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Debt Sale   (From viewpoint of Debt Sale   (From viewpoint of

Debt Sale (From viewpoint of - PowerPoint Presentation

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Debt Sale (From viewpoint of - PPT Presentation

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

sale debt price debtor debt sale debtor price fiqh scholars deferred present dayn exchange property obligation validated contract shia

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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