Location via proxy:   [ UP ]  
[Report a bug]   [Manage cookies]                
Scribd Logo
Upload

Welcome to Scribd!

  • 10 views

    SS 5 Guarantee Ss2

    Uploaded by

    syedbilalhaidergillani995

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd

    SS 5 Guarantee Ss2

    Uploaded by

    syedbilalhaidergillani995
    10 views5 pages

    Copyright

    © © All Rights Reserved

    Available Formats

    DOCX, PDF, TXT or read online from Scribd

    Did you find this document useful?

    Is this content inappropriate?

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    10 views5 pages

    SS 5 Guarantee Ss2

    Uploaded by

    syedbilalhaidergillani995

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    You are on page 1of 5

    The **AAOIFI Shariah Standard No.

    5 (Guarantee)** provides the


    framework for Islamic financial institutions regarding the permissibility,
    conditions, and practical aspects of guarantees in Islamic financial
    transactions. Guarantees are an important part of Islamic finance as
    they offer security and assurance in transactions, while still adhering to
    the principles of Shariah. Below is a detailed summary of the
    **headings and sub-headings** with the main details from **Shariah
    Standard No. 5**, as per the **November 2017** publication.

    ---

    ### **1. Scope of the Standard**


    - This section outlines the situations in which the Shariah standard on
    guarantees is applicable. It addresses guarantees offered in different
    types of contracts and financial transactions.

    ### **2. Definition of Guarantee (Kafalah)**


    - **2/1 General Definition:** A guarantee (Kafalah) is a contract
    where a guarantor takes responsibility for the liability of another party.
    - **2/2 Types of Guarantees:** Various types of guarantees are
    allowed under Shariah, such as guaranteeing a debt or an obligation.
    - **2/3 Difference Between Guarantee and Suretyship:** This
    subsection explains how guarantees differ from suretyship in Islamic
    law.

    ### **3. Basic Elements of a Guarantee**


    - **3/1 Parties to the Guarantee:** The three parties involved are the
    guarantor, the beneficiary (the creditor), and the debtor.
    - **3/2 Object of Guarantee:** The object of the guarantee is the
    responsibility assumed by the guarantor, which could be financial or
    related to performance.
    - **3/3 Legal Capacity:** The guarantor must have legal capacity to
    offer the guarantee, and the contract must meet Shariah requirements.
    - **3/4 Consent of the Beneficiary:** The guarantee becomes
    effective upon the acceptance by the beneficiary (creditor).

    ### **4. Conditions of Guarantee**


    - **4/1 Voluntary Nature:** Guarantees must be voluntary and not
    coerced.
    - **4/2 Absence of Compensation:** The guarantor cannot receive
    compensation for issuing a guarantee, as it is considered a non-
    commercial act in Islamic finance.
    - **4/3 Debt Must Exist:** The guarantee must be linked to an actual
    and valid obligation or debt owed by the debtor to the beneficiary.

    ### **5. Guarantee for Future Debts and Obligations**


    - **5/1 Permissibility:** Guarantees can be issued for future debts
    and obligations, provided the conditions of the debt are clearly defined
    and agreed upon.

    ### **6. Joint Guarantee**


    - **6/1 Definition of Joint Guarantee:** Multiple parties may act as
    joint guarantors. This arrangement is called a "joint guarantee."
    - **6/2 Liability in Joint Guarantee:** Joint guarantors can either
    share the liability equally or assume it in varying proportions based on
    agreement.

    ### **7. Discharge of the Guarantor**


    - **7/1 Discharge by Payment:** The guarantor is discharged from
    the obligation when the debt is paid off.
    - **7/2 Discharge by Waiver:** The beneficiary can waive the
    guarantee, releasing the guarantor from any further obligations.
    - **7/3 Discharge by Expiry of the Guaranteed Obligation:** When
    the primary obligation is fulfilled or extinguished, the guarantee
    automatically ends.

    ### **8. Liability of the Guarantor**


    - **8/1 Full Liability:** The guarantor assumes full liability for the
    debt or obligation if the debtor defaults.
    - **8/2 Right of Recourse:** After fulfilling the obligation, the
    guarantor has the right to recover the amount from the original debtor.

    ### **9. Guarantee of a Non-Existent Item**


    - **9/1 Permissibility:** Guarantees can be issued for non-existent
    items, such as future debts or obligations, as long as they are clearly
    defined in the contract.
    - **9/2 Conditions:** The conditions for non-existent items must be
    Shariah-compliant, and the object of the guarantee must be clearly
    identified.

    ### **10. Practical Applications of Guarantee**


    - **10/1 Guarantee in Sale Contracts:** Explains how guarantees can
    be applied in sales transactions, such as guaranteeing the performance
    or payment of a contract.
    - **10/2 Guarantee in Leasing Contracts:** The standard describes
    the role of guarantees in Ijarah (leasing) contracts, where the guarantor
    may assume responsibility if the lessee defaults.
    - **10/3 Guarantee in Agency Contracts:** The use of guarantees in
    agency (Wakalah) contracts is also covered, especially when an agent
    needs to guarantee the principal’s interests.

    ### **11. Miscellaneous Issues Related to Guarantee**


    - **11/1 Revocation of Guarantee:** A guarantee cannot be revoked
    unilaterally by the guarantor once it is accepted by the beneficiary.
    - **11/2 Guarantee for Non-Muslim Debtors:** Guarantees can be
    offered for non-Muslim debtors, provided the transaction itself
    complies with Shariah principles.
    - **11/3 Transfer of Guarantee:** The transfer of guarantees is
    permissible under specific conditions, as long as the original terms are
    honored.

    ### **12. Collateral and Security in Guarantee Contracts**


    - **12/1 Collateral:** Guarantees can be secured by collateral, which
    provides the creditor with additional assurance.
    - **12/2 Conditions of Collateral:** The collateral must be
    permissible under Shariah and clearly documented in the contract.

    ### **13. Conclusion**


    - This section emphasizes the importance of adhering to the principles
    of transparency, voluntary commitment, and the absence of riba
    (interest) or gharar (uncertainty) in guarantee contracts, while ensuring
    that the practice aligns with Shariah principles.

    ---

    This summary outlines the key **headings and sub-headings** in


    **AAOIFI Shariah Standard No. 5 (Guarantee)** from the **November
    2017** publication. The standard focuses on the role of guarantees in
    Islamic financial transactions, ensuring that they are structured in a way
    that complies with Shariah, emphasizing the importance of voluntary
    commitment and the prohibition of compensation for issuing

    You might also like