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The Shariah Advisory Council of Bank Negara Malaysia (the SAC) 150th Meeting
The Shariah Advisory Council of Bank Negara Malaysia (SAC) held its 150th meeting on 26 August 2014. The meeting discussed, among others, issues arising from Shariah Standards on Wadiah, Wakalah and Kafalah respectively; and the proposed liquidity management instrument based on mudarabah.
Shariah Standard on Wadiah: The SAC viewed that offer and acceptance in wadiah may be expressed verbally, in writing or any other methods that could be evidenced by appropriate documentation or record.
Standard on Wakalah: The SAC is of the view that the wakil must guarantee the investment capital if the wakil breaches the condition by investing in another instrument or portfolio, although the wakalah contract has clearly stipulated the condition that the fund must be invested only in a specific instrument or portfolio. In the event that the above investment generates profit which is less than the profit of the specified instrument/portfolio (should the investment were to be invested in that approved portfolio), the wakil shall only pay the muwakkil the actual realised profit. If the realised profit is higher than the profit of the specified instrument/portfolio, subject to consent of the muwakkil, the treatment of profit shall be in accordance to the agreed terms and conditions at the inception of the contract. Where the terms and conditions on the treatment of profit including performance fee are not stipulated, the muwakkil may claim for the whole profit.
Shariah Standard on Kafalah: The SAC is of the view that if the kafalah fee is paid by the guaranteed party, the consent of the guaranteed party is required prior to the dissolution of a kafalah contract. If the kafalah is guaranteed by more than one guarantor, the SAC is of the view that the terms and conditions, including priority ranking of the claim to a particular guarantor and the amount of guarantee attributed to the respective guarantors may be agreed among the guarantors. In the event of default by the guaranteed party, both the guaranteed party and the guarantor are equally obliged to fulfil the financial obligation to the beneficiary.
The SAC also approved a new liquidity management instrument proposed by BNM based on mudarabah contract. It is a non-guaranteed returns instrument and the underlying investments consist of both Shariah-compliant tangible and intangible assets combined as one composite underlying asset.
