Obtaining and Deploying Liquidity - Appendix B (The Shariah Basis for the Standard)

Transcription

1. Shari ’ah Standard No (44): Obtaining and Deploying Liquidity Appendix (B) The Shari’ah Basis for the Standard ■ The basis for the definition of liquidity as referring to cash and whatever is easily converted into cash is that the traditional terminology for liquidity is Tandid (literally, to convert to cash), actually or by estimation. Actual Tandid means converting commodities into cash by selling them. Tandid by estimation means evaluating commodities in order to arrive at the expected monetary value that can be realized from them. ■ The basis that profit distribution depends on the availability of liquidity is that there cannot be any profit except after the protection of the capital, and this protection is realized by liquidating the assets. ■ The basis for the prohibition of procuring liquidity through interest-based loans is the prohibition of any type of Riba (usury). The supervisory bodies are the entities most responsible for overseeing that the institutions’ liquidity is compliant with Shari’ah. This is because it is these bodies that have licensed the institutions to operate by Shari’ah-compliant procedures and prohibited them from that which violates the Shari’ah. ■ The basis for the Shari’ah-compliant methods of obtaining liquidity is provided in the Shari’ah standard for each method. ■ The basis for the Shari’ah-compliant methods of deploying liquidity is provided in the Shari’ah standard for each method. 1094