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The Principles and Practices of Shariah in Islamic Finance - page 40 / 49

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84. If the customer defaults, the IFI may purchase the same asset or part thereof from the customer in default, in cash, based on a mutually agreed price.The proceeds of which may be used to settle the outstanding debt on the basis of set-off (Muqasah). Upon acquisition of the asset by the IFI, the asset may be leased to the purchase orderer on the basis of lease with an option to purchase (jarah Muntahia Bi Al-Tamlik).

F’s purchase of the Murabahah asset from the customer who defaulted

85. A customer in default may be granted an extension to settle his debts, provided no additional charges on the financing amount are imposed. For the purpose of rescheduling the outstanding debt, the IFI may demand additional securities from the purchase orderer.

Extension of time for settlement of debt

86. The IFI may impose on the customer in default to bear all costs accrued to recover the payment defaulted, including the costs of judicial proceedings and legal fees which the IFI would have incurred to recover the outstanding payment.

Compensation for actual damage caused by the customer who defaulted

87. The contract of Murabahah may contain a clause, binding the customer to settle all outstanding obligations before the maturity date if he defaults on any instalment.

Ear y settlement of all instalments by customer who defaulted

88. The IFI may grant the customer in default a grace period to settle the debt after sending notice of reminders before commencement of debt recovery measures. However, any increase in the selling price due to rescheduling of the contract or due to inability to pay on time is not permissible.

Grace period for settlement prior to recovery procedures

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