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  1. 1. ISB 548 : ADVANCED FIQH MUAMALAT The Application Al-Hiwalah in Banking System Prepared for : Ustaz Mu’alliM Bin Mohd BakriGroup Members :Juliana Bt TajuddinWan Nur Hasyimah Bt Wan HanafiSiti Nur Nadhira Bt Muhammad NafizonRohaida bt abd rahman Powerpoint Templates Page 1
  2. 2. Introduction• Literally means to turn over, move or transfer. Technically means to make transfer of a debt from one debtor to the debtor account of another or to transfer a debt from one person (debtor) to another with the same price, it comes to the consequence than the liability of the debtor is abolished.• Hawalah, or the transfer of debt, is different from the transfer of right in which a creditor is replaced by another creditor. Powerpoint Templates Page 2
  3. 3. Application of Al-Hiwalah• The principle application of hiwalah can be of use in commercial banking transactions such as in the modern day negotiability of loan instruments.• A number of products/services provided by the banking industry today are forms of Hawalah, like cheques, drafts, pay orders, remittances, promissory notes, bills of exchange, ODs, endorsements, etc. (Muhammad Ayub, 2007) Powerpoint Templates Page 3
  4. 4. 1) Negotiable instrument• Hiwalah resemble negotiable instruments in that its purpose is to guarantee the payment of debt to the creditor• Similarly, when A, a holder of instruments negotiates it to B, he secures the payment of debt due on the bill. An acceptor of an instrument after accepting it becomes primarily liable while a drawer’s liability becomes secondary and conditional. Powerpoint Templates Page 4
  5. 5. 2) Remittance• Hiwalah also can occur in the form of remittances, whereby the client orders the bank to transfer certain amount of money from his account to another account locally or abroad, within the same bank or the other banks.• Remittances can be made by cashier’s order, demand drafts, telegraphic transfer and mail. Powerpoint Templates Page 5
  6. 6. a) Bankers cheque• Bankers cheques is also known as cashier’s order• It is issued by banks for payments to certain recipients• The difference between a banker’s cheque as compared to a cheque is that the banker’s cheque is a cheque issued by the bank and therefore it normally does not have default in payment. Powerpoint Templates Page 6
  7. 7. Cont…• Generally, it is considered a good cheque to make the payment because it was issued by the bank. Banks will charge commission (charge) and stamp duty to issue a banker’s cheque.• Banker’s cheque is used extensively to make payment, especially if an individual checks are not accepted and cash payments are discouraged. Powerpoint Templates Page 7
  8. 8. b) Traveller’s checks• Traveller’s checks are checks issued in specific denominations in the main international currency for travel purposes.• Owners are asked to pay a price of a check with the commission.• When the applicant wants to used the cheque for payment, they are required to sign the cheque in front of the recipient. Powerpoint Templates Page 8
  9. 9. c) Telegraphic Transfer• Telegraphic transfer is a way to transfer money or funds either through cable, telex or fax.• This telegraphic transfer is not using any signature and can be used domestically and internationally.• The sender’s bank will send the information required to the beneficiary’s bank in overseas.• The information includes remittance of payments contained in the introduction, the credit of the account beneficiary, information and payments to beneficiaries.• The funds of money can be claimed from the sender’s bank, the recipient’s bank and also international banks. Powerpoint Templates Page 9
  10. 10. 4) Bills of exchange (Suftajah)• Suftajah is a loan of money in order to avoid the risk of transport. By this application it enables a debtor to make payments in another place through his agent or a second person.• Technically, a debtor passes the responsibility of payment of his debt to the third party who owes the former of debt• Thus, the responsibility of payment is ultimately shifted to a third party. This is a mechanism is used for settling international accounts.• Example: A person gives a portion of his property to a merchant to pay to another person in a different country. The sender benefits by insuring himself against the risks of transferring that Powerpoint Templates property himself. Page 10
  11. 11. Conclusions Advantages• Creditor – Could secure loan repayment and ensure the creditor could retrieve his money back by demanding payment from the transferor (muhal alaih) under normal circumstances or even in case of default payment it could be retrieved from the 1st debtor ( transferee)• Debtor – Minimize and spread the risk because he/she can pass over his debt to his own debtor – Could convince the creditor to lend him money since he has somebody to back him up as the transferor of the payment. Powerpoint Templates Page 11
  12. 12. Thank you for listening Powerpoint Templates Page 12