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R A H N - B A S E D M I C R O C R E D I T FAC I L I T Y
INTRODUCTION AND METHOD
Redemption Auction
If debtor cannot fulfill repayment at due
A debtor can redeem his jewelery if he date or does not request extension
can repay his debt and safekeeping fee without full settlement at due, the
due date. pawnshop or bank as creditor will
proceed the jewellery to auction list.
1 Customer keeps
jewellery in the
bank and pays the
fee
customer Bank
1 Jewellery as
Collateral
(marhun)
customer Bank
Loan (qard)
Contract
Wadi’ah Yad
Dhamanah
Contract
In current Islamic microcredit facility, there are two structures adopted. First structure begins
with a loan contract (qard) prior to the execution of the wadi’ah yad al-damanah contract,
while on second structure, wadi’ah yad al-damanah contract is executed before loan contract.
SHARI'AH ISSUES
(BAY’ WA SALAF AND QARD JARRA MANFA’AH)
Indicates
Safekeeping Benefit for
customer
fee creditor
motive
•Qard
Loan is given contract • Higher than • To get loan • Qard jarra
storage cost from bank manfa’ah (loan
with additional
benefits)
Sale (of • Bay’ wa
service)
contract with salaf
loan contract
Muqtada
Invalid
Rahn Rahn
contract contract
al-’aqd
Wadi’ah
Same fee
object
Bay’ Al Wafa
• Sale contract (Bay’) between two parties with an obligation for buyer to resell the
commodity in a certain date in the future to the seller
Jurists have different opinion about it
• Most of them hold view that this contract is impermissible on the premise that it resembles
the contract of rahn in which the buyer benefits from the sold asset.
• It is important that the current structure can be concerned worse than Bay’al-wafa in terms
of the ribawi element embedded it.
International Fiqh Academy in its 7th session has resolved Bay’al-wafa issue
• It is invalid contract on the premise that it is in fact a loan contract that draws benefit.
SECTION 4
OT H E R S T R U C T U R E S F O R
R A H N - B A S E D I S L A M I C M I C R O C R E D I T FAC I L I T Y
THE MODUS
OPERANDI
O F OT H E R S T RU C T U R E S
STRUCTURE 2:
COMBINATION OF WADI’AH BI-AJR, QARD, AND RAHN-AL-WADIAH
1 Wadi’ah Bi-Ajr
customer Bank
1. Qard Contract
2 Buy a commodity
4 Pledge a gold
(rahn)
customer
Bank
Sell a commodity with
3 marked-up price (deferred
payment)
6 Sell a commodity
7 Cash
Broker B
THE ISSUE
3.Tawarruq
• Classical is allowed
• Munazzam is prohibited (can be led to bai’ Inah)
STRUCTURE 4:
COMBINATION OF QARD, RAHN, AND HIBAH
Rahn (without
2 safekeeping fee)
customer Bank
1 Qard
THE FEATURE
Gold bar/Jewellery
Bank
customer 2
Cash
Gold bar/Jewellery
Bank customer
2
Cash
IMPORTANT FEATURE
Sarf contract can meet most (if not all) requirements of a sharia
compliant microcredit facility
• Further evaluation and investigation especially by sharia scholars are needed to ensure sharia
compliance issue in both form and substance