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    Ibria-A Clause in Financial Contract

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    proffina786
    The document discusses the practice of ibra' (rebate) in Islamic banking and proposes incorporating a clause promising ibra' into financing agreements. Ibra' was previously granted at the bank's discretion when customers paid debts early. To reduce customer uncertainty, the Council resolved that Islamic banks may include a clause committing to provide ibra' based on early repayment, as long as the clause is clear. This mirrors the Shariah concept of discount for prompt payment and removes confusion about ibra' eligibility or calculation.

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    Ibria-A Clause in Financial Contract

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    proffina786
    22 views1 page
    The document discusses the practice of ibra' (rebate) in Islamic banking and proposes incorporating a clause promising ibra' into financing agreements. Ibra' was previously granted at the bank's discretion when customers paid debts early. To reduce customer uncertainty, the Council resolved that Islamic banks may include a clause committing to provide ibra' based on early repayment, as long as the clause is clear. This mirrors the Shariah concept of discount for prompt payment and removes confusion about ibra' eligibility or calculation.

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    The document discusses the practice of ibra' (rebate) in Islamic banking and proposes incorporating a clause promising ibra' into financing agreements. Ibra' was previously granted at the bank's discretion when customers paid debts early. To reduce customer uncertainty, the Council resolved that Islamic banks may include a clause committing to provide ibra' based on early repayment, as long as the clause is clear. This mirrors the Shariah concept of discount for prompt payment and removes confusion about ibra' eligibility or calculation.

    Copyright:

    Attribution Non-Commercial (BY-NC)
    Download as DOC, PDF, TXT or read online from Scribd
    Download as doc, pdf, or txt
    22 views1 page

    Ibria-A Clause in Financial Contract

    Uploaded by

    proffina786
    The document discusses the practice of ibra' (rebate) in Islamic banking and proposes incorporating a clause promising ibra' into financing agreements. Ibra' was previously granted at the bank's discretion when customers paid debts early. To reduce customer uncertainty, the Council resolved that Islamic banks may include a clause committing to provide ibra' based on early repayment, as long as the clause is clear. This mirrors the Shariah concept of discount for prompt payment and removes confusion about ibra' eligibility or calculation.

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    Ibra’ Clause In Financing Agreement

    In the beginning, ibra’ was practised in Islamic banking institutions, based on the
    financier’s discretion to grant it to a customer who settles his debt earlier than the
    stipulated period.
    However, since the practice of giving rebate is solely discretionary on the part of an
    Islamic banking institution, the customers may cast doubt whether they are eligible to
    receive ibra’ when they make an early settlement.
    Furthermore, they are also in the dark about the formula for the ibra’ computation by the
    bank. As a result, customers may shift to conventional financing instead. To overcome
    this confusion in granting and computing the ibra’ Islamic banking institutions, it was
    proposed that a clause on promise to provide ibra’ to customers who settle their debts
    earlier than the stipulated period be introduced.
    Therefore, it is important to resolve the issue of whether the incorporation of such clause
    on promise to give ibra’ to customers in the Islamic financing agreement is permitted by
    the Shari’ah.
    Resolution
    The Council, in its 24th meeting, held on 24th April 2002 / 11th Safar 1423, resolved that
    Islamic banking institutions may incorporate the clause on undertaking to provide ibra’ to
    customers who make early settlement in the Islamic financing agreement, on the basis of
    public interest (maslahah).
    This clause shall be stipulated under the method of payment. With the inclusion of the
    ibra’ clause in the financing agreement, the bank is bound to honour that promise. This
    approach mirrors the concept of giving discount on price or reducing the debt of the
    customers who make early settlement, based on the concept of dho` wa ta`ajjal, which is
    acceptable in the Shari’ah.
    The confusion on the issue of uncertainty in price (gharar) does not arise, if the clause on
    promise to give ibra’ is stated clearly in the financing agreement.
    Issuer: Shariah Advisory Council, Central Bank of Malaysia.

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