ISLAMIC BUSINESS TRANSACTION

CHAPTER TWELVE ALAL-WADIAH

Ð

MAHYUDDIN KHALID

Ð

emkay@salam.uitm.edu.my

CONTENT
DEFINITION

EVIDENCE

Ð Ð Ð Ð Ð

DEFINITION EVIDENCE PILLARS SIGNIFICANCE OF AL-WADIAH MODERN APPLICATION

TYPES

SIGNIFICANCE

APPLICATION

COMPARISON

2

DEFINITION
DEFINITION

EVIDENCE

TYPES

Ð Literally: Al-wadiah it means to leave, quit, abandon etc Ð Technically: A thing or commodity committed to the trust and care of a person A contract whereby a person leaves his property for safe protection to another person Ð Al-wadiah is the commission given by the depositor to the depositary for holding his property in safe custody; al-amanah

SIGNIFICANCE

APPLICATION

COMPARISON

3

EVIDENCE
Ð Al-Quran:
DEFINITION

.

EVIDENCE

TYPES

SIGNIFICANCE

Ð Hadith: ´Discharge the trust to the person who entrust it to you, and do not betray the one who betrays youµ Ð Ijma·: The scholars from every single era of the Islamic eras had came to a consensus on the permissibility of the Wadiah c ontract since it is desired by the people in general to the extent that it is actually an essential and vital contract for the society

APPLICATION

COMPARISON

4

PILLARS OF AL-WADIAH
1.
DEFINITION

2.
EVIDENCE

3.
TYPES

4.
SIGNIFICANCE

Al ² Muwaddi· Depositor, Owner of the property Al ² Wadi· Depositee, Custodian of the property Al-Wadiah Property for safe keeping Sighah Offer (Ijab) Acceptance (Qabul)

APPLICATION

COMPARISON

5

FLOWS OF AL-WADIAH
DEFINITION
Ijab (Offer)

EVIDENCE

TYPES
Al-Muwaddi· (Depositor, Owner of the property)

SIGNIFICANCE

Al-Wadiah (Property for safe keeping)

Al ² Wadi· (Depositee, Custodian of the property)

APPLICATION

COMPARISON Qabul (Acceptance)

6

TYPES OF AL-WADIAH
TYPES
DEFINITION

1.

Wadiah Yadd al- Act of Trust Amanah Bank acts as a trustee to the fund. If the money under custody is accidentally lost or destroyed, the custodian is not obliged to replace or compensate it.

EVIDENCE

TYPES

2.
SIGNIFICANCE

Wadiah Yadd al- Act of Guarantee Dhamanah Bank·s responsibility is in form of guarantee If the deposits are pooled together and are utilized, it is compulsory for the bank to return the fund as when requested by the customer

APPLICATION

COMPARISON

7

AL-WADIAH CONTRACT : TRUST OR GURANTEE?
Ð Al-Wadiah: Act of Trust (amanah) or Act of Gurantee (dhamanah)? The jurists from different mazhabs had agreed that al² Wadiah is an act of good deed which is encouraged (mandub), and there is reward (in the hereafter) for its preservation. It is essentially an act which is based on pure trust(amanah) and not a guarantee (dhamanah). The depositee is not liable to be the guarantor of the contract except for cases of carelessness or negligence. Hence, it is not legal to require the trustee to be a guarantor (accountable).

DEFINITION

EVIDENCE

TYPES

SIGNIFICANCE

APPLICATION

COMPARISON

8

AL-WADIAH: ACT OF TRUST BECOME ACT OF GUARANTEE
Ð Besides the cases of ignorance, contract of Wadiah could be transformed from trust (amanah) into guarantee (dhamanah) in the following cases if the depositee: 1. Ignores the protection and safe keeping of the deposited property 2. Deposits the property with somebody else, or not somebody who normally takes care of the depositee·s property. 3. Benefits from the usage of the deposited property 4. Travels with the deposited property. 5. Refuses to return the deposited property to the depositor or withholds it even though he/she is capable of returning it. 6. Mixes the deposited property with other properties, which could not be recognized and distinguished from each other. 7. Commits certain conducts which are against the predetermined condition of the depositor.

DEFINITION

EVIDENCE

TYPES

SIGNIFICANCE

APPLICATION

COMPARISON

9

SIGNIFICANCE OF AL-WADIAH
1.
DEFINITION

EVIDENCE

TYPES

SIGNIFICANCE

APPLICATION

COMPARISON

Safeguard and protect any valuable from being stolen, destroyed or misplaced. 2. The protection of valuables for almost everybody who thinks their home and office are not safe enough. It is also costly and not cost effective (except for bigger corporations) to manage these properties on their own since not everybody could afford to manage their valuables on their own and still need professional individuals or groups to handle it. 3. Furthermore, in the case of Cash Deposits, it could also be used for investment purposes and can contribute to the economic growth of the nation from two aspects: a. The surplus units (depositors) could channel their cash for the deficit units (companies and entrepreneurs). They can obtain return in the form of dividends or profit. b. The deficit units (companies and corporations) could obtain funds for the financing of their projects from the pool of funds deposited by the surplus units.

10

PROFIT GAINED FROM THE USAGE OF MONEY UNDER AL²WADIAH
1.

DEFINITION

Al²Malikiah , Abu Yusof, AlLaiths and Sufyan REASON:

The profit is for the depositee who traded the cash

EVIDENCE

TYPES 2.

1. The agent (depositee) is the guarantor and custodian of the money until it is returned back to the real owner. 2. The depositor does not essentially enter the contract of Wadiah with the intention of gaining any profit but with the purpose of safe guarding their deposited property. Hence, they should be given their original property without any amount of profit. Abu Hanifah REASON: 1. The revenues were earned through an illicit gain. 2. If it is forbidden to sell the Wadiah property, the acquired profit would be considered as an illicit gain which could only be purified through donation and charity. 3. The profit will be shared and split between the depositor and depositee on the basis of Mudharabah contract. The depositee should donate the profit without benefiting from the proceeds

SIGNIFICANCE

APPLICATION

COMPARISON

11

MODERN APPLICATION
DEFINITION

EVIDENCE

TYPES

SIGNIFICANCE

APPLICATION

COMPARISON

Ð Responsibility of an Islamic Bank is considered as Yad Dhamanah when: Bank imposes certain fee on the safe keeping of the items and provides a special place for the safe custody of these items. The bank will be held responsible for the replacement of these items in cases of loss, damage or destroy even if these disaster occur unintentionally or due to negligence. Bank uses the cash money for business purposes. In this case, the bank is obligated to fully return the al-Wadiah money that has been used back to the owner, regardless of whether the bank had made any profit or even loss from the business venture using the al²Wadiah money. This means that any profit would be owned by the bank and they have the right to give all or part of the proceeds back to the depositor based on their discretion as a gift or token which are not promised earlier

12

MODERN APPLICATION
DEFINITION

EVIDENCE

TYPES

SIGNIFICANCE

APPLICATION

COMPARISON

Ð Al-Wadiah Current Account Islamic Bank mobilizes customers· deposits in Current Account under the principles of Al-Wadi·ah Yad Dhamanah (guaranteed custody). It is based on the combination of contract of custody (alWadi·ah) and guarantee (Yad Dhamanah). Bank receives deposits from its customers who want to make a safe custody of their funds and utilizing the services provided under the scheme of a current account. The bank then will ask permission to utilize their funds. However, the customers may withdraw their saving any time they desire. All the profit generated by the bank from the use of funds belongs to the bank. The bank provides cheque books and other services provided by conventional bank to the current account.

13

MODERN APPLICATION
DEFINITION

EVIDENCE

TYPES

SIGNIFICANCE

APPLICATION

COMPARISON

Ð Al-Wadiah Saving Account Islamic Bank mobilizes customers· deposits in Savings Account under the principles of Al-Wadi·ah Yad Dhamanah (guaranteed custody). It is based on the combination of contract of custody (alWadi·ah) and guarantee (dhamanah) Bank accepts deposits from its customers who want to make a safe custody of their fund Profit generated by the bank from the use of such funds belong to the bank. Bank may at his discretion reward the customer by returning a portion of profits generated from the use of their funds from time to time. Bank provides its customers with saving passbook and other usual services provided for saving accounts by the conventional banks. ah).

14

DIFFERENCES BETWEEN DEPOSITS UNDER ISLAMIC AND CONVENTIONAL BANKING CONVENTIONAL
DEFINITION

ISLAMIC
CONTRACT

Loan contract

Wadiah (safe-keeping) contract Depositor ² Depositee

EVIDENCE

Lender ² Borrower
TYPES

RELATIONSHIP

SIGNIFICANCE

Deposits are paid interest Conventional banks must give the depositers their interest payment Deposits are liability products of a bank

INCOME

Deposits are not entitled to any income Islamic banks may give the depositer a share of the profits generated at their discretion Deposits are either a trust or guarantee products of a bank

APPLICATION

OBLIGATION

COMPARISON PRODUCTS

15

END OF CHAPTER
DEFINITION

EVIDENCE

TYPES

SIGNIFICANCE

Ð

APPLICATION

COMPARISON

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