International Journal of Financial Management

Open Access Open Access  Restricted Access Subscription Access
Open Access Open Access Open Access  Restricted Access Restricted Access Subscription Access

Revisiting the Principles of Gharar (uncertainty) in Islamic Banking Financing Instruments with Special Reference to Bay Al-inah and Bay Al-dayn towards a New Modified Model


Affiliations
1 Associate Professor, Department of Business Administration, Kulliyyah of Economics & Management Science, International Islamic University, Kuala Lumpur, Malaysia
     

   Subscribe/Renew Journal


One of the signifi cant features of Islamic banking is the elimination of riba and gharar. However many problems arise in some of Islamic banking fi nancing instruments when they are claimed to contain signifi cant elements of gharar thus held unacceptable in certain Muslim countries. Among these instruments are Bay al-Inah and Bay al-Dayn. Currently, Bay al-Inah is not accepted in some countries such as the Middle East countries as it is regarded as part of interest-based transaction. However, in Malaysia, Bay al-Inah has been formalised as a permissible practice and is has emerged as the most important mode of transactions that stimulates the growth of Islamic transaction in Malaysia, which fi nally comes across the globe to be among the most successful Muslim state in the development of Islamic Finance. On the other hand, Bay al-dayn or the sale of debt is not unanimously accepted or validated by Muslim scholars. Even though some scholars allow it in all forms and aspects, the others either disallow it entirely or allow it under certain circumstances and with certain clauses or conditions.The paper will discuss at length on both contracts and the legal implications of the presence of gharar on the validity of these contracts. The views from the jurists will be critically examined to revisit the existence of gharar especially in these two Islamic banking instruments namely bay al-dayn and bay al-inah.

Keywords

Islamic Financial Instruments, Contracts, Gharar (uncertainty), Bay Al-inah and Bay Al-dayn, Islamic Banking Products
Subscription Login to verify subscription
User
Notifications
Font Size

  • Al Haskafi ,(1971), Al Durr al Mukhtar fi Sharh Tanwir al Absar, v.5, Dar al Fikr, Beirut

  • Hassan O. Ahmed,(1990), Shariah Contracts in Islamic Banking & Finance, Dar al Fikr, Beirut

  • Imam Shafi , Al Um, v.3, Dar al Fikr, Beirut

  • Kamali M.H,(2001) Prospects for an Islamic Derivatives Market in Malaysia, http://lawinislam.com/article. php?id=7

  • Kamali,M.H.i,(1988),Uncertainty and Risk-Taking (Gharar) In Islamic Law, IIUM Law Journal, Vol. 7, No. 2, , IIUM

  • Kamali.M.H, (1990) ,Principles of Islamic Jurisprudence, Cambridge, UK

  • Muhammed Obaidullah,(2005,) Islamic Financial Services, Islamic Economic Research

  • Nabil A. Saleh,1986,Unlawful Gain and Legitimate Profi t in Islamic Law: Riba, Gharar and Islamic Banking, Cambridge,Cambridge University Press.

  • Pramanik,A.H,(2001)., Islamic Banking: How Far Have We Gone, IIUM, KL

  • Razali S.Salwani,(2008) Online Contract and the Issues of Gharar and Uncertainty, IIUM Law Journal vol 16, 1

  • Razali,S.Salwani,(2008) The Dominance Entry of Principle of Gharar in E-Contract,Arab Law Quarterly vol 35 ,5

  • Rosly S.A.,(1999),Critical Issues on Islamic Banking and Financial Markets, Dinamas, KL

  • Saiful Azhar Rosly & Mahmood M. Sanusi,(1999), The Application of Bay al Inah and Bay al Dayn in Malaysian Islamic Bonds: An Islamic Analysis, International Journal of Islamic Financial Services, Vol. 1, No. 2

  • Saleem.M.Y,(2000) A Handbook on Fiqh for Economists ,IIUM

  • Sunan Abu Dawud

  • Sahih al Bukhari

  • The Holy Quran

  • http://infad.kuim.edu.my/modules.php?op=modload&na me=News&fi le=article&sid=9346

  • http://infad.kuim.edu.my/modules.php?op=modload&na me=Search&fi le=index&action=search&overview= 1&active_stories=1&stories_topics[0]=7

  • http://infad.usim.edu.my/modules.php?op=modload&na me=News&fi le=article&sid=9348&mode=thread& order=0&thold=0

  • http://islamicfinanceandbanking.blogspot.com/2007 _08_01_archive.html

  • http://staff.uob.bh/fi les/620922311_fi les/FinancialEngineering. pdf

  • http://staff.uob.bh/fi les/620922311_fi les/FinancialEngineering. pdf

  • http://www.applied-islamicfi nance.com/sp_securitization _1.htm

  • http://www.badralislami.com/glossary/a-h.asp

  • http://www.ifisa.co.za/Articles/Derivatives/Argument %20n%20derivatives_pdf

  • http://www.islamic-world.net/economics/contract.htm

  • http://www.islamic-world.net/economics/contract.htm#

  • http://www.islamic-world.net/economics/derivatives_instruments. htm

  • http://www.islamic-world.net/economics/riba_intro.htm

  • http://www.islamic-world.net/economics/trade_business. htm

  • http://www.islamonline.net/lifefatwa/english/Browse. asp?hGuestID=FdpYlv

  • http://www.livingislam.org/maa/dcdt_e.html

  • http://www.mekkaoui.net/MaktabaIslamya/haditENG/ MaliksMuwatta/31.htm

  • http://www. r h b i s l a m i c b a n k . c o m . m y / i n d e x . asp?fuseaction=general.article&aid=20

  • http://www.siddiqi.com/mns/Islamic_Finance_May2004. html

  • Abdulkader S. Thomas, Stella Cox, Bryan Kraty(edited), Structuring Islamic Finance Transactions, Euromoney Books

  • Bank Negara Malaysia Product Information Kit

  • Dr Afandi Awang Hamat, Sales With Deferred Payment In Islamic Commercial Laws (al-Inah and al-Tawarruq) With Reference to Malaysian Experiences

  • Dr. Muhammad Yusuf Saleem, A handbook on Fiqh for Economist II, Semester 1 (2006/2007)

  • Dr. Zainal Azam B. Abd. Rahman Islamic securities play key role, 03/06/2003 | The Star

  • http://islamiccenter.kau.edu.sa/english/Journal/ Announcements/Tawarruq.html

  • http://www.badralislami.com/glossary/a-h.asp

  • http://www.fi nanceinislam.com/article/

  • http://www.ibfi m.com/index.php?option=com_content&t ask=view&id=1040&Itemid=99

  • http://www.muamalat.com.my/index.php?pg=business _fi nancing&ac=11

  • Professor Dr. Ala’ Eddin Kharofa (2004), Transactions in Islamic Law, A.S. Noorden, Kuala Lumpur.

  • Saiful Azhar Rosly and Mahmood M. Sanusi, The Application of Bay al-Inah and Bay al-Dayn in Malaysian Islamic Bonds: an Islamic, International Journal of Islamic Financial Services Vol. 1 No.2.

  • Al-Bukhari, Abu Abdullah Bin Isma’il (1314 A.H.), Sahih Al-Bukhari, Al-Ameria Press, A.H. 1314.

  • Al-Nawawi, A.M.S. (n.d.), Sharh al-Namami ala Shahah Muslim.

  • Al-Muwatta, on the margin of Muntaqa 4/157. Qaradawi, fatawa fi al-buyua’a (2000)

  • Ibn Taymiyya, Abu Al-Abbas Taqi Al-Din Ahmad Bin Abdul Halim, (n.d.), Majmu’ Fntawa (Al-Kordi Edition).

  • Muslim Bin Al-Hajjaj Bin Muslim Al-Qushaiyri (n.d.), Saheh Muslim.

  • Bank Negara Website : http://www.bnm.gov.me

  • Kharofa, Ala’ Eddin (2000) Transactions in Islamic Law. 2nd ed. Kuala Lumpur: A.S. Noordeen, 2000.

  • Razali, Siti Salwani (2008), The Principles of Gharar in Bai Bithaman Ajil, Proceedings of The MFA Conference 2008

  • Rosly, S.A., & Sanusi, M.M. (1999). The application of bay’ al-inah and bay’ al-dayn in Malaysian Islamic Bonds: An Islamic analysis. International Journal of Islamic Financial Services, 1(2). [On-line]. Available at: http://www.islamicfi nance.net

  • Rosly, S.A., Sanusi, M., Yasin, N.M. (2001), The Role of Khiyar Al-Ayb in Al-Bay Bithaman Ajil Financing, International Journal of Islamic Financial Services Vol. 2 No.3.

  • Rosly, Saiful Azhar (2008), Shariah Compliant Parameters Reconsidered, Proceedings of The MFA Conference 2008

  • Rosly, Saiful Azhar (2005), Critical Issues on Islamic Banking and Financial Markets, Authorhouse, Bloomington

  • Thani, N. N., Abdullah, M.R.M., & Hassan, M.H. (2003). Law and practice of Islamic banking and fi nance. Thomson Sweet & Maxwell Asia. The Holy Quran


Abstract Views: 850

PDF Views: 0




  • Revisiting the Principles of Gharar (uncertainty) in Islamic Banking Financing Instruments with Special Reference to Bay Al-inah and Bay Al-dayn towards a New Modified Model

Abstract Views: 850  |  PDF Views: 0

Authors

Siti Salwani Razali
Associate Professor, Department of Business Administration, Kulliyyah of Economics & Management Science, International Islamic University, Kuala Lumpur, Malaysia

Abstract


One of the signifi cant features of Islamic banking is the elimination of riba and gharar. However many problems arise in some of Islamic banking fi nancing instruments when they are claimed to contain signifi cant elements of gharar thus held unacceptable in certain Muslim countries. Among these instruments are Bay al-Inah and Bay al-Dayn. Currently, Bay al-Inah is not accepted in some countries such as the Middle East countries as it is regarded as part of interest-based transaction. However, in Malaysia, Bay al-Inah has been formalised as a permissible practice and is has emerged as the most important mode of transactions that stimulates the growth of Islamic transaction in Malaysia, which fi nally comes across the globe to be among the most successful Muslim state in the development of Islamic Finance. On the other hand, Bay al-dayn or the sale of debt is not unanimously accepted or validated by Muslim scholars. Even though some scholars allow it in all forms and aspects, the others either disallow it entirely or allow it under certain circumstances and with certain clauses or conditions.The paper will discuss at length on both contracts and the legal implications of the presence of gharar on the validity of these contracts. The views from the jurists will be critically examined to revisit the existence of gharar especially in these two Islamic banking instruments namely bay al-dayn and bay al-inah.

Keywords


Islamic Financial Instruments, Contracts, Gharar (uncertainty), Bay Al-inah and Bay Al-dayn, Islamic Banking Products

References