Islamic Finance Fatawa

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Treatment of Surplus from Sale of a Collateralised Asset

QUESTION How should surplus from the sale of collateral? ANSWER In the Name of Allah, the Most Gracious, the Most Merciful. As-salāmu ‘alaykum wa-rahmatullāhi wa-barakātuh. The Answer: Any surplus proceeds in excess of an outstanding debt realised from the sale of a collaterised asset must be returned to the debtor. The Fiqh (jurisprudence of the […]
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Is lending and pegging repayment to the rate of inflation permitted?

  وَالْمُمَاثَلَةُ صُورَةٌ بِاعْتِبَارِ الْقَدْرِ؛ لِأَنَّ الْمِعْيَارَ فِي هَذَا الْمِقْدَارِ كَالطُّولِ وَالْعَرْضِ وَالْمُمَاثَلَةِ مَعْنِيٌّ بِاعْتِبَارِ الْجِنْسِيَّةِ وَلَكِنَّ هَذِهِ الْمُمَاثَلَةَ لَا تَكُونُ قَطْعًا إلَّا بِشَرْطٍ وَهُوَ سُقُوطُ قِيمَةِ الْجَوْدَةِ مِنْهَا لِجَوَازِ أَنْ يَكُونَ أَحَدُهُمَا أَجْوَدُ مِنْ الْآخَرِ وَإِذَا سَقَطَتْ قِيمَةُ الْجَوْدَةِ مِنْهَا صَارَتْ أَمْثَالًا مُتَسَاوِيَةً قَطْعًا فَإِنَّمَا يُقَابَلُ الْبَعْضُ بِالْبَعْضِ فِي الْبَيْعِ مِنْ حَيْثُ الذَّاتُ فَإِذَا […]
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Islamic Finance in One Principle

The Islamic Finance industry is a thriving US $3 trillion industry. It spans across several sectors such as banking, capital markets, insurance and investment funds. These sectors are regulated by several Shariah principles and Shariah standards. Generally, several principles are cited as the core framework which highlight key Shariah principles for Economics and Finance. However, […]
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The 5 Highs and 5 Lows of being a Shariah Advisor

Being a Shariah advisor can be a dream career for many; I mean, you are engaged daily in matters of Shariah, learning, teaching and promoting Islamic Finance. You are actively engaged in establishing social and economic welfare. You are part of the seismic shift from Riba to non-Riba. It is a noteworthy endeavour and status. […]
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The Obsession with Possession in Islamic Finance

In almost all contemporary Islamic Finance structures and products, a fair amount of attention is given to how assets are being possessed, transferred and how the associated risks are being allocated. Similarly, retail investments are vetted and screened to understand whether an investor has possession of the underlying asset. What’s the big deal and obsession […]
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The Life of a Transaction in Islamic Finance

I often describe the sale item or the subject matter of a contract as the ‘heart’ of a transaction; everything revolves around the sale item and it is central to a transaction. If the subject matter is the heart, the life of the transaction depends on it. If the sale item is destroyed, the transaction […]
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Making Sense of the 30% Rule in Islamic Finance

To determine the Shariah compliance of an equity investment, a company’s business and financials are screened. Investors commonly ask the nature and evidence behind the 30% and 5%. This article addresses the rationale and the history of the financial screening as well as raise some questions on the future of the screening criteria. The History […]
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