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SYARIAH IN ISLAMICBANKING & FINANCE

Chapter 12:

Kafalah

Definition of Kafalah

• Literal Definition: meansresponsibility.

• Legal Definition: is the act ofsomeone adding him self toanother person and making himself liable to perform theresponsibility.

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Elements of Kafalah

• Makful ‘Anhu: the principle debtor orguaranteed.

• Kafil: the person who offers to bear theliability.

• Makful Lahu: creditor, this is the partywhose right is owed by the principledebtor.

• Makful Bihi: object /guarantee.

• Sighah: expression.

Rules & Conditions

• The guaranteed• not allowed to guarantee the debt of a person who

dies insolvent because his entire debts standdischarged after his death: Hanafi

• kafalah for an insolvent deceased is valid, becausedeath does not discharge the liability of an insolventdebtor; Hadith of Abu Qatadah

• The guarantor• must have legal capacity

• Object of guarantee• jurists are unanimous that kafalah can be effected

upon all pecuniary claims relating to the enforceablerights of the creditors

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Rules & Conditions

• The creditor• creditor should be known to the guarantor,

because without this condition, the objective ofsuretyship cannot be realised

• Sighah• clear and inferring, explicitly or implicitly, the

meaning of the guarantee

• must be done without stipulating any uncommonconditions which attainment is uncertain

• “I guarantee Mr. A’s debt if it rains.”

Types of Kafalah

• Kafalah bil Nafs (physical guaranty)• this is a contract whereby the guarantor

undertakes to produce the guaranteedperson before the court of law.

• Kafalah bil Mal (Financial guarantee)• it is a pledge given to a creditor by the

guarantor that the debtor will pay hisdebt, fine or any other personal liability.

• guarantor is entitled to arrange theorder of liability by stipulating it in thecontract of agreement

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Types of Kafalah

• financial guarantee are divided intothree• Kafalah bi al-dayn (guarantee for debt)

• to guarantee the payment of debt

• Kafalah bi al-Taslim (guarantee fordelivery)

• guarantee to deliver property to its owner

• Kafalah bi al-dark• seller will return the price of the object, or• a guarantee in favour of the seller

Kafalah in ModernCommercial Transactions

• Murabahah• the guarantee here maybe as a third party, to

secure the operation of the Murabahah.

• Ijarah• to take guarantee in Ijarah to secure the payment

against the leasing of the equipment or other typeof rental.

• Salam & Istisna• institution to lay claim on either the supplier or his

guarantor for the recovery of the contract sum orrecover the same from the security obtained

• Shirkah & Mudarabah• on situations of negligence and loss resulting from

unauthorised transactions• capital only, not the profit that may be derived

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The End

Thank You