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ISB540 - Chapter 4


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ISB540 - Chapter 4

  3. 3. DEFINITION  Qardh: Loan/ DebtDEFINITION  Literally: EVIDENCES  To cut something off; money given to the borrower is called Qardh since portion that has PILLARS been cut off from the property of the lender  Also known as al-Salaf or al-DaynCONDITIONS  Technically: QARDH  Specific contract on transferring a specified AL-HASSAN property to another party on condition that a DEBT similar property will be given back in returnDISBURSEMENT 3
  4. 4. AL-QARDH  The property can be any type of assets ranging fromDEFINITION cash money, livestock or business  It is called qardh, as through this contract a certain EVIDENCES part of the lenders property is cut off and given to the PILLARS borrower.  Qardh refers to a contract through which a lenderCONDITIONS gives a certain homogenous property to a borrower on the condition that the latter is responsible to return a QARDH AL-HASSAN similar property immediately upon a demand or at a specified time. DEBTDISBURSEMENT 4
  5. 5. EVIDENCE  QuranDEFINITION EVIDENCES  Hadith PILLARS  Narrated by Anas ibn Malik: The prophet saw said:  I saw on the night of Isra’ something written on the gate ofCONDITIONS the paradise. Donation(sadaqah) is rewarded 10 folds, and qardh is rewarded 18 folds. QARDH AL-HASSAN  I asked Gibrail: Why is it giving Qardh is better than donation? He replied: Because the receiver of the donation DEBT asked for it while he actually has something, but theDISBURSEMENT borrower will not ask for loan except when there is a necessity 5
  6. 6. EVIDENCE  Ijma:DEFINITION  The scholar had formed an ijma’ that Qardh is permissible in Islam EVIDENCES  This contract is classified under the category of contracts pertaining to the utilization of usufruct (aqad al-manfa’ah) PILLARS  There is no actual transfer or exchange of property involved.CONDITIONS QARDH AL-HASSAN DEBTDISBURSEMENT 6
  7. 7. PILLARS OF QARDH  MuqridhDEFINITION  Creditor or Lender  Muqtaridh EVIDENCES  Debtor or Borrower  Maal PILLARS  Property  SighahCONDITIONS  Ijab: Offer  Qabul: Acceptance QARDH AL-HASSAN DEBTDISBURSEMENT 7
  8. 8. FLOW OF AL-QARDHDEFINITION Muqridh (Creditor) EVIDENCES PILLARS Qabul (Acceptance) Ijab (Offer)CONDITIONS Maal (Property/ Asset) QARDH AL-HASSAN DEBTDISBURSEMENT Muqtaridh (Debtor) 8
  9. 9. CONDITIONS OF QARDH  Ijab (Offer) and Qabul (Acceptance)DEFINITION  Must be in a very clear and concise type of sighah (offer & acceptance) EVIDENCES  Ahliah  Eligibility of the contracting parties (sane, adults & qualified) PILLARS  Quantity and Quality  Must be specified in quantity, weight & qualityCONDITIONS  Items that are not mixed with other material QARDH AL-HASSAN DEBTDISBURSEMENT 9
  10. 10. QARDH AL-HASAN  LiterallyDEFINITION  Qardh means cutting off.  Hasan means benevolence, beautiful, and kindness. EVIDENCES  The term al-qard al-hasan literally means beneficial loan, benevolent loan, gratuitous loan, and beautiful loan. PILLARS  A debt that is free from any type of predetermined condition or promise to repay back more than the original amount stated inCONDITIONS the contract, but a special token is sincerely given by the debtor to the lender during debt settlement not because any written QARDH agreement or any predetermined provision or term AL-HASSAN DEBTDISBURSEMENT 10
  11. 11. QARDH AL-HASAN  Under Qardh al-Hassan, borrowers or debtor con voluntarilyDEFINITION give some extra amount more than the loan principle provided that: EVIDENCES  Not stated in the contract  Not have agreed upon PILLARS  Not predeterminded in any manner by both partiesCONDITIONS QARDH AL-HASSAN DEBTDISBURSEMENT 11
  12. 12. EVIDENCE  Quran:DEFINITION EVIDENCES PILLARSCONDITIONS  The Quran verses explains Qardh al-Hassan between Allah and the believers whereby it is actually an offer from Allah for them QARDH AL-HASSAN to lend their energy, time and property in Qardh al-Hassan manner DEBT  They will receive back all the things that they had sacrificed forDISBURSEMENT the sake of Allah plus all extra rewards that will be given to them 12
  13. 13. EVINDENCE  Hadith:DEFINITION  Abu Rafi said: The prophet (s.a.w) borrowed a young camel and then the camels from the zakat came to him. He ordered EVIDENCES me to repay the man his young camel.  I said, I can only find a good camel in its seventh year among PILLARS the camels  The prophet said, “Give it to him. The best of people are those who discharge their debts in the best manner”CONDITIONS QARDH AL-HASSAN DEBTDISBURSEMENT 13
  14. 14. PROCEDURE OF DEBT DISBURSEMENT IN ISLAM 1. The debt transactions must be documented in a written contractDEFINITION and binding agreement.  Jumhur Fuqaha EVIDENCES  The command to “put it down in writing” is recommended command indicating the best suggested practice; not compulsory  Supported by Abdullah Yusuf Ali that it is not obligatory in law. PILLARS  Contemporary scholars (Mohd Tahir Asyur & Sayid Qutb)  Original ruling for the command is mandatory practice, that allCONDITIONS debt must be documented and not optional.  Reason: Obviously understood especially if we studied report on QARDH AL-HASSAN cases of false claims, forgery, and fraud in the society which intensifies in an almost alarming rate every year. DEBTDISBURSEMENT 14
  15. 15. PROCEDURE OF DEBT DISBURSEMENT IN ISLAMDEFINITION EVIDENCES PILLARSCONDITIONS  Verses 283 indicate the “rukhsah” which exempts parties QARDH AL-HASSAN involved from this following ruling provided they can really trust each other. DEBT  By making writing debts compulsary, people will not haveDISBURSEMENT tendency of taking things for granted from the beginning.  The ruling will be benefiacial for creditors to legitimixe their claims to the debtors 15
  16. 16. PROCEDURE OF DEBT DISBURSEMENT IN ISLAM  The objectives (maqasid ) of this rulings;DEFINITION  Secure the right of all parties involved and legitimize their claim from one another EVIDENCES  Avoid any future dispute or argument  Organize and standardize the procedure of muamalat in the business society PILLARS  Enable to distinguish between legal and illegal contractsCONDITIONS QARDH AL-HASSAN DEBTDISBURSEMENT 16
  17. 17. PROCEDURE OF DEBT DISBURSEMENT IN ISLAM 2. The parties involved must not be reluctant or wary inDEFINITION documenting every single loan transaction regardless of its size or duration. The emphasis given on documentation of debt has EVIDENCES been justified as in above verses:  Aqsat  It is preferable, equitable and fairer for all parties in sight of PILLARS Allah  AqwamCONDITIONS  A documented testimony or evidence is more reliable and consistent than oral testimony which based solely on memory QARDH AL-HASSAN  It can prevent any suspicion or doubt on the contract itself, or any claim made by any parties DEBTDISBURSEMENT 17
  18. 18. PROCEDURE OF DEBT DISBURSEMENT IN ISLAM 3. The parties involved must provide witnesses to certify the debtDEFINITION contract with the following conditions:  The witnesses must be either 2 males or 1 male and two EVIDENCES females  The witnesses must be reliable and approved or accepted by PILLARS both parties. Reliability is based on the track record of the witnesses.  The witnesses must not refuse to testify when they are calledCONDITIONS upon by disputed parties or by the relevant authorities QARDH AL-HASSAN DEBTDISBURSEMENT 18