The Shariah Advisory Council of Bank Negara Malaysia (the SAC) 143rd Meeting

The Shariah Advisory Council of Bank Negara Malaysia (SAC) held its 143rd meeting on 30 January 2014. The meeting discussed issues arising from the proposed Shariah Standard on Istisna` and Shariah Standard on Musharakah.

On the Shariah Standard on Istisna`, the issue discussed was on the available options to be undertaken in the event that the seller fails to complete and deliver the istisna` asset to the purchaser. The preliminary view of the SAC concluded two options. Under the first option, the purchaser may opt to purchase the istisna` asset on an ‘as is’ basis which requires the purchaser to pay the istisna` price and take ownership of the asset on ‘as is’ basis. Under the second option, the purchaser may dissolve (fasakh) the istisna` contract. In this option, the seller is required to return the amount that has been paid by the purchaser. The ownership of the istisna` asset will, however remain with the seller.

The SAC also provided preliminary views on the effect of the demise or dissolution of any of the contracting parties in an istisna` contract. In such an event involving the purchaser, the istisna` selling price will be borne by the legal heir or estate of the seller. In the case of death or demise of the seller, the purchaser may opt to either purchase the istisna` asset on an ‘as is’ basis or choose to dissolve the istisna` contract.

On the Shariah Standard on Musharakah, in the event of losses under musharakah, the SAC is of the view that the liability in the musharakah contract may not limited to the amount of the capital contribution. The musharakah partners may, however agree to incorporate a limited liability provision in the musharakah contract to limit the loss exposure.

This document belongs to Bank Negara Malaysia (BNM). Full access to the original source is available here: https://www.bnm.gov.my/banking-islamic-banking