ISLAMIC FINANCIAL

MANAGEMENT
Guidelines on Ibra and Waqf
MOHD DANIAL MOHD YAZID 173567
MOHAMMAD HANIF B MD ALI 173425

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DEFINITION

Ibra (
)Represents the waiver on right of claim accorded by a person
to another person that has an obligation (zimmah) which is due
to him.
Ibra or rebate refers to an act by a person relinquishing his
rights to collect payment due from another person.

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ISLAMIC FINANCIAL
INSTITUTION
In the context of Islamic finance, an Islamic financial institution
(IFI) may grant ibra ( ) to its customers of a sale based
financing who settled their debt prior to the agreed settlement
period as stipulated in the agreement concluded by both
parties.

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SALE-BASED FINANCING
CONTRACT
In context sale-based financing contract a Customer is required
to settle the selling price (comprising the principal sum and
profit margin) regardless as to whether:

DEFERRED SPOT BASIS

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PURPOSE
Guideline on Ibra
( )
To promote transparency and
equitable mechanism of the granting
of ibra by (Islamic Financial
Institution) IFIs.
To specify the requirements
relating to the granting of
and incorporation of an ibra
clause in the financing
documentation and other
relevant.
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APPLICABILITY
These Guidelines are applicable to:

Islamic banks licensed under the Islamic

Banking Act 1983 (IBA)

Banks licensed under the Banking and

Financial Institutions Act 1989 (BAFIA)

Development financial institutions prescribed

under the Development Financial Institutions
Act 2002 (DFIA)

Takaful operators registered under the Takaful

Act 1984 (TA)

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 EFFECTIVE &
IMPLEMENTATION
D ATE

For IFIs other than For IFIs other than For takaful
takaful operators, takaful operators, operators, the
the Guidelines the requirements effective and
shall be effective under paragraphs implementation
from 1 November 7, 8, 9, and 10 date of the
2011. The shall be fully Guidelines is 31
requirements implemented from January 2013.
under paragraph 6 1 July 2012. Earlier
shall take effect implementation is
immediately. encouraged.
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 PRINCIPLE
REQUIREMENTS

Customers who make an Settlement by

early settlement or early customers in the case of
redemption, default

Settlement of the Settlement by

original financing customers in the event
contract due to of termination or
financing restructuring cancellation of financing
exercise before the maturity date
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PRINCIPLE
REQUIREMENTS
(Contd.)

Under Variable
Financing
The IFIs shall grant ibra on the difference between
the amount of profit calculated based on the
ceiling/contracted profit rate (CPR) and the amount
of profit based on the effective profit rate (EPR)

Ibra must be granted if the profit amount based on

EPR is lower than the profit amount based on CPR.

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CALCULATION OF
Ibra (
)
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 CALCULATION
E A R LY S E TTL E M E N T

a) Early Settlement Charges

The IFIs are not allowed to claim any penalty charges from customers
making early settlement during a specified time period.

The early settlement charges should not penalise or act as a barrier to

prevent customers from switching or closing a financing account
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 CALCULATION
E A R LY S E TTL E M E N T

a) Early Settlement Charges

(Contd.)
The charges that may be imposed on the customers for partial
or full settlement during the specified time period as determined
by IFIs shall reflect a reasonable estimate of the costs
incurred by the IFIs as a direct result of settlement prior to
maturity
Costs that have not been recovered
Initial costs that have not been recovered

The charges must exclude any consideration of the following

costs:

Loss of profit that would have been received if the financing

continues until the end of the specified
12
time period9 or
expected tenure.
CALCULATION
L ATE PAYM E N T

b) Late Payment Charges

The late payment charges11, if any, at the point of settlement prior to

maturity are to be calculated separately from the ibra calculation.
The late payment charges shall be reflected in the settlement amount
of the customer. 13
Voluntary Waqf
Waqf means to stop, to withhold the thing (e.g. the house is
withheld for the mosque, which means that the revenue of the rent
of the house is withheld to spend on the mosque).

Waqf is a financial charitable institution established by withholding

one's property to eternally spend its revenue on fulfilling certain
needs depending on the choice and conditions made by the founder

Once the property been created as waqf, it can never be given as

gift, or to be inherited, or sold. It belongs to Allah and the
corpus/waqf property always remains intact.
Waqf in the Hadith

)
.(

The Prophet (s) said: When a man dies his acts come to an end, except three
things, recurring charity, knowledge (by which people benefit), and pious
offspring, who pray for him.
 Kinds of Waqf
There are two kinds of Waqfs:

Immovable property
Includes land, fields, farms, or buildings such as mosques,
schools, hospitals, or basic infrastructures such as bridges,
roads, water supply etc.

Movable property
Includes cattle, books, money/cash, crops and weapons,
shares of Joint-Stock Company, etc.
 DEFINITION OF CASH-WAQF

The terms, waqf, habs, tasbil mean to stop, to restrain i.e. devoting in
the way of Allah

The confinement of an amount of

money by a founder(s) and the
dedication of its usufruct in perpetuity to
the welfare of society

Beneficiaries of Cash-Waqf

Waqf Khayri, Waqf Am (Public Waqf) is a cash endowment made by

the founder to support the general good and welfare of society, the
poor and the needy.

Waqf Ahl, Waqf Khas al-waqf al-dhurri and waqf al-awlad are all the
same and refer to family waqf/specific waqf.

Waqf Mushtarak (combined Public and Family Waqf) is a cash waqf

created by a founder to support both the public and his family or specify
certain persons, group of people or needy areas.
 Characteristics of Cash-Waqf

Irrevocability: This means that once the founder created the cash-waqf he
cannot revoke it back, however, he/she can benefit from its
investment/revenue.

Perpetually: Once the cash-waqf is created it must be perpetual. This will

ensure regular and continual support from the cash-waqf to financing needy
areas in the Muslim society.

Inalienability this means that once cash is created as waqf no one can
ever become the owner to alienate it, i.e. it becomes a frozen asset. It
cannot be the subject to be given as gift, inheritance, or any alienation
 Investment of Cash-Waqf

Mudarabah (partnership) has been recommended by earlier

Muslim jurists.

The latest fatwa issued by Fiqh Academy Islam, agreed that

cash waqf can be invested in any shariah compliant mode
of investment, such as Mudharabah, Murabaha, BBA,
Musharakah, Istisna, etc.
Can Non-Muslim Create Cash-Waqf?

The Shafie School permitted the creation of waqf from a non -Muslim even if it is for the benefit of a Mosque. He based his opinion on the following hadith :

)( " :

The Prophet (pbuh) said Allah will not oppress any Muslim from his good deeds, as he
gives it in this world and he will be rewarded in this world and in the hereafter. But for
the non- Muslim he will be rewarded for all his good deeds only in this world
II. MODERN APPLICATIONS OF CASH WAQF

The last two decades witness the revival of the institution of waqf and the
creation of movable waqf i.e. cash waqf in almost all Muslim countries and
Muslim minority countries.

The followings will highlight nine different cash-waqf models that have
been practiced in 15 countries and in 3 international organizations.
 The Role of Waqf in Development

The Waqf system had played a vital role in achieving

development in the following areas:
Reduces government expenditure
Solve the problem of unemployment
Creates cities and commercial activities
Creates financial institutions.
Enhances the different sectors in the Muslim countries,
agricultural, industrial, social and service sectors.
THANK
YOU
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