Fiqh Schools By Dr Seyyed Abbas Musavian Secretary of Shariah Board Securities and Exchange Organization Introduction Today the Sale of debt contract Bay AlDain has widespread applications in money and capital market including ID: 635072
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Slide1
Debt Sale (From viewpoint of Fiqh Schools)
By
Dr.
Seyyed
Abbas
Musavian
Secretary of Shariah Board
Securities and Exchange OrganizationSlide2
IntroductionToday the Sale of debt contract (Bay’ Al-Dain) has widespread applications in money and capital market including: Financing working capital of corporations through discounting commercial documentsProviding credits in current accounts through discounting commercial documents by commercial banks
Increasing credit base of banks through rediscounting commercial documents by Central Bank
Banks liquidity management through discounting commercial documents between banks
Issuing Islamic securities (Sukuk) such as
Murabahah
, Istisna’,
Jo’alah
, etc, which secondary market is pending for allowance of selling and buying obligation.
This contract has been a subject of debates and arguments among
Shia
and Sunni scholars.
Here I want to explain viewpoints of quintuple
Fiqh
schools about sale of debt
.Slide3
Vocabulary Definition of Dain (Debt)According to some Arab philologists, the word “Dain” means everything which currently is not present.Some others define it as “Qard” (borrowing and lending)
In some
Fiqh
texts, the word is defined as “affirmation of a right against the other person”
Abi
Hilal
Askari
in “Al-
Forouq
ul-Loqavyyah
” takes Dain as more general than
Qard
and points out two aspects in its definition:
Firstly, in credit sale, the price is called Dain not
Qard
;
Secondly, in
Qard
, the substitute should be the same as what is borrowed, but in Dain it is not necessary
.Slide4
Terminology of DaynFiqh scholars use “Dayn” in two meaning:1.
Dayn
in more general meaning
Everything which is imposed as an obligation including Allah’s right or
Ibad’s
right (the right of those devoted to Allah)
By “Allah’s right” it is meant any religious practice for which a Muslim is charged such as prayer, fasting, Al-Hajj, etc.
“
Ibad’s
right” is those obligations which are imposed on persons whether as a result of
Qard
, or an exchange, or damaging others’ properties.
According to this meaning, what is proved as an obligation is not required to be property and non-financial affairs can also be considered as “
Dayn
”.Slide5
Terminology of Dayn (Con ’d)2. Dayn in more particular meaningThere is a controversy among
Fiqh
scholars about
Dayn
in more particular meaning.
According to
Hanafiyeh
,
Dayn
is an obligation which is imposed as a result of exchange,
Qard
or damaging others’ properties.
Dominant
Fiqh
scholars in both
Shia
and Sunni schools have extended the reasons of affirmation of debt. According to them,
Dayn
is that property which is imposed on a person’s obligation, no matter what its cause is; whether common obligations among people which cause is
Qard
or exchange or damaging, or Allah’s rights such as
Zakat
and
Khoms
.Slide6
Kinds of Dayna) Classifying Dayn according to the time of its fulfillmenta.1) Present
Dayn
It is a kind of debt that no date is set for its fulfillment. So it is possible for creditor to charge the debtor at any time and it is necessary for debtor to fulfill the debt on demand.
This kind of debt is also called “hurried debt” (
Dian Mu]
ajjal
) and includes the substitutes in contract of exchange, price in present sale (Bay’
Haal
), and also price in advanced sale.
a.2) Deferred
Dayn
It is a debt which has a specific maturity and creditor cannot charge the debt before that time and in the case he charge the debtor, it is not necessary to service the debt.
If debtor clears the debt before maturity, his obligation had met.Slide7
Kinds of Daynb) Classifying Dayn according to its confirmation on obligationb.1) Confirmed Debt (
Dayn
Mustaqar
)
It is a debt which possession is confirmed for creditor and it is necessary for debtor to service it.
This kind includes: the substitute of borrowed property, price of usurped property, price of object of sale (
Mabi
’), worker’s wage after finishing the work, etc.
b.2) Unconfirmed debt
It is a debt which still is not confirmed against debtor such as the wage before doing the work, marriage gift before penetration.Slide8
Related ConceptsSale (Bay’)Sale is “exchange of one property with another”. In this exchange, one property is “price” (Thaman) and another is “sale object” (Muthman
).
Therefor
in realizing sale, the substitutes should be property and if one of them lacks this trait, sale is not realized. Accordingly, there has been many debates among
Fiqh
scholars concerning whether “debt” is a property or not.
Is debt a property?
Fiqh
scholars have classified property into numerous kinds; the property may be a physical good or a benefit or a right. Physical good may be specific or general.
By general physical good We mean a commodity which has no external existence but just an obligation on a person. According to
Fiqh
scholars, one example of general physical good is “general on obligation” (
Kulli
fi
Dhimmah
) which is debt.
In conclusion, debt is a property and sale of debt is not prohibited.Slide9
The Conception of debt saleAccording to what has said before, the conception of debt sale is that one of the two properties in sale of debt contract, is general (Kulli) and on obligation.Precise Definition:
the creditor sales a property which is on obligation of debtor to the debtor or any other person. In this contract, the “debt” which is on obligation of debtor, is object of sale (
Mabi
’) and what is paid for it, is the price.
Sometimes the price is also debt; in such a case, the contract is called “exchange of debt with debt” (Bay’
Dayn
bi-
Dayn
). For example, two creditors exchange the debt that each of them has on obligation of the other. This kind of debt sale is invalid according to all of
Fiqh
schools
. Slide10
Different forms of debt saleSale of date contract can have different forms because the debt is either present or deferred. In addition, its price is either physical good or debt. In some situations if both price and the object of sale are debt, it will result into exchange of debt with debt. Details of each form will be discussed later.
It is worth to note that
Fiqh
scholars discuss debt sale contract in two parts: selling the debt to the debtor himself and selling it to someone other than him. As the judgment on each of these forms is different, we divide our discussion into two parts and survey different forms and their judgments with respect to these two parts.Slide11
Viewpoint of Fiqh SchoolsAll of Shia and Sunni Fiqh scholars do not validate sale of debt which is as a result of “advanced sale”, before maturity whether to debtor himself or any other person, and whether on present price or on deferred price.
Viewpoints about sale of debt which is caused by something other than advanced sale, are as follow:
a. Sale of debt (not caused by advanced sale) to the debtor
1. If price is deferred, the sale of present or deferred debt to debtor
is not validated
by most of
Shia
scholars and all of Sunni scholars because it is a kind of exchange of debt with debt.
2. If price is present, the sale of present or deferred debt to debtor
is validated
by all of
Shia
scholars and is dominant among Sunni scholars because it is a kind of sale and there is no restriction on it.Slide12
Viewpoint of Fiqh Schoolsb. Sale of debt (not caused by advanced sale) to someone other than debtor1. If price is deferred, the sale of present or deferred debt to someone other than debtor
is not validated
by most of
Shia
scholars and all of Sunni scholars because it is a kind of exchange of debt with debt.
2. If price is present, the sale of present or deferred debt to someone other than debtor is too controversial and there are some different viewpoints:
2.1.
Hanafiyah
,
Hanabelah
, some of
Shafe’iyah
and some of
Shia
scholars do not validate it.
Of course
Hanafiyah
validate it in three cases:
a. If buyer is appointed by seller (creditor) to take the debt from debtor. (
Wakalah
)
b. If buyer is drawn by seller (creditor) to debtor. (
Hawalah
)
c
. If the seller make a will to give the debt to buyer after his death. (
Wasiyyah
)
Slide13
Viewpoint of Fiqh Schools2.2. Dominant of Shia, some other of Shafe’iyah,
Ibn
Taymiyah
and
Ibn
Qayyem
have validate it.
2.3. The rest of
Shafe’iyah
validate it provided that:
a. Debtor is wealthy and confess to have such a debt or his debt is proved by evidence.
b. Debt is confirmed (
Mustaqar
)
c. The substitute is delivered at the session of contract.Slide14
Viewpoint of Fiqh Schools2.4. Malikiah validates it if this eight condition is met:a. debt be of issues which sale before delivery is permitted, such as Qard
and not food.
b. the price should be received because otherwise it become exchange of debt with debt.
c. the price not to be of the same genus of debt and in the case of similarity in genus, their amount should be equal.
d. if the debt is gold, the price should not be silver and vice versa because in such a case, delivery in session of contract is necessary.
e. debtor be present in the city in which debt sale takes place; this is because to get informed about his poverty or affluence as well as his hardship or ease.
f. debtor confess to his debt
g. there has been no enmity between buyer and debtor
h. debtor be
Mukallaf
(be charged with Islamic duties)Slide15
Concluding viewpoints of Fiqh schools1. Selling deferred debt to debtor at deferred price is not validated.2. Selling deferred debt to debtor at present price is validated.3. Selling deferred debt to someone other than debtor at deferred price is not validated.
4. Selling deferred debt to someone other than debtor at present price is controversial as follows:
a. dominant
Shia
: validated
b. dominant
Shafe’iyah
: validated
c.
Malikiyah
: validated under some conditions
d.
Hanafiyah
: validated in three forms of
Wakalah
,
Hawalah
and
Wasiyyah
e.
Hanbaliyah
: not
validatedSlide16
Thank you for your kind attention