The Shariah Advisory Council of Bank Negara Malaysia (the SAC) 151st Meeting

The Shariah Advisory Council of Bank Negara Malaysia (SAC) held its 151st meeting on 30th September 2014. The meeting discussed amongst others issues arising from the draft Shariah Standards on Tawarruq and Ijarah respectively.

On the Shariah Standard on Tawarruq, the SAC decided that;

a. Where the murabahah sale in tawarruq is executed by the agent on a date later than the date on which the fund is accepted from the principal, the Islamic bank must fulfil the following requirements:

1. The fund/deposit must be held based on trust (amanah) by the agent;
2. Both the agent and principal must ensure that funds/deposits accepted from the principal/depositor shall not be treated as qard to the agent prior to the execution of tawarruq between the agent and principal. Such usage of the fund as a qard may be tantamount to combining between loan and a sale (bai` wa salaf) which is prohibited; and
3. Notwithstanding paragraph (i) and the prohibition enumerated in paragraph (ii) above, in situation where the funds/deposits need to be treated as qard to the agent due to necessary and unavoidable incidental basis (tabi’) such as operational infrastructure constraints, such treatment may be allowed. This is based on the fiqh legal maxim;

b. In the case where the seller requires the purchaser to provide a security deposit (hamish jiddiyyah) to secure an undertaking to purchase the asset, such security deposit shall not be treated as qard from the purchaser; and the seller shall not utilise it prior to the execution of the sale and purchase contract under tawarruq.

On the Shariah Standard on Ijarah, the SAC is of the view that if the lessee decided to return the asset before the maturity of the ijarah contract, the contract may be dissolved, and the lessor is entitled for compensation based on the terms agreed at the inception of the contract.

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