Kafalah - Overview

Transcription

1. Kafalah 3 of 18 PART A OVERVIEW 1 . Introduction 1.1 Compliance with Shariah requirement is a prerequisite in ensuring the legitimacy and integrity of Islamic financial products and services. In meeting this expectation, it is essential for an Islamic financial institution (IFI) to establish the necessary operational framework and infrastructure to ensure that the conduct of the Islamic financial transactions is consistent with Shariah. 1.2 The Shariah contract-based regulatory policy is intended to promote consistency of Shariah contract application in Islamic financial products and services. This policy is envisaged to strengthen legal certainty and Shariah compliance practices by the IFI. 1.3 Kafalah refers to a contract where the guarantor conjoins the guaranteed party in assuming the latter’s specified liability. In the context of Islamic financial transactions, kafalah is used by the IFI to provide guarantee services, such as bank guarantee, standby letter of credit and shipping guarantee. It is also being used as one of the contracts to supplement various primary Islamic financial products, predominantly for risk mitigation purposes, such as musyarakah, mudarabah, murabahah, istisna´, ijarah and tawarruq. 1.4 This objectives of this policy document are to: (a) provide reference on the applicable Shariah rulings for kafalah contract; (b) set out key operational requirements for the implementation of kafalah contract; and (c) promote end-to-end compliance with Shariah requirements which further promote sound banking practices safeguard consumers’ interests. 1.5 This policy document sets out the following: (a) salient features and essential conditions of kafalah in Part B; and (b) regulatory and supervisory expectations for the operational requirements on governance and oversight, structuring, risk management, financial reporting and business and market conduct in Parts C and D. Part C provides general operational requirements for a kafalah contract, whereas Part D provides specific operational requirements where the IFI is in the capacity of a guarantor or a beneficiary. 1.6 This policy document covers the application of kafalah contract in financial products and services offered by the IFI. 1.7 For the purpose of the policy document, the subject matter of kafalah is confined to financial guarantees (kafalah bi al-mal). Therefore, guarantee on ensuring presence of certain person (kafalah al-nafs) and appearance of certain person (kafalah al-wajh) are excluded from the application of this policy document. Issued on: 13 April 2017 BNM/RH/PD028-4
2. Kafalah 4 of 18 2 . Applicability 2.1 Subject to paragraph 2.2, this policy document is applicable to all IFIs as defined in paragraph 5.2. 2.2 A licensed takaful operator and professional retakaful operator is only required to comply with Part B of this policy document. 3. Legal provisions 3.1 The requirements in Part B of this policy document are specified pursuant to: (a) section 29(1)of the Islamic Financial Services Act 2013 (IFSA); and (b) section 33E of the Development Financial Institutions Act 2002 (DFIA). 3.2 The requirements in Part C, D and E of this policy document are specified pursuant to: (a) sections 29(2), 57(1), 135(1) and 155 of the IFSA; and (b) sections 33E(2), 41, 42C(1) and 116 of the DFIA. 3.3 The guidance in this policy document is issued pursuant to section 277 of the IFSA and section 126 of the DFIA. 4. Effective date 4.1 This policy document comes into effect on 1 January 2018 except for Part E which shall take effect immediately upon the issuance of this policy document. 5. Interpretation 5.1 The terms and expressions used in this policy document shall have the same meanings assigned under the IFSA, Financial Services Act 2013 (FSA), and DFIA, as the case may be, unless otherwise defined in this policy document. 5.2 For the purpose of this policy document– “S” denotes a standard, an obligation, a requirement, specification, direction, condition and any interpretative, supplemental and transitional provisions that must be complied with. Non-compliance may result in enforcement action. “G” denotes guidance which may consist of statements or information intended to promote common understanding and advice or recommendations that are encouraged to be adopted. “Islamic financial institution” or “IFI” means any: (a) licensed Islamic bank; (b) licensed takaful operator and professional retakaful operator; (c) licensed bank and licensed investment bank and approved under section 15(1)(a) of the FSA to carry on Islamic banking business; and Issued on: 13 April 2017 BNM/RH/PD028-4
3. Kafalah 5 of 18 (d) prescribed institution and approved under section 33B of the DFIA to carry on Islamic financial business. 5.3 A glossary of terms used in this policy document is set out in Appendix 2. 6. Related legal instruments and policy documents 6.1 This policy document must be read together with other relevant legal instruments, policy documents or guidelines that have been issued by the Bank. Issued on: 13 April 2017 BNM/RH/PD028-4