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Bay' al-Dayn
This document defines and discusses bay' al-dayn (sale of debt), including: 1) Its definition in Islamic law and evidence from hadith. 2) The different types of debts and pillars required for a valid bay' al-dayn contract. 3) Scholars' opinions on the permissibility of selling debt to the debtor or third parties. 4) Modern applications of bay' al-dayn in Islamic finance instruments.
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Bay' al-Dayn
- 1. MAHYUDDIN KHALID emkay@salam.uitm.edu.my
- 2. CONTENT DEFINITION DEFINITION EVIDENCES EVIDENCES PILLARS OF BAY AL-DAYN TYPES OF BAY’ AL-DAYN PILLARS CONDITIONS OF BAY AL-DAYN TYPES OPINION OF SCHOLARS MODERN APPLICATION OPINION OF SCHOLARS APPLICATION 2
- 3. DEFINITION Literal: DEFINITION Debt, pecuniary obligation, liability or obligation EVIDENCES Technical: An exchange between A payable right upon the person PILLARS and A property on the basis of ownership of the price and the right TYPES Sale of debt which can be either against a debt or other than a debt , to the debtor or other than a OPINION OF SCHOLARS debtor, on a cash basis or a deferred payment basis. Sale contract in which the creditor sells his payable APPLICATION right upon the debtor either to the debtor himself or to A third party at discount price or at cost price on the spot payment basis 3
- 4. EVIDENCES Hadith: DEFINITION Ibn Umar reported that: One day he came to see the Prophet (saw) and told him: I sell camel in Baqi’ in EVIDENCES dinars (debt) and accept dirhams (payment), and I sell in dirhams (debt) and accept dinars (payment). The PILLARS Prophet (saw) said: It is okay, but you should try to accept it at the day price for each before you conclude TYPES your contract. Narrated by Muslim OPINION OF SCHOLARS APPLICATION 4
- 5. EVIDENCES Ijma’ DEFINITION Majority of scholars agree on its permissibility because there is no single nas quoted its prohibition except the EVIDENCES prohibition of bay’ al-kali’ bi al-kali’. They hold different views about sale of debt to the third PILLARS parties on the ground that the seller will not be able to deliver the sold debt. TYPES Legality of bay’ al-dayn depends on its types which OPINION OF are determined by the number of parties involved SCHOLARS (whether two or three), the party to whom the debt APPLICATION is sold (whether to the debtor or non debtor) and the modes of delivery (on a spot basis or credit basis) 5
- 6. PILLARS OF BAY’AL-SARF Seller and buyer DEFINITION Merchandise/goods EVIDENCES Price Sighah PILLARS TYPES OPINION OF SCHOLARS APPLICATION 6
- 7. TYPES OF AL-DAYN DEFINITION Confirmed Debt (Dayn Mustaqir) • A debt which is fully confirmed upon the debtor and he has to pay it. EVIDENCES • It cannot be either cancelled or waived without the consent of the creditor PILLARS • Eg. Credit, cost of damages, price of a good, cost of completed labor, and dowry of spouse after marital consummation TYPES Non confirmed Debt (Dayn Ghayr Mustaqir) • A debt in which has not fully confirmed upon the debtor due the fact OPINION OF that the possession of the creditor is subject to its confirmation. SCHOLARS • It can be cancelled at any time before the completion of the basic of the debt. APPLICATION • Non-confirmed debt is used for selling or buying to a third party. • Eg. Cost of labor before the completion of the work, dowry of spouse may not complete in case of the divorce before marital consummation. 7
- 8. CONDITIONS OF BAY’AL-DAYN No delivery risk DEFINITION The debt is confirmed and owned EVIDENCES No element of riba and gharar PILLARS TYPES OPINION OF SCHOLARS APPLICATION 8
- 9. OPINION OF SCHOLARS DEFINITION Sales of Debt to the Debtor (Bay’ al-dayn li al-madin) EVIDENCES • According to Hanafis, Malikis, Shafiis and some Hanbalis, the sale is allowed and fully permissible PILLARS • The creditor has the full right to sell his debt to the debtor as the debt raised from the cost of damage, qard, price of commodity TYPES and cost of services • Regardless of the types of the debt (confirmation or time OPINION OF stipulation) and at any time and any price SCHOLARS • Selling the debt to the debtor means the debtor is taking what he is supposed to take in reality APPLICATION • The debt is a right. Therefore selling or giving it to the debtor is originally allowed • The delivery of the item to the buyer is not needed in sale of debt, therefore it is permissible 9
- 10. OPINION OF SCHOLARS DEFINITION The Sale of Debt to a Third Party (Bay al-dayn li ghayr al madin) EVIDENCES • According to Hanafis, some Shafiis, Hanbalis and Zahiris – the sale of confirmed or non confirmed debt is not allowed to be sold to the third PILLARS party based on: • A sale of un possessed item (bay’ ma la tamlik) TYPES • A sale of undeliverable item • It may create a conflict between the debtor and the buyer of the debt OPINION OF • Some Shafiis and Hanbalis (Ibn Qayyim) – the sale of confirmed debt to SCHOLARS the third party is allowed based on: • There is no authentic nas that prohibits such sale APPLICATION • The debt is a right in the possession of the creditor. So he has the full right to sell it to the debtor or the third party • Based on legal maxim: All transactions are permissible until they are proven non permissible by an authentic source 10
- 11. OPINION OF SCHOLARS DEFINITION The Sale of Debt to a Third Party (Bay al-dayn li ghayr al madin) EVIDENCES • According to Majma’ Fiqh al Islami PILLARS • Sale of debt to the debtor is permissible • Sale of debt to the 3rd party is permissible TYPES • Provided that there is no element of riba and gharar • Shariah Advisory Council of Securities Commission of OPINION OF Malaysia SCHOLARS • Bay’ al dayn is permissible • Bay’ al-kali’ bi al-kali’ is not permissible APPLICATION • Sale of debt to the debtor is permissible • Sale of debt to the 3rd party is permissible • Provided that there is no element of riba and gharar 11
- 12. APPLICATION Bay’ al-dayn has been mainly used in Malaysia as DEFINITION one of the underlying Shariah contracts in structuring various Islamic finance facilities EVIDENCES including: PILLARS Islamic money markets instruments Islamic treasury bills TYPES Islamic negotiable instruments Islamic accepted bills OPINION OF SCHOLARS Islamic bonds APPLICATION 12
- 13. END OF CHAPTER DEFINITION EVIDENCES PILLARS TYPES OPINION OF SCHOLARS APPLICATION 13