Abstract
Ju’alah is one of the least researched types of Shariah contracts used in Islamic finance. The objective of this paper is to explore the current and potential applications of Ju’alah with specific reference to Malaysian Islamic banking, takaful and the Islamic capital market. This paper establishes that there is potential for using Ju’alah in Islamic finance as a primary and/or secondary contract. It also establishes that Ju’alah can be used in takaful, though it is not being currently used for this in Islamic banking and the Islamic capital market in Malaysia. It is anticipated that the findings of this paper will improve understanding of the practice of Ju’alah in the Malaysian Islamic finance industry.
Highlights
The famous English law case Lampleigh v
At that time English contract law was against the claim of Lampleigh on the grounds that the performance by the plaintiff came before the promise by the defendant; a case of past consideration
One good example can be found in Indonesia, where Ju’alah is being used a primary contract for short-term certificates (Sarker, 2016), namely Bank Indonesia Shariah Certificate (SBIS), a monetary instrument issued by the central bank for monetary control and management of Islamic banking liquidity (Ananta et al, 2011)
Summary
The famous English law case Lampleigh v. Braithwaite [1615] which is about past consideration, is a perfect example of Ju’alah In this case, the defendant, Braithwaite, killed a man and asked the plaintiff, Lampleigh to secure him a pardon from the king. At that time English contract law was against the claim of Lampleigh on the grounds that the performance by the plaintiff came before the promise by the defendant; a case of past consideration. Some literature could be found on the application of Ju’alah in the Takaful industry and in Islamic Capital Markets (ICM). This paper is divided into four sections Following this introduction, section two discusses the literature review about Ju’alah while section three analyses the current application of Ju’alah in Islamic Banks, Takaful and Islamic Capital Market in Malaysia.
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