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The Principles and Practices of Shariah in Islamic Finance - page 43 / 49





43 / 49

Shariah compliant assurances are permissible

Purchase of Takaful policy by purchase orderer for payment guarantee

Third party guarantor



  • 99.

    The IFI may require assurances in two stages of MPO arrangement. The first is assurance at the stage of Wad from the purchase orderer and the second is assurance at the stage of Murabahah contract. The assurance at the Wad stage is to ensure actual purchase of the asset by the purchase orderer from the IFI while the assurance at the Murabahah contract stage is to ensure full payment of the selling price at the date of maturity.These assurances may include a security deposit, a third-party guarantee, a pledge of any asset or real or moveable property, or a pledge of the asset of the Murabahah contract, cheques or promissory notes, or any security measure deemed legal and lawful.

  • 100.

    At the stage of acquisition from the supplier, the IFI shall not require the purchase orderer to subscribe to a takaful policy on the asset of Murabahah so that IFI could secure the full payment which will be due on the purchase orderer.

  • 101.

    A third-party guarantor shall be of good financial standing and is capable of making good the instalments defaulted by the purchase orderer.

  • 102.

    Securities of non-Shariah approved companies such as shares of conventional banks shall not be pledged as collateral for Murabahah transaction.

103. If collateral consists of a mixture of principal amount and interest amount, only the principal amount is allowed to be taken by the IFI in the case of customer default.

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