Guarantees in Early Islamic Financial System

Abstract

Guarantees are considered to be the most common form of credit security used for lending transactions in modern banking. In Islam, guarantees are not peculiar since this practice has been known since the time of Prophet Muḥammad (saw). However, to date, no literature has discussed this concept or its historical development in detail. This article is an attempt to fill this gap through a discussion on this issue with special reference to the practice of the Prophet, his Companions and Followers. Reference has also been made to the Holy Qur’ān and prophetic Sunnah, as well as to books on tafsīr (exegesis), classical manuals, journal articles and legal historical bibliographies. This article concludes that financial guarantees were recognized as important in the development of the nation and that they were based upon good ethical values as well as the principle of taʿāwun (cooperation).