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KembaraXtra – Islamic Banking-Contracts According to Their Purpose in Islamic Law
Islamic contracts (ʿUqūd) are classified based on their main purpose. The diagram shows how Sharīʿah groups contracts according to what they are intended to achieve, such as transferring ownership, sharing profits, providing security, appointing agents, or giving up rights. This classification is especially important in Islamic banking because each category follows different Sharīʿah rules.
Transfer of Ownership (ʿUqūd Tamlikāt)
These contracts are used to transfer ownership of wealth or property from one party to another. They are divided into two types. Contracts with exchange (Muʿāwaḍāt) involve receiving something in return, such as trading contracts and qard (loan). Contracts without exchange (Tabarruʿāt) involve giving without expecting anything back, such as hibah (gift), waqf (endowment), and ṣadaqah (charity).
Share Ownership (ʿUqūd Ishtirāk)
These contracts are meant for joint ownership or partnership. In muḍārabah, one party provides the capital while the other manages the business, and profits are shared. In mushārakah, all partners contribute capital and/or effort and share both profits and losses. These contracts are commonly used in Islamic finance and investment.
Securities and Guarantees (ʿUqūd Tawthīqāt)
This category focuses on securing obligations and protecting rights. Rahn refers to collateral or pledge, while kafālah or ḍamānah refers to guarantees. These contracts help reduce risk in financial transactions.
Appointment and Permission (ʿUqūd Idhānat)
These contracts allow one party to authorize another to act on their behalf. Wakālah is the appointment of an agent, commonly used in Islamic banking operations. Tawliyah refers to the appointment of an officer or administrator.
Restrictions (ʿUqūd Taqyīdāt)
These contracts impose legal restrictions on a person’s ability to deal with wealth. Taflīs refers to bankruptcy, while ḥajr means declaring a person legally incapable, such as a prodigal or mentally unfit person.
Letting Go of Rights (ʿUqūd Isqāṭāt)
This category involves waiving or giving up rights. Khaṣm refers to giving a discount, while ibrāʾ means releasing someone from a debt or obligation.
Safe Custody (Ḥifẓ)
This contract is used for safekeeping of property. Wadīʿah refers to placing an item or money with someone for safe custody, which is widely applied in Islamic banking deposits.
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