), the sukuk issuer as the
guaranteed party (makful ‘anhu) and the investors as the beneficiary (makful lahu); and
2. Danajamin is allowed to claim back the amount that has been paid to the investors from
the sukuk issuer through this guarantee facility. The repayment period for the amount
claimed by Danajamin from the sukuk issuer shall be based on the current market
practice subject to obtaining the consent of contracting parties, namely, Danajamin and
the sukuk issuer, and it shall take into consideration the size of the sukuk.1
Basis of the Ruling
The aforesaid SAC resolution is based on the permissibility of a guarantee facility with fee
(kafalah bi al-ujr).
Unit 8.4.2 CAPITAL GUARANTEE IN THE OPERATION OF

DANAJAMIN
As Danajamin provides guarantee facility for both sukuk and conventional bonds, the SAC
was referred to on the issue as to whether Danajamin’s capital for guarantee facility services
on the sukuk and conventional bond should be segregated. This was due to the concern that
the capital segregation might limit Danajamin’s capacity to efficiently and effectively provide
guarantee facility for both sukuk and conventional bond.
Resolution
The SAC, in its 10th special meeting dated 9 April 2009, has resolved that Danajamin’s capital for
guarantee facility services for sukuk and conventional bonds need not be segregated. However,
the fund obtained from the services of the guarantee facility for sukuk and conventional bond
(with fee) shall be separated.2
Basis of the Ruling
Danajamin’s capital management for guarantee facility services for sukuk and conventional
bonds need not be segregated on the basis of maslahah, so as to ensure Danajamin is able to
SAC BNM p. 168.

1
SAC BNM p. 169

2

Unit 8 | 16
carry its function as a guarantor by effectively stimulating growth and stability of the capital
market, including the Islamic capital market. In addition, capital segregation will only limit the
capacity of this guarantee institution to effectively and efficiently provide guarantee facility on
sukuk and conventional bonds.
Unit 8.4.3 SCOPE OF DANAJAMIN’S GUARANTEE ON

SUKUK
The SAC was referred to ascertain the scope of guarantee by Danajamin on the sukuk issuer,
specifically on the issue as to whether Danajamin may guarantee capital and profit value.
Resolution
The SAC, in its 10th special meeting dated 9 April 2009, has resolved that:
1. For sale-based sukuk, like murabahah, Danajamin shall guarantee both capital and
profit value; and
2. For sukuk issued based on isytirak contracts (partnership) like musharakah, mudarabah
and wakalah bi al-istithmar, Danajamin shall guarantee the capital value only.
Basis of the Ruling
For sukuk issued based on isytirak contracts like musharakah, mudarabah and wakalah bi al-
istithmar, Danajamin as a third party may only guarantee the amount of capital. This is in line
with the jurists’ view that a third party guarantee is permissible for musharakah, mudarabah
and wakalah bi al-istithmar contracts but the guarantee is restricted only to the capital value.
Unit 8.4.4 GUARANTEE ON THE OBLIGATION ARISING

FROM A PURCHASE UNDERTAKING
The SAC was referred to on the issue as to whether Danajamin may guarantee sukuk obligation
arising from a sukuk purchase undertaking as agreed between the sukuk issuer and the investors.
Resolution
The SAC, in its 94th meeting dated 23 December 2009, has resolved that Danajamin may
guarantee the obligation of the sukuk issuer arising from the purchase undertaking in sukuk

Unit 8 | 17
as agreed between the sukuk issuer and the investors. However, the formula to determine the
amount of the purchase undertaking shall exclude the unearned profit.
Basis of the Ruling
Fundamentally, the obligation of purchase undertaking in sukuk is valid and acknowledged

by Shari’ah. This is because such obligation is derived from a binding promise (wa’d mulzim)
by the sukuk issuer to purchase an underlying asset of the sukuk based on agreed terms and
conditions. In this regard, the guarantee on such obligation and responsibility may be executed
either with or without fee.
Unit 8.4.5 LATE PAYMENT AND ADDITIONAL RECOURSE

CHARGE
Normally, after Danajamin makes payment to the investors in the event of default by the sukuk
issuer, Danajamin will claim the amount paid from the sukuk issuer. In order to avoid delay
of the repayment by the sukuk issuer, the imposition of late payment charges on the sukuk
issuer who delays the repayment was proposed. In this regard, the SAC was referred to on the
following matters:
1. Whether the late payment charge may be imposed on the sukuk issuer who delays in
repayment; and
2. Whether Danajamin may impose additional charges on the sukuk issuer upon making
the repayment to Danajamin.
Resolution
The SAC, in its 10th special meeting dated 9 April 2009 and 95th meeting on 28 January 2010,
has resolved that:
1. It is permissible to impose a late payment charge on the sukuk issuer who fails to make
repayment within the stipulated period. However, the late payment charge shall be
non-compounding;
2. A certain amount of the late payment charge may be recognised as income by Danajamin
on the basis of ta’widh. However, the determination of the ta’widh rate shall be made by
a third party, namely, Bank Negara Malaysia; and

Unit 8 | 18
3. The imposition of any other additional charges by Danajamin on the sukuk issuer upon
claiming the guaranteed amount paid to the investors is not allowed.
Basis of the Ruling
The aforesaid SAC resolution on late payment charge is based on the permissibility of ta’widh
and gharamah. In addition, the prohibition to impose an additional recourse charge is based
on the view that the payment of guarantee (kafalah) by Danajamin to the investors and the
right to claim such payment from the sukuk issuer would result in the guarantee to appear as a
debt (qardh) that is granted by Danajamin to the sukuk issuer. The Shari’ah stipulates that any
additional charge on debt repayment is considered as riba unless such the additional charge is
imposed only to recover the actual cost incurred.
Unit 8.5 BAY MUZAYYADA
Bay muzayyada is the offering of goods for sale in a market by a seller with a number of interested
buyers who compete to offer the highest price. This process ends with the seller selling the
goods to the highest bidder. In other words, it is similar to an auction. Other names used for
this principle by past Islamic jurists are bay fuqara’, bay man kasadat bidha’atuhu, bay mahawij,
and bay mafalis. This concept is relevant to many issues in the Islamic capital market, especially
those related to the behaviour of market participants profiteering from price differences.
Unit 8.5.1 ARGUMENTS THAT SUPPORT BAY MUZAYYADE
Bay muzayyada is a form of trading that has existed and been applied in the muamalat system
for a long time.
The following are the athar (practice based on the Companions of the Prophet (p.b.u.h.))
supporting bay muzayyada:
(a) Imam Bukhari had written a specific topic on the concept and views of Ata’ who
said that bay muzayyada had been practised by society in the sale of war booty;
and

Unit 8 | 19
(b) Anas had reported the the Prophet (p.b.u.h.) was selling a carpet and a water vessel
and called out for customers. A man offered to buy them for one dirham. The
Prophet (p.b.u.h.) then asked for a higher bid. Another man offered two dirham
and so the Prophet (p.b.u.h.) sold the items to him.
Unit 8.5.2 OPINION OF THE JURISTS
There were two opinions among the Islamic jurists in determining the hukm of bay muzayyada.
The majority viewed it as permissible by Shari’ah, while the minority thought otherwise. The
main reason for the difference in opinion was the interpretation of the hadith of the Prophet
(p.b.u.h.), which prohibited bidding on another person’s bid (saum ‘ala saum akhihi).
Al-Kasani, a jurist of the Hanafi school of law, said that bay muzayyada is not prohibited
because the Prophet (p.b.u.h.) himself practised it.
Ibnu Humam, another jurist of the Hanafi school of law, also permitted the principle using the
same argument.
Ibnu Juzaiy, a jurist of Maliki school of law permitted this principle because it is different from
saum ‘ala saum akhihi which is forbidden, and there is no element of unfairness in choosing
the goods.
Ibnu Qudamah, a jurist of the Hanbali school of law, stated that bay muzayyada is permitted
according to ijma, based on what was practised by the Prophet (p.b.u.h.).

Unit 8 | 20
Unit 8.6 BAY URBUN
Bay urbun can be mentioned as urbun, ‘arabun and ‘urban. It is a deposit given by the buyer
to the seller in a buying and selling contract. If the sale takes place, the deposit will be part of
the price of the goods. Otherwise, it will be considered as hibah (gift) from the buyer to the
seller. For example, A wishes to buy a car that costs RM 40,000 from XYZ Company. A is asked
to pay urbun of RM 4,000 as a booking fee, and there is a condition that this money will not be
returned to him if he cancels the order. However, if he proceeds with the purchase, the deposit
will be considered as part of the cost of the car. This means A needs to pay only RM36, 000 for
the balance.
Unit 8.6.1 ARGUMENTS ON BAY URBUN
The issue of urbun is based on the following arguments.
Past Islamic jurists were divided on determining the ruling of bay urbun. The following is a
summary of their opinions.
The majority of the jurists were of the opinion that bay urbun is not permissible as it contained
elements of gharar, gambling and unlawful acquisition of property. They also discussed the
prohibition of bay urbun by the Prophet (p.b.u.h.).
Some tabi’in, among them, Mujahid, Ibnu Sirin, Nafi’ bin Haris, Zaid bin Aslam and the Hanbali
school of law considered it permissible based on the practices of Saidina Umar Ibn Al-Khattab.
He once appointed Nafi’ to be his representative to buy a house from Safwan bin Umaiyyah
in Mecca to be converted into a prison. Safwan asked Omar for a deposit and laid down the
condition that the deposit would be his if Omar terminated the contract. Omar agreed to the
condition. This opinion was strengthened by Kadhi Shuraih who said that whoever causes
delay and intizar (waiting), has to pay compensation to the party affected by the termination
of the contract.
Although there were two opposing views to this method of trading, bay urbun can be regarded
as a permissible contract and can be developed as an instrument in Islamic finance. It has been
a common practice in any society to pay a deposit in a business transaction so that the parties

Unit 8 | 21
involved will not lose their rights within a certain given period. This does not contradict Shari’ah
principles because it is urf sahih to ensure the smooth running of a muamalat. Bay urbun is
permissible because the hadith of the Prophet (p.b.u.h.) which indicates the prohibition is
weak.
Unit 8.7 SUFTAJAH
The word suftajah originated from the Persian language and has been adopted by the Arabs. It
means a document written by a person to his representative or debtor instructing him to pay
a certain sum of money to his creditor. There is little difference between its meaning in Arabic
and its Islamic jurisprudence terminology, which is a credit instrument in the form of financial
notes given to someone to enable the creditor to use it at another pre-determined venue. The
benefits given by the debtor using this method are from a risk management aspect.
A creditor does not run the risk of losing money during his journey as he is only carrying
suftajah notes. Among the applications of suftajah in the modern financial world is the process
of money transfer, i.e., telegraphic transfer, traveller’s cheque and money order. In the context
of the capital market, it is related to financial notes.
Unit 8.7.1 ARGUMENTS AND SHARI’AH RULES OF

SUFTAJAH
The concept of suftajah is not new in financial risk management as seen in the writings of past
Islamic jurists.
There are many narrations in al-Sunan al-Kubra by Al-Baihaqi that showed that suftajah was
practised by the companions of the Prophet (p.b.u.h.) and tabi`un (successors), such as Ali bin
Abi Talib, Ibnu Abbas, Abdullah bin Zubair and Ibnu Sirin.

Unit 8 | 22
Unit 8.7.2 OPINION OF THE JURISTS
The Islamic jurists held opposing views on permitting suftajah to be used as a financial
instrument because it contains elements of hawalah (debt assignment contract) and benefit.
Generally, their views can be divided into the following.
(i) Views not Permitting Suftajah

Those who held this view related the concept to elements of riba because of the increased value
in the form of benefit for the creditor. There is a hadith of the Prophet (p.b.u.h.) that prohibited
qardh which gives returns to the creditor in the form of profits. The hadith says: “Every qardh
that benefits the creditor is riba.”
(ii) Views Permitting Suftajah

The Maliki school of law gave some flexibility in permitting this instrument in daily dealings, with
the condition that dharurah (necessity) must exist whereby suftajah is used as an instrument to
avoid the risk of losing money while travelling. Some jurists of the Hanbali school of law, such
as Ibn Taymiyyah, Ibn Qayyim and Ibn Qudamah, were of the opinion that the instrument of
suftajah does not contradict Shari’ah principles because its benefits are enjoyed by both the
creditor and the debtor.

Unit 8 | 23
Unit 8.8 ‘UMUM BALWA
‘Umum balwa, according to the Islamic juristic terminology, is an unfavourable widespread

situation affecting most people and is difficult to avoid.
There is a number of maxims of Islamic jurisprudence that excuse Muslims caught in ‘umum
balwa situations. The purpose of such an excuse is to facilitate the conduct of daily activities.
Without such an allowance, the maslahah of the public will be affected, especially in an
economic field that involves the control of mal and trade as well as social stability.
The maxims of Islamic jurisprudence touching on ‘umum balwa situations are as follows:
“Adversity allows for measures to bring about ease.”
“If a situation faces a problem, Syara’ allows for a way out.”
“(For) something forbidden which occurs widely (and which is difficult to avoid),
Syara’ brings relief to those affected.”
Imam al-Suyuti, when explaining the maxims of Islamic jurisprudence included ‘umum
balwa among factors permitting the taisir principle, which is the application of relief
measures. This means that if something is categorised as ‘umum balwa, Shari’ah allows
for relief so as not to burden the Muslim community.

Unit 8 | 24
Unit 8.9 QABD
Qabd, according to Islamic jurists, means the control and ownership of something that usually
refers to an uqud mu’awadhat (exchange contract). It can be explicitly done by claiming the
goods after the sale transaction, or implicitly, by recognising that as a result of a certain action,
qabd has successfully taken place.
Generally, qabd depends on the perception of urf or the common practices of the local
community in recognising that the control and possession of a good has taken place. Islamic
jurists also use a number of other terms which have the same meaning, among which are: naqd,
munajazah, hiyazah, yadd, yadd bi yadd, ha’ wa ha’, qadha’ wa iqtidha’.
Qabd is closely related to the theory of ‘aqd in Islamic jurisprudence, and this relationship can
be seen from two dimensions:
1. Outcome and obligation of an ‘aqd.

An ‘aqd carries certain obligations that are binding to the parties involved. For example, in
a sale and purchase ‘aqd, the seller is obliged to deliver the goods to the buyer. Similarly, the
buyer is obliged to pay the seller. This transaction involves the collection of goods by the buyer
and the payment for the goods to the seller is called qabd; and
2. Completion of an ‘aqd.
Some ‘aqd require qabd to complete the ‘aqd. An example is the acceptance of payment in ‘aqd
salam, which is qabd used as a condition to complete the ‘aqd. For the sale and purchase of
ribawi goods, taqabudh (exchange transaction between seller and buyer) is a requirement for
the ‘aqd. If the ‘aqd partnership dissolves before the qabd is effected, the ‘aqd is considered
invalid. In general, Islamic jurisprudence has outlined two forms of qabd:
First form: Qabd Haqiqi or Qabd Hissi
This qabd is explicit. For example, a qabd transaction occurs when the buyer is seen
taking the goods sold to him. Qabd in this form usually takes place when it involves the
following assets.

Unit 8 | 25
(i) ‘Aqar – fixed property such as land and buildings.

Qabd for fixed property like land is considered to have taken place when the original
owner gives permission to the buyer to take control of the land and carry out whatever
activity he wishes to without hindrance. In the context of administering the real estate,
it is the official transfer of ownership by changing the name on the ownership certificate
and this is enough to complete the qabd.
(ii) Manqul – movable property such as trading goods, food, vehicles, and so on. Qabd
hakiki is considered to have taken place when it involves the collection of goods.
For example, in the purchase of books, qabd hakiki occurs when the buyer collects the
books and pays the price.
Second form: Qabd Hukmi or Qabd Ma’nawi
Qabd hukmi is the opposite of qabd hakiki, in that the transaction that takes place is
implicit. However, Islamic jurisprudence still equates its status with that of qabd hakiki.
The following conditions are considered as qabd hukmi:
(iii) Takhliah – the seller gives permission to the buyer to take the goods sold, unhindered.
For example, the seller delivers the sold goods to an agent appointed by the buyer
to receive the goods on his behalf. Another example is the seller opening up his
warehouse to show the wheat to the buyer, as an indication of handing over the
wheat to be sold;
(iv) Muqasah – meaning a contra debt.
In a contra debt, an implicit settlement takes place between the two parties, i.e., debtor
and creditor. As a result of the contra transaction, there is no more debt between the
two parties. For example, Ahmad owes Ali RM 2,000. Then, Ali owes Ahmad the same
amount. This means the two parties are no longer in debt with each other. In this context,
qabd hukmi of the amount of the debt has taken place in the form of a contra debt.
(v) Earlier action

Qabd hukmi can also take place due to an earlier action which shows that qabd has taken
place, although the earlier qabd differs in form from the new qabd. For example, in the
case of a qabd, rental is followed by a purchase. During rental, the tenant occupies the
rented premises. This represents a form of early qabd. Then, the premises is sold to the

Unit 8 | 26
tenant, and qabd hukmi takes place although the qabd hakiki takes place after the sale
and purchase ‘aqd; and
(vi) Itlaf qabd hukmi also takes place when there is itlaf.
Itlaf means damage. If the goods are damaged by the buyer before the sale and purchase
‘aqd (when the goods are in the hands of the buyer), qabd is still considered to have
taken place. The buyer has to pay for the goods, if he causes damage while examining
them, e.g., dropped the goods, and so on because qabd for the goods is considered to
have taken place
In the present context of the capital market, the concept of qabd often touches on
issues like bay al-dayn, crude palm oil futures contract and contra trading in the capital
market. Hence, understanding this concept is very important in determining whether
the trading status of the instrument is in line with Shari’ah principles.
Unit 8.9.1 VIEW OF THE JURISTS
Because the Prophet (p.b.u.h.) himself mentioned the matter of qabd in a number of sale and
purchase situations, Islamic jurists discussed whether it was a valid condition in transactions
or otherwise. The majority of Islamic jurists were of the view that qabd represented a valid
condition in the transaction of ribawi goods if the said goods have similar ‘illah riba, such as
similarity in type (sale and purchase of gold with gold) or difference in type (sale and purchase
of gold with silver). The transaction should meet the conditions of the ‘aqd ceremony whereby
goods are handed over and payment is made on the spot. Such a condition does not apply when
the transaction of ribawi goods involves ribawi goods of different ‘illah, such as buying gold
and paying for it with rice. Gold is categorised as a medium of exchange whereas rice is a staple
food.
Unit 8.9.2 TRANSACTION BEFORE QABD HAKIKI
In general, there are two viewpoints of Islamic jurists regarding this issue.
First viewpoint: Some Islamic jurists were of the view that qabd is not a valid rule for a business
transaction. Hence, a person should sell his goods (without exception) before qabd can take
place. Among those of this view were ‘Ata’, ‘Uthman al-Batti and Syi’ah Imamiyah.

Unit 8 | 27
Second viewpoint: The majority of Islamic jurists were of the view that qabd hakiki is valid for
the transaction of some types of goods. This was based on validated prophetic traditions which
forbade the sale of some types of goods before qabd hakiki. Nevertheless, they were of differing
views in deciding on the ‘illah and guidelines for the types of goods that should be included
under this restriction. This is because the prophetic traditions which discussed qabd were very
generally stated and related to food.
The Islamic jurists tried to find an answer as to whether the restriction was only specific for
food or whether it applied to other things. Among the hadith used to support qabd hakiki were:
“From Ibnu ‘Abbas, it was narrated that the Prophet (p.b.u.h.) had forbidden a man
from selling food he had not yet procured. Ibnu ‘Abbas was asked as to its form. He
answered: ‘Dirham with dirham, and food after it has been procured.’”
“From Abdullah bin Dinar, it was said that that he had heard Ibnu ’Umar said, the
Prophet (p.b.u.h.) said: ‘Whoever buys food, he should not resell it before he procures
it (qabd hakiki).’”
Based on the above hadith and a few other narrations with the same understanding, the
Prophet (p.b.u.h.) had forbidden the resale of food before qabd hakiki. These evidence shows
the importance of qabd hakiki in sale and purchase transactions involving food, specifically,
which is perishable.
In general, the Hanafi, Shafi’i and Hanbali schools of law were of the view that the ‘illah
forbidding the sale of an object before qabd hakiki was due to the presence of gharar. This was
because of the concern that the goods might not be delivered due to damage or other factors.

Unit 8 | 28
SUMMARY
• Islamic law has introduced a number of contracts used in different areas of business
and finance to safeguard the rights of the parties involved in the financial transactions.
• In this unit, a combination of contracts that serve different objectives in business and
finance were presented. They are muzayyada, urbun, kafalah, suftajah, ’umum balwa
and qabd. Each of the above contracts has specific rules and conditions to be observed
to ensure Shari’ah compliance in its implementation.
• The above contracts are used in different applications in Islamic banking; some of
them are used for security (kafalah), others are meant to fulfil the Shari’ah compliant
process (qabd), and others are regarded as references for issuing Shari’ah rulings(‘umum
balwa).
• Shari’ah scholars have debated the above contracts from different perspectives; where
there are different views and interpretation that have emerged andhave been reflected
in various instruments and practices of Islamic financial institutions.

Unit 8 | 29
QUESTIONS AND PROBLEMS
Question 1.
Discuss the different opinions of Shari’ah scholars pertaining to muzayyada
Question 2.
Elaborate on the different opinions of Shari’ah scholars pertaining to urbun.
Question 3.
Highlight the different opinions of Shari’ah scholars pertaining to kafalah.
Question 4.
Discuss the different opinions of Shari’ah scholars pertaining to suftajah.
Question 5.
Discuss the different opinions of Shari’ah scholars pertaining to ‘umum balwa.
Question 6.
Elaborate on the different opinions of Shari’ah scholars pertaining to qabd.

Unit 8 | 30
• Abdul Rahman Juzairi, Kitab Al-Fiqh ‘Ala Madhahib al-

Arba’ah, Dar Al-Thaqalain, Beirut, 1998.
• Accounting and Auditing Organization for Islamic Financial

Institutions (AAOIFI), Shari’ah Standards: 2003, (Manama:
AAOIFI, 2003).
• Ali al-Salus, Al-Kafalah fi al-Shari’ah al-Islamiyyah, (np.,

nd).
• al-Baghdadi, Abu Muhammad ibn Ghanim ibn Muhammad,

Majma’ al-Damanat fi Madhhab al-Imam al-Aczam Abi
Hanifah al-Nucman, ed. Muhammad Ahmad Siraj & Ali
Jumucah Muhammad, Dar al-Salam, Cairo, 1st , 1999 C.
E.–1420 A. H.
• al-Baji, Sulayman ibn Khalaf, al-Muntaqa Sharh al-Muwatta’,

Beirut, Dar al-Kitab al-cArabi, 1332 A. H.
• al-Bahuti, Mansur ibn Yunus ibn Idris, Kashshaf al-Qinac

can Matn al-Iqnac, ed. Hilal Musailihi Mustafa Hilal, cAlam
al-Kutub, Beirut, 1983 C. E.–1403 A. H.
• Bank Islam Malaysia Berhad (BIMB), Islamic banking

practice from the practitioner’s perspective, (BIMB: Kuala
Lumpur, 1994).
• al-Dasuqi, Ibn cArafah, Hashiyah al-Dasuqi cala al-Sharh

al-Kabir, Dar Ihya’ al-Kutub al-Arabiyyah, Cairo, n. d.
• Ibn Rushd al-Hafid, Abu al-Walid, Muhammad ibn Ahmad

ibn Muhammad ibn Ahmad, Bidayat al-Mujtahid wa
Nihayat al-Muqtasid, Dar al-Jil, Beirut, 1989 C. E.–1409 A.
H.
• Ibn Taymiyyah, Ahmad ibn Muhammad, Majmucat al-

Fatawa, compiled by cAbd al-Rahman ibn Muhammad ibn
Qasim al-cAsimi, Dar al Taqwa, Jeddah, n.d.

Unit 8 | 31
• Mohammad Ali El Gari, Guarantee by the Islamic Bank of

the Investment Deposit, Journal of Islamic Economic, Vol.
16, No.2, 2003.
• Mohd Daud Bakar, “Contracts in Islamic Commercial and

their application in modern Islamic Financial system,” in
Iqtisad Al-Islami, (Khalifa Institute, available at http://
islamic-world.net/economics/contract_03.htm)
• Nazih Hammad, Mada Jawaz Akhz al-‘Ujrah ‘ala al-Kafalah

fi al-Fiqh al-Islami, Majallat Jami’ah al-Malik ‘Abd al-‘Aziz,
Vol. 9, 1997.
• al-Nawawi, Abu Zakariyya Muhy al-Din ibn Yahya ibn Sharf,

al-Majmu’ Sharh al-Muhadhdhab, Maktabat al-Irshad,
Jeddah, n.d.
• Rafiq Yuus al-Misry, Hal Yajuzu fi al-Mudarabah An Yadman

al-‘Amil Ra’s al-Mal, Majallat Jami’ah al-Malik ‘Abd al-‘Aziz,
Vol. 16, No. 1, 2003.
• al-Ramli, Ahmad ibn Hamzah ibn Shihab al-Din, Nihayat

al-Muhtaj ila Sharh al-Minhaj, Dar al-Fikr, Beirut, 1984.
• Wahbah al-Zuhayli, Financial Transactions in Islamic

Jurisprudence, Translated by Mahmoud A. El-Gamal, Dal
al-Fikr, Damascus, Syria, 2003.
• Zakaria Man, “Islamic Banking: The Malaysian Experience”

in Ariff, M., ed., Islamic Banking in Southeast Asia,
(Singapore: Institute of South East Asian Studies 1988).
• Mohammad Muslehuddin, Banking and Islamic Law,

Islamic Book Service, New Delhi, 2000.
• Ibn al-Hummam, Kamal al-Din ibn al-Hummam al-Hanafi,

Fath al-Qadir Sharh al-Hidayah, Vol. 8, 1316 A.H., Matba’ah
al-Kubra Amiriyyah, Bulaq, Egypt.

Unit 8 | 32
• Al-Kasani, Ala’ al-Din Abi Bakr ibn Mas’ud, Bad’i’ al-Sana’i’

fi Tartib al-Shara’i’, Vol. 6, Dar al-Kutub al-Ilmiyyah, Beirut,
1997, pp. 143– 180.
• Ibn Aidin, Ala’ al-Din Muhammad ibn Ali al-Haskafi, Radd

al-Muhtar ala al-Durr al-Mukhtar Sharh Tanwir al-Absar
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• Wahbah al-Zuhayli, Mahmoud A. El-Gamal (tr), Financial

Transactions in Islamic Jurisprudence, Vol. 1,Dar al-Fikr al-
Mu’asir, Beirut, 2003.
• The Mejelle (translation of Majallah al-Ahkam al-Adliyyah),

The Other Press, Kuala Lumpur, Malaysia, n.d., Articles
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Nordeen, 1997, pp. 154–162.
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Law of Transactions, Univision Press, 1999, pp. 219–223.
• Abdullah Alwi Hassan, Sales and Contracts in Early Islamic

Commercial Law, Kitab Bhavan, New Delhi, 1997, pp. 146–
154.


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Shari’ah Issues in Financial Transactions

Shari’ah Issues in Financial

8.2- Kafalah contract

8.3- Credit Guarantee Corporation (Malaysia) Berhad

8.4- Danajamin National Berhad

8.5- Bay muzayyada

8.6- Bay urbun

8.8- ‘Umum balwa

Unit At the end of this unit, you should be able to:

SH5023 Shariah Issues in Islamic Finance

SUPPORTING CONTRACTS USED IN

There are some contracts which are not popular

SH5023 Shariah Issues in Islamic Finance

Unit 8.1 INTRODUCTION

Unit 8.2 KAFALAH CONTRACT

Unit 8.2.1 DEFINITION

SH5023 Shariah Issues in Islamic Finance

SH5023 Shariah Issues in Islamic Finance

Unit 8.2.2 FINANCIAL GUARANTEE

The financial guarantee is further divided into the following types:

• Kafalah bi al-dayn (guarantee for debt) – It means to guarantee the payment of

SH5023 Shariah Issues in Islamic Finance

Unit 8.2.3 KAFALAH ON MUDARABAH CAPITAL

Unit 8.2.3.1 ARGUMENT PERTAINING TO KAFALAH ON

1. Third-party guarantee based on tabarru’ (voluntarily given);

SH5023 Shariah Issues in Islamic Finance

2. Third-party guarantee based on qardh (debts);

Unit 8.2.3.2 ARGUMENT PERTAINING TO A THIRD PARTY

Unit 8.2.3.3 THIRD PARTY GUARANTEE BASED ON QARDH

SH5023 Shariah Issues in Islamic Finance

Unit 8.2.3.4 MUDARAH YUDARIB

Unit 8.2.4 GUARANTEE THROUGH A SPECIAL FUND

Unit 8.2.5 DEPOSIT INSURANCE SCHEME

SH5023 Shariah Issues in Islamic Finance

Unit 8.2.6 CREDIT (DEBT) GUARANTEE

SH5023 Shariah Issues in Islamic Finance

Unit 8.2.7 KAFALAH FOR A FEE

SH5023 Shariah Issues in Islamic Finance

Arguments on Ujrah on Guarantees

Imposition of Rahn (Collateral) on the Issuer

SH5023 Shariah Issues in Islamic Finance

Unit 8.3 CREDIT GUARANTEE CORPORATION (MALAYSIA)

Unit 8.3.1 CONCEPT OF THE CORPORATION OF ISLAMIC

SAC BNM p. 165.

SH5023 Shariah Issues in Islamic Finance

Basis of the Ruling

Unit 8.3.2 GUARANTEE ON THE SALE PRICE

SAC BNM p. 167.

SH5023 Shariah Issues in Islamic Finance

Basis of the Ruling

Unit 8.4 DANAJAMIN NATIONAL BERHAD

Danajamin Nasional Berhad (Danajamin) was established in 2009 as a national financial

Unit 8.4.1 SHARI’AH CONCEPT FOR THE OPERATION OF A

SH5023 Shariah Issues in Islamic Finance

Basis of the Ruling

Unit 8.4.2 CAPITAL GUARANTEE IN THE OPERATION OF

Basis of the Ruling

SAC BNM p. 168.

SAC BNM p. 169

SH5023 Shariah Issues in Islamic Finance

Unit 8.4.3 SCOPE OF DANAJAMIN’S GUARANTEE ON

Unit 8.4.4 GUARANTEE ON THE OBLIGATION ARISING

SH5023 Shariah Issues in Islamic Finance