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Kembaraxtra-Islamic Finance – Restricted and Non-Restricted Hiwalah
Notes on Hiwalah
Restricted Hiwalah (Hiwalah Muqayyadah)
Non-Restricted Hiwalah (Hiwalah Mutlaqah)
Qur’an & Hadith References
5 Case Scenarios with Solutions
Case 1: Restricted Hiwalah – Time Condition
Case 2: Restricted Hiwalah – Partial Amount
Case 3: Non-Restricted Hiwalah – Immediate Settlement
Case 4: Non-Restricted Hiwalah – Business Use
Case 5: Restricted vs. Non-Restricted Mixed
Summary Notes:
Notes on Hiwalah
- Hiwalah = transfer of debt obligation from one person (debtor) to another.
- Shari‘ah basis: Hadith in Bukhari & Muslim – “If one of you is referred to a wealthy man, he should accept the reference.”
- Purpose: To simplify settlement of debts, prevent injustice, and ensure smooth financial dealings.
Restricted Hiwalah (Hiwalah Muqayyadah)
- Transfer of debt with conditions or restrictions.
- The creditor (transferee) can only claim under specified terms set by the transferor.
- Example: Time restriction, partial amount, or other conditions.
- Less flexible, but valid under Shari‘ah if both parties agree.
- Used in situations where cash flow or contractual obligations must be coordinated
Non-Restricted Hiwalah (Hiwalah Mutlaqah)
- Transfer of debt without conditions or restrictions.
- The creditor (transferee) can immediately claim the debt directly from the principal debtor.
- More flexible and commonly practiced in Islamic finance.
- Removes the burden from the transferor immediately.
- Ensures faster settlement of financial obligations.
Qur’an & Hadith References
- Qur’an (Al-Baqarah 2:282): “When you contract a debt for a specified term, write it down…” → supports documentation and clarity in debt transfers.
- Hadith (Bukhari & Muslim): “Delay in payment by a rich person is injustice, but when one of you is referred to a wealthy man, he should accept the reference.” → foundation of Hiwalah.
5 Case Scenarios with Solutions
Case 1: Restricted Hiwalah – Time Condition
- A owes B RM10,000.
- B owes C RM10,000.
- B tells C: “You may claim from A, but only after 3 months.”
- Solution: This is restricted Hiwalah. C must wait 3 months before demanding payment.
Case 2: Restricted Hiwalah – Partial Amount
- A owes B RM15,000.
- B owes C RM10,000.
- B transfers only RM10,000 of A’s debt to C, keeping RM5,000 with himself.
- Solution: Valid restricted Hiwalah. C can only claim RM10,000 from A.
Case 3: Non-Restricted Hiwalah – Immediate Settlement
- A owes B RM5,000.
- B owes C RM5,000.
- B transfers the claim to C without conditions.
- Solution: C can immediately demand RM5,000 from A. This is non-restricted Hiwalah.
Case 4: Non-Restricted Hiwalah – Business Use
- A contractor (A) owes supplier (B) RM50,000.
- B owes wholesaler (C) RM50,000.
- B transfers the debt directly to C.
- Solution: Non-restricted Hiwalah. C now claims from A directly without restrictions.
Case 5: Restricted vs. Non-Restricted Mixed
- A owes B RM20,000.
- B owes C RM20,000.
- B tells C: “You may claim RM10,000 now, and RM10,000 after 2 months.”
- Solution: This is a combination. The first RM10,000 = non-restricted. The second RM10,000 = restricted with time condition.
Summary Notes:
- Restricted Hiwalah: Bound by conditions (time, partial claim, etc.).
- Non-Restricted Hiwalah: Free from conditions, transferee can claim immediately.
- Both are valid under Shari‘ah if terms are clear and agreed upon.
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