Opinions of Shaikh Ali Al- Qaradaghi in the Issues of Debt Arrears in IFIs A Comparative Study with Institutional Ijtihād

Abstract

Almost all the transactions done by Islamic financial institutions comprise of debts which are measured in local or foreign currencies. This study aims at presenting and discussing opinions of Sh. Shaikh Ali Al- Qaradaghi in issues related to debt arrears settlement as faced by IFIs and prioritizing its usage. The study will discuss the overall principles of debts in general, and about the bad debts in particular. Also, the study discussed standards and Shari’ah pronouncements about debts and arrears settlement issued by organizations and Shari’a boards which focus on issuing pronouncements and standards in the Islamic financial industry. Also, the study discussed opinion of Sh. Ali AlQaradaghi about debts arrears and comparing it with opinions of ijtihād organizations as per the sequence arranged by the researcher. The study found that difference in opinions is existing while dealing with a procrastinating debtor, but for insolvent debtor, so there is no difference of opinion between Shaikh Ali and other except Shariah Standards of Bank Negara Malaysia with no different treatment between a procrastinating and insolvent debtor. The study further arrived at that acceleration of installments and alternatives to bad debts are based on four aspects: acceleration of remaining installments, compensation due to harm of inflation during the arrears, imposing financial penalty, and liquidated damages. This is concerning all the ijtihād bodies. However, Shaikh Ali’s view goes around two aspects: acceleration of remaining installments and compensation due to harm caused by hyperinflation. The study found that there is 71% homogeneity in all the solutions between the opinions of Shaikh Ali and other bodies, and 50% homogeneity for the solution of compensation for harm of inflation. The researcher presented some recommendations, and some of the important ones are working towards unifying the alternatives at least in one country, subsequential treatment of treating bad debt starting from partial acceleration of installments in tandem with the harm of inflation, and finally going for harm of inflation which can be adopted by those who take the view of Shaikh Ali.