The Shariah Advisory Council of Bank Negara Malaysia (the SAC) 139th Meeting

The Shariah Advisory Council of Bank Negara Malaysia (SAC) held its 139th meeting on 27 September 2013. The meeting discussed the application of hiwalah al-haq (transfer of right) as an alternative to wakalah (agency) in istisna` financing products and the current progress of the Shariah Standards initiatives.
 
On the application of hiwalah al-haq as an alternative to wakalah in istisna'  financing, the main issue discussed is on the concept of tasarruf fuduli (act of unauthorised agent). The SAC's preliminary view on tasarruf fuduli is that the practice may not be suitable in the context of current application of istisna`. Tasarruf fuduli normally takes place randomly, unlike financial instruments that are properly structured and pre-arranged. In addition, tasarruf fuduli would normally involve a party who acts on another person asset and subsequently rectified by the asset owner. This is in contrary to the current practice ofistisna` where a party acts using his own asset prior rectification made by another party.
 
On the progress of the Shariah standards, the SAC sub-committee on murabahah has identified several issues that affect the Shariah standards. Among the issues deliberated by the SAC were the seller to waive his liabilities on defects of the asset based on the concept of "bai` bi al-baraah", the contracting parties to mutually agree to limit the period of time given to the purchaser to discover the defect of the asset in relation to him exercising khiyar`aib (defect option), the rahn (collateral) to also be utilised to recover actual costs incurred arising from debt recovery exercise.

This article is also available in Arabic version