PRINCIPLES OF WA’D AND MUWA’ADAH: THEIR APPLICATION IN ISLAMIC FINANCIAL CONTRACTS

The application of unilateral promise (wa’d) in certain Islamic financial products, although recent, has witnessed spectacular development. It has been widely applied in products such as murabahah for a purchase orderer (murabahah lil amir bi al-shira’), leasing ending with ownership (ijarah muntahiyah bi al-tamlik), Islamic hire-purchase (ijarah thumma al-bay’), diminishing partnership (musharakah mutanaqisah),  sukuk structures and treasury products such as FX-i forward Islamic profit rate swaps. Some of the abovementioned structures employ only one-way wa’d while others use two-way wa’d.