Al-Wakalah Bi Al-Istithmar (Investment Agency) - Appendix B - The Shariah Basis for the Standard

Transcription

1. Shari ’ah Standard No (46): Al-Wakalah Bi Al-Istithmar (Investment Agency) Appendix (B) The Shari’ah Basis for the Standard ■ The basis for the differentiating between investment agency and agency in general is that the former is in order to increase wealth, and it is similar to Mudarabah and Musharakah in this respect. However, the difference between investment agency and Mudarabah and Musharakah is that Investment Agency is a form of Ijarah (hiring), while Mudarabah and Musharakah are forms of partnership. As for the general agency, it is an authorization to perform specific tasks such as payment etc. Even if the authorization is to engage in a sale/purchase, such as the authorization of the client in a Murabahah contract, its main purpose is to acquire ownership for the institution rather than investment on its behalf. ■ The basis for the permissibility of investment agency is the Hadith stating: “Engage in trade with the wealth of orphans so that it will not be consumed by Zakah”(3) as well as numerous Verses of the Qur`an on seeking sustenance, striving and earning. ■ The basis for the binding nature of the investment agency is that it is entered into for a specific period; i.e., there is an agreement between the counterparties that neither of them can unilaterally dissolve the contract except in certain circumstances specified in the contract. ■ The basis for allocating for the investment agent any profit amount in excess of the expected profit is that it is a type of conditional gift and is an incentive. ■ If the agency contract stipulates a certain percentage of profit and the agent invests in lower-yielding transactions, the agent is liable to compensate the principal for the difference between the profit earned and the average (3) Related by Al-Tabrani in “Al-Awsat” and graded authentic (sahih (sahih)) by Al-’Iraqi. Ibn Hajar graded it as good (hasan (hasan). ). “Fayd Al-Qadir” [1: 108]. It is found in “Al-Muwatta`” as a statement of Umar (may Allah be pleased with him). 1130
2. Shari ’ah Standard No (46): Al-Wakalah Bi Al-Istithmar (Investment Agency) profit prevalent in the market (if it is less than the stipulated amount/ percentage), because he is in breach of the conditions of the Agency. However, the agent is not liable for the specified percentage stipulated in the contract if it is higher than the prevalent market rate, because it will be tantamount to acquiring another’s wealth by illegitimate means.(4) ■ The basis for the permissibility of employing the agency’s funds in the Mudarabah portfolio is that the authorization granted by the investment agency includes such employment when the agency is unrestricted. ■ The basis for the principle that the agent, in a situation where the agency’s funds are employed in a Mudarabah portfolio, is entitled to the agency commission and not to Mudarabah profit is that his contract with the institution is that of agency and not of Mudarabah. Even if the agent has employed the funds in a Mudarabah portfolio, the profit entitled to the institution is generated from the Mudarabah portfolio and not on the basis of agency. (4) See “Al-Mughni” “Al-Mughni”,, vol. 5, (P. 135). 1131