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The Shariah Advisory Council of Bank Negara Malaysia (the SAC) 174th Meeting
The SAC of Bank Negara Malaysia in its 174th meeting on 28 February 2017 discussed the following:
Shariah Issues Related to the Development of Shariah Standard on Rahn
The SAC has ruled that:
1) an asset that will exist in the future may be pledged as collateral under a rahn contract with the agreement between the contracting parties.This is supported by the view of some Maliki’s jurists that allows the pledging of a future asset as collateral based on the following:
a) Rahn is a supporting contract and uncertainty(gharar)in supporting contracts is more tolerable as opposed to exchange contracts.
b) It is an obligation for a debtor to pay the debt even without any collateral. Therefore, having an asset as collateral even in the form of uncertainty is better than not having one. This is based on the justification by Maliki’s jurists which states that:
"شيء في الجملة خير من لا شيء"
“Something in general is better than nothing”
c) The benefits to the parties from the practice far outweigh the possible harm to them.
This ruling provides flexibility in the operationalisation of rahn by the Islamic financial industry such as pledging an asset that will exist after certain period of time or asset in the form of floating charge.
2) a third party may pledge his asset under a rahn contract to secure another party’s debt.
3) an obligor in rahn contract may pledge an asset which belongs to a third party subject to the latter’s consent.
These rulings provide clarity that the pledging an asset that is not owned by the obligor is permissible under Shariah.
Shariah Issues Arising from Kafalah Contract
The SAC deliberated the procedures for the beneficiary to claim the oustanding debt due from the guaranteed party or the guarantor’s estate following the demise of the guarantor. The SAC has resolved that the beneficiary may concurrently claim the oustanding debt amount due from the guaranteed party and the guarantor’s estate following the demise of the guarantor. However, it is advisable that the beneficiary initiates to claim the guaranteed amount from the guaranteed party first before claiming against the guarantor’s estate.
This statement is to inform the ruling of 174th SAC meeting and its related discussions. The effective date of these rulings is subject to the effective date of Policy Document Kafalah on 1 January 2018 and Policy Document Rahn which is expected to be issued in Q3 2017.
