A few methods in charging fees for kafalah bank guarantee-i among Islamic banks in Malaysia

Kafalah (guarantee) is generally considered as a tabarru' (gratuitous gift) act, and the majority of past Muslim jurists held the opinion that imposing ujrah (fee) on Kafalah is not allowed; however some contemporary jurists have allowed it. Islamic banks in Malaysia offer Bank Guarantee-i (BG-...

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Main Authors:	Syed Alwi, Sharifah Faigah, Ibrahim, Uzaimah, Md. Sawari, Mohd. Fuad
Format:	Article
Language:	English English
Published:	International Shari'ah Research Academy for Islamic Finance (ISRA) 2014
Subjects:	BP140 Islamic law (Fiqh) HG Finance HG1501 Banking
Online Access:	http://irep.iium.edu.my/40186/ http://irep.iium.edu.my/40186/ http://irep.iium.edu.my/40186/1/Kafalah_Bank_Guarantee-i.pdf http://irep.iium.edu.my/40186/4/Kafalah_Bank_Guarantee-i.unlocked.pdf

id	iium-40186
recordtype	eprints
spelling	iium-401862018-06-12T06:58:53Z http://irep.iium.edu.my/40186/ A few methods in charging fees for kafalah bank guarantee-i among Islamic banks in Malaysia Syed Alwi, Sharifah Faigah Ibrahim, Uzaimah Md. Sawari, Mohd. Fuad BP140 Islamic law (Fiqh) HG Finance HG1501 Banking Kafalah (guarantee) is generally considered as a tabarru' (gratuitous gift) act, and the majority of past Muslim jurists held the opinion that imposing ujrah (fee) on Kafalah is not allowed; however some contemporary jurists have allowed it. Islamic banks in Malaysia offer Bank Guarantee-i (BG-i) which uses the contract of Kafalah as the main contract, and they charge a fee for it. The objective of this paper is to determine the practice of Islamic banks in charging a fee for Kafalah BG-i and to get clarification from Islamic banks on the basis for their practices. The qualitative method is adopted as the main research methodology; the information on the practice of 12 Islamic banks in Malaysia is gained from semi-structured interviews conducted with bankers directly involved with Kafalah BG-i. This paper discovered that Islamic banks in Malaysia use three methods to determine the fee for Kafalah BG-i: using the percentage issued by the Association of Bankers Malaysia; calculating the actual cost incurred by the bank in issuing the BG-i; and using the bank’s own calculation or formula based on a percentage in determining the fee. There are two reasons for this variation. First, the Shariah Committees of Islamic banks have different interpretations of the nature of Kafalah: whether it is a tabarru' contract or aqd mu'awadah (contract of commercial exchange). Second, Bank Negara Malaysia (BNM) has not yet imposed any standard method upon Islamic banks for determining fees in Kafalah BG-i. BNM’s role is very important in recommending the best practice of charging fees among Islamic banks in order to avoid confusion among the bankers and the customers of Islamic banks regarding the most appropriate practice according to Shariah requirements. International Shari'ah Research Academy for Islamic Finance (ISRA) 2014-06 Article PeerReviewed application/pdf en http://irep.iium.edu.my/40186/1/Kafalah_Bank_Guarantee-i.pdf application/pdf en http://irep.iium.edu.my/40186/4/Kafalah_Bank_Guarantee-i.unlocked.pdf Syed Alwi, Sharifah Faigah and Ibrahim, Uzaimah and Md. Sawari, Mohd. Fuad (2014) A few methods in charging fees for kafalah bank guarantee-i among Islamic banks in Malaysia. ISRA International Journal of Islamic Finance, 6 (1). pp. 51-66. ISSN 0128-1976 http://www.ifikr.isra.my/web/guest/publication
repository_type	Digital Repository
institution_category	Local University
institution	International Islamic University Malaysia
building	IIUM Repository
collection	Online Access
language	English English
topic	BP140 Islamic law (Fiqh) HG Finance HG1501 Banking
spellingShingle	BP140 Islamic law (Fiqh) HG Finance HG1501 Banking Syed Alwi, Sharifah Faigah Ibrahim, Uzaimah Md. Sawari, Mohd. Fuad A few methods in charging fees for kafalah bank guarantee-i among Islamic banks in Malaysia
description	Kafalah (guarantee) is generally considered as a tabarru' (gratuitous gift) act, and the majority of past Muslim jurists held the opinion that imposing ujrah (fee) on Kafalah is not allowed; however some contemporary jurists have allowed it. Islamic banks in Malaysia offer Bank Guarantee-i (BG-i) which uses the contract of Kafalah as the main contract, and they charge a fee for it. The objective of this paper is to determine the practice of Islamic banks in charging a fee for Kafalah BG-i and to get clarification from Islamic banks on the basis for their practices. The qualitative method is adopted as the main research methodology; the information on the practice of 12 Islamic banks in Malaysia is gained from semi-structured interviews conducted with bankers directly involved with Kafalah BG-i. This paper discovered that Islamic banks in Malaysia use three methods to determine the fee for Kafalah BG-i: using the percentage issued by the Association of Bankers Malaysia; calculating the actual cost incurred by the bank in issuing the BG-i; and using the bank’s own calculation or formula based on a percentage in determining the fee. There are two reasons for this variation. First, the Shariah Committees of Islamic banks have different interpretations of the nature of Kafalah: whether it is a tabarru' contract or aqd mu'awadah (contract of commercial exchange). Second, Bank Negara Malaysia (BNM) has not yet imposed any standard method upon Islamic banks for determining fees in Kafalah BG-i. BNM’s role is very important in recommending the best practice of charging fees among Islamic banks in order to avoid confusion among the bankers and the customers of Islamic banks regarding the most appropriate practice according to Shariah requirements.
format	Article
author	Syed Alwi, Sharifah Faigah Ibrahim, Uzaimah Md. Sawari, Mohd. Fuad
author_facet	Syed Alwi, Sharifah Faigah Ibrahim, Uzaimah Md. Sawari, Mohd. Fuad
author_sort	Syed Alwi, Sharifah Faigah
title	A few methods in charging fees for kafalah bank guarantee-i among Islamic banks in Malaysia
title_short	A few methods in charging fees for kafalah bank guarantee-i among Islamic banks in Malaysia
title_full	A few methods in charging fees for kafalah bank guarantee-i among Islamic banks in Malaysia
title_fullStr	A few methods in charging fees for kafalah bank guarantee-i among Islamic banks in Malaysia
title_full_unstemmed	A few methods in charging fees for kafalah bank guarantee-i among Islamic banks in Malaysia
title_sort	few methods in charging fees for kafalah bank guarantee-i among islamic banks in malaysia
publisher	International Shari'ah Research Academy for Islamic Finance (ISRA)
publishDate	2014
url	http://irep.iium.edu.my/40186/ http://irep.iium.edu.my/40186/ http://irep.iium.edu.my/40186/1/Kafalah_Bank_Guarantee-i.pdf http://irep.iium.edu.my/40186/4/Kafalah_Bank_Guarantee-i.unlocked.pdf
first_indexed	2023-09-18T20:57:38Z
last_indexed	2023-09-18T20:57:38Z
_version_	1777410410817781760

A few methods in charging fees for kafalah bank guarantee-i among Islamic banks in Malaysia

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