Abstract
There are two different approaches to the prophetic concern regarding debt acquisition and the related rulings. The Prophet (peace be upon him) was recorded as having discouraged debt while other verbal traditions provided guidelines on how to manage debt in a socially responsible manner. This paper aims to analyse these two contrary views according to the Maqasid Shariah and look at how this has impacted juristic rulings. Furthermore, the paper reviews classical fiqh theories on debt, sale of debt, al-Muqassah, Suftajah, Hawalah, and Ibra. The paper also reviews the theoretical perspective on the sale of debt according to the understanding of Islamic scholars across the schools of Islamic Jurisprudence which has a substantial impact on the contemporary practices in Islamic banking and the Islamic capital market.
Highlights
The word Dayn (Debt) is an Arabic word developed from the same root as (Din) meaning submissiveness or disgrace
Scholars from the Maliki, Shafii, Zahiri and some of the Hanafi schools are of the opinion that al-hawalah is a sale of debt for debt, it is permissable and it is an exception from the general rule, the legality comes because it is based on the needs of people and it is regarded as a special sympathy of the lawgiver which facilitates its acceptance
Ibra has two interpretations according to Islamic scholars; it encompasses the meaning of withdrawal of debt by the creditor and the meaning of transfer of ownership of debt to the debtor
Summary
The word Dayn (Debt) is an Arabic word developed from the same root as (Din) meaning submissiveness or disgrace. After the Prophet told me to pray two rakat, he repaid me the debt he owed me and gave me an extra amount” (Sahih al-Bukhari, Book 43, Hadith 10) This hadith shows that the Prophet took loans in his lifetime and repaid the debt including more than the principal amount borrowed. The Prophet told them to give it to him and said, “The best amongst you is he who pays his debts in the most handsome manner” (Sahih alBukhari, Book 43, Hadith 6) This hadith indicates that the Prophet repaid his debt with more than the principal amount he owed to show his gratitude. Interestbearing loans are prohibited, but making an additional principal payment is considered good practice These two different attitudes towards debt inspire a number of debt theories in Islamic finance and banking, which will be discussed in detail in this paper
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